New Theories of Consumer behaviour
It is a fact that economics is a dynamic science in the sense that it changes with time, and over the decades it has really broadened its frontiers in all spheres.
It is a fact that economics is a dynamic science in the sense that it changes with time, and over the decades it has really broadened its frontiers in all spheres. For example, in the area of consumption, many “new” theories have emerged beyond those that are based on cardinal and ordinal utility.
As a consequence of many controversies in respect of the earlier theories, over the last 3 to 4 decades, many “new” theories of consumer behaviour came to the forefront. These are briefly mentioned below:
3. The Allocation of Time: This theory was propounded by Gary S Becker (A Theory of the Allocation of Time, Economic Journal, September, 1965) who later was awarded the Nobel Prize in the year 1992 for having extended the domain of microeconomic analysis to a wide range of human behaviour and interaction, including nonmarket behaviour. According to this theory, income is the only limiting factor on the individual’s choice. Another factor is that consumption takes time, which is also limited in supply. Time is always required as an input whether consumers are involved in paid employment, housework, or leisure. Traditional theories ignore the influence of time on consumption choice. 4. Family Decision Making: By and large each individual belongs to a family (household). This theory looks at the influence of the family on the behaviour of its members. This theory was also pioneered by Gary Becker. This theory is based on two facts: Each member of a family has a comparative advantage over other members in a given household activity (this is based on the Theory of Comparative Advantage as used in international trade). There are differences in comparative advantage between the various family members. In order to maximize the wellbeing of the family, each member has to undertake the responsibility in which he or she has a comparative advantage over other members. The individual decision of a family member has to be Pareto Optimal in the sense that if it brings a benefit to him or her, it, in no way, depreciates the benefits of other members. If this is not done, the individual decision will not be Pareto Optimal. These “NEW” theories have now become of age, and in time to come many “NEWER” theories of consumer behaviour would emerge because, as everyone knows, Economics is a dynamic science, and changes with time. It is really unfortunate that in the various syllabi of Economics as prescribed in most the universities in India in the sphere of consumer theories, students are taken just up to the theory of revealed preference and not beyond that. There is no mention of these “NEW” Theories of Consumer Behaviour! I wonder why! What will happen when “NEWER” theories would emerge?
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