Early contributions to the economics of consumption as a social phenomenon

Abstract

During the 1920s some American women economists developed theoretical, empirical and historical analyses that constituted a theory of consumption. The original formulations of this approach were based on the view, theorised by T. Veblen, that consuming certain goods makes it possible to identify with specific social groups. These analyses were explicitly alternative to the theories of consumption based on marginal utility. In the 1930s, however, the analyses of a second generation of women economists became exclusively empirical and the theoretical features that made the approach original and an alternative to marginalism were lost.

Keywords:

• Theory of consumption
• social relevance of consumption
• institutionalism

Acknowledgements

I am grateful to R. Ciccone, M. Bianchi and two referees for useful comments on previous versions of this paper. I am particularly indebted to D. Pignalosa and the other students of my course at Roma Tre over the past years. The usual disclaimer applies. This paper is dedicated to three women: my mother, who taught me to have faith in the intelligence of women, my first wife, who tried to make me terrified of it, and my daughter, who is living proof that her grandmother was right.

Notes

1 A complete reconstruction of the embryonic forms of this idea since the seventeenth century and its presence in the more recent economic literature can be found in Mason (1998) which is also rich in references to other influential analyses of the history of this idea. For the particular way in which this idea entered the marginalist theories of consumption, see Bianchi (2010).

2 See Thomas (1989), especially fn. 17.

3 The “instinct of workmanship” is also used by Veblen to explain why even the most superfluous consumer good generally appears to have some utility in satisfying a need. “The instinct of workmanship […] asserts itself even under very adverse circumstances. So that however wasteful a given expenditure may be in reality, it must at least have some colourable excuse in the way of an ostensible purpose.” (Veblen 1899, p. 93)

4 See Rutherford (2011), especially Chapter 1.

5 In August 1928, more than 125 women from the United States, Australia, New Zealand and Japan gathered in Honolulu for the first Pan-Pacific Women's Conference, which gave rise to the Pan-Pacific Women Association (PPWA). The PPWA, which organised many other conferences in the following years, aimed to promote “inter-cultural exchange” and “inter-racial friendship” among women of the Pacific through a combination of social reformism, anti-racism and pro-peace policies. Renamed the Pan-Pacific and South East Asia Women's Association (PPSEAWA) in 1955, it is still active. One of its goals from the very outset is “To initiate and promote co-operation among the women of the Pacific region for the study and betterment of existing social conditions”, a task clearly connected with the study of standards of living advocated in Honolulu. None of the women economists examined here actually took part in the 1928 conference, for which readers are referred to the Bulletin of the Pan-Pacific Union (1928). For general historical information on the PPWA/PPSEAWA, see Paisley (2013). I thank Professor Thomas Dublin and Mrs Taina Rokotuiveikau for suggestions and bibliographical indications.

6 Forget indicates 1918 as the divide between the first and the second phase. The contributions of women economists considered here are mainly from the 1920s. The features of the economists and their contributions are those described by Forget for women economists of the first phase.

7 Any discussion of the presence of women in the economics profession necessarily intersects with the history of home economics and its role in the evolution of the role of women in US society and politics. In this connection, see Stage and Vincenti (1997), who describe the change from the 1970s, when home economics was seen as an “enemy” of women, to the more complex and currently dominant view that instead grants it and its practitioners a positive role in the history of women in American society.

8 Land-grant colleges were institutions of higher education focused on the teaching of practical agriculture, science, military science and engineering (as opposed to “classical studies”) and developed as a response to the industrial revolution and changes in social structure. Their name is due to the fact that the Morrill Act of 1862, which instituted them, granted federally-owned land to the states for them to develop or sell to raise funds for this purpose. Their most intense phase of development was during the early decades of the twentieth century, and home economics became an essential part of the education they offered to young women as the female counterpart of agricultural education for men. Most of these land-grant colleges became public universities or private schools (including Cornell University and the Massachusetts Institute of Technology) offering the full spectrum of educational opportunities. For our analysis, it is important to note that Iowa was the first state legislature to accept the provisions of the Morrill Act and founded the State Agricultural College (now Iowa State University) as a land-grant college in 1864. See Miller Solomon (1985).

9 Biographical information and references are provided below in footnotes to the text addressing their contributions.

10 In refuting the claim that Institutionalist economists “did not develop a systematic body of theory”, Rutherford (2011) refers to Kyrk's analysis of consumption as an example of theoretical contribution (p. 52).

11 Born in 1886, Hazel Kyrk studied at Chicago University. She graduated in 1910 and delivered her PhD dissertation, in economics, which won the Hart Schaffner and Marx Prize, in 1920. It was then prepared for publication under the supervision of J. Maurice Clark and published in 1923. She joined the department of economics at Chicago University in 1925 and later the department of home economics as well. She also worked for the federal government and at the Food Research Institute of Stanford University, taking part in important empirical research on the standards of living. These and many other biographical data on Kyrk can be found in Nelson (1980) and Dimand et al. (2000). For Kyrk's contributions on topics other than those addressed here, see Beller and Kiss (2001).

12 See Kyrk (1923), p. 172.

13 Kyrk (1923), p. 176 and 223.

14 Kyrk (1923), p. 181.

15 Kyrk (1923), p. 184.

16 See Kyrk (1923), p. 273

17 She tends to argue – following Hobson – that in the case of extremely uneven distribution, consumption would increase too slowly and a crisis of underconsumption would be possible.

18 Theresa Schmid McMahon was born in Tacoma, Washington, DC, in 1878 and studied social sciences at the University of Washington. After graduating in 1899, she moved to Milwaukee, where she obtained her doctorate in sociology at the University of Wisconsin in 1909. (Economics and sociology formed a single department at Wisconsin.) She then accepted a position as a social worker. She also worked as a statistician at the Associate Charities of Chicago. In 1911 the McMahons moved to Seattle, where she had a position in the economics department, she taught elementary economics and then labour history and legislation. She was also appointed as a member of the Minimum Wage Board. McMahon examined the relationship between women and economics and she introduced a course in the study of women at the University of Washington. She was a militant member of the labour movement and lobbied for an eight-hour working day and the end of sexual discrimination in employment. McMahon passed away in 1961. These and many other biographical data on McMahon can be found in Dimand et al. (2000).

19 McMahon criticises what she calls Malthus's law for ignoring the fact that development prompts an increase in agricultural productivity and a drop in the population growth rate. She also argues that international movements of capital mean that capital always finds employment in the countries offering higher levels of returns and protection, and hence that the scarcity of capital rarely increases, but concludes that economists realise the inevitability of the law of diminishing returns when applied to natural resources.

20 McMahon's analysis shows no trace of the marginalist principles on which the statement of the tendency to full employment is based, i.e. the principles ensuring the adjustment of investment decisions to full-employment saving. There is no trace in fact either of a decreasing investment–demand function or of the assumption that the flexibility of the interest rate is a sufficient adjustment mechanism. The rigidity of output with respect to the hypothetical expansion of consumption is therefore based, as in the original version of Say's Law, on the immediate identification of decisions to save with decisions to invest.

21 Born in 1903, E. Gilboy graduated in economics and sociology at Barnard College (Columbia University) in 1924 and took her PhD degree at Wellesley College, Harvard, in 1929 with research into wages in eighteenth century England. For this research she spend a period in the UK where she was registered as a graduate student at the London School of Economics and Political Science. She then worked at Harvard until the 1960s as Secretary of the Committee on Research in the Social Sciences at Harvard. She also worked for the Office of Strategic Services in Washington during World War II, and was then employed as a consultant by the US Bureau of Labor Statistics from 1960 to 1964. She held the post of associate director of the Harvard Economic Research Project from 1950 and became acting director in 1964–65. Known as the Leontief Project, this was essentially devoted to the development of input–output analysis.

22 It is hardly necessary to recall that this debate took place one decade before the clear formulation of the problem of aggregate demand in the General Theory.

23 J.B. Peixotto (1864–1941) was born into a rich and prominent Sephardic Jewish family in New York. She obtained both a degree and a PhD degree from the University of California (1894 and 1900) after a period spent at the Sorbonne studying the history of French socialism. She was the second woman to be awarded a doctoral degree by the University of California and later, in 1918, become the first woman to be appointed full professor in any field at Berkeley, where she taught the history of socialism and then social economics, developing a post-graduate course in that field. She founded the Berkeley Commission of Public Charity and served on the California State Board of Charities, on the Council of National Defense during World War I, and later on the Consumers’ Advisory Board of the National Recovery Administration. She became vice-president of the American Economic Association in 1928. She remained at California University until her retirement in 1935. These and many other biographical data on Peixotto can be found in Chambers (1980), Dimand et al. (2000) and Baskin (2009).

24 See for example: Ogburn and Kelly (1916), Hexter (1916), Ogburn (1919a), Ogburn and Thomas (1922), Ogburn (1919b), J.B. Peixotto (1927) and Zimmermann (1927). W.F. Ogburn reviewed a summary of the major budget studies of wage earners’ families in America over the period 1895–1922 entitled Family Budgets of American Wage-Earners: A Critical Analysis (a report of the National Industrial Conference Board published by the Bureau of Applied Economics) in the Journal of the American Statistical Association in 1922.

25 Williams Faith and Zimmerman (1935) examine and summarise over 1500 family-budget studies carried out between 1875 and 1935 all over the world. The number of works reviewed is surprisingly high, especially in view of the development of statistical techniques of data gathering and processing.

26 See Yi (1996) and Stage and Vincenti (1997). According to Dimand et al. (2000, xxi), these three women “bring the concepts of economic efficiency to considerations of the allocation of time and other resources within households”, paving the way for the “new home economics” of the Nobel laureate Gary Becker.

27 Elizabeth Ellis Hoyt was born in Augusta, Maine, in 1893 and graduated from Boston University in 1913. From 1917 to 1921 she worked for the National Industrial Conference Board in Boston doing field interviews for a cost-of-living index. She was an instructor at Wellesley College 1921–1923. Hoyt's graduate work in economics at Harvard (Radcliffe) led to a PhD in 1925. She then joined the economics faculty of Iowa State College in 1925 as an associate professor, becoming full professor in 1928. In the 1940s, when M. Reid left Iowa State College, Hoyt started a new line of research on development and international economics. These and other biographical data on Hoyt can be found in Dimand et al. (2000).

28 Margaret Reid was born in Canada in 1896. She trained as a school teacher and she graduated in home economics in 1921 at Manitoba Agricultural College. As a doctoral student she worked under the supervision of Kyrk and took her PhD in economics at the University of Chicago in 1931. Reid lectured on home economics at Connecticut College and then she went to Iowa State College, where she lectured on consumption economics in the departments of economics and home economics along with Hoyt. Reid became a full professor of economics at Iowa State in 1940. Between 1943 and 1948 she worked as a statistician for the Division of Statistical Standards in the Executive Office of the President and then directed the family economics division of the Department of Agriculture. Between 1948 and 1951, she was professor of economics at the University of Illinois at Urbana-Champaign. In 1951, she joined the University of Chicago as a full professor of economics. These and other biographical data on Reid can be found in Dimand et al. (2000).

29 Dorothy Stahl Brady (1903–1977): graduate of Reed College, Oregon; M.A., Cornell; PhD in mathematics, Berkeley; home economics specialist at U.S. Department of Agriculture; division chief at the Bureau of Labor Statistics, professorships at Chicago, and Pennsylvania; vice-president of the American Statistical Association and Economic History Association; fellow of the American Statistical Association and Econometric Society; chair of the Conference on Research in Income and Wealth. These and other biographical data on Brady can be found in Dimand et al. (2000) and Forget (2010).

30 Rose Director was born in Russia in 1911. Two years later her family emigrated to Portland, Oregon, where she grew up and attended Reed College before transferring to the University of Chicago to study economics. She graduated in philosophy in 1932 and then enrolled in the economics PhD programme, during which she met Milton Friedman. Rose Director then worked as Knight's research assistant and began her PhD dissertation on the history of capital theory, which was never finished, under his supervision. She left Chicago for Washington in the autumn of 1936 to work for the National Resources Committee on the nation-wide Study of Consumer Purchases. She married Friedman in 1938 and they moved to New York, where both joined National Bureau of Economic Research. She then followed her husband to Wisconsin and then to Washington, DC, where she returned to work at the Bureau of Home Economics with Dorothy Brady. While the Friedmans returned to New York in 1943, her work at the Bureau of Home Economics was the origin of the Brady and Friedman paper on the relative-income hypothesis. Rose Friedman has since collaborated with Milton in many different ways. These and other biographical data on R. D. Friedman can be found in Hammond, in Dimand et al. (2000)

31 See Trezzini (2012).