Consumption is the end result of human action. Without consumption a human can not survive. For consumption to occur a product has to be in existence at the spatial location of the consumption. This necessitates that production must occur first. This production could be as simple as picking a piece of fruit off a tree and carrying it to a site to be eaten. Production in a modern society could be extremely complex and take place over a long period of time and at multiple locations.
To take the fruit example, when it is consumed it no longer exists and can no longer be consumed. Other consumption items such as buildings are consumed over long periods of time. These time periods may be so long that the casual observer may think that they are not consumed at all.
The list below is intended to be a comprehensive list of consumption categories for individuals and their dependents. It can be used to prepare a budget and for planning for future consumption. It also determines the production pattern that needs to occur if consumption is to continue. Obviously if items are not produced, they cannot be consumed. Consumption can be expressed similarly to production. It is function of both land and labor and takes time.
For a household, which consists of one or more natural persons who pool their medium of exchange, consumption over a consumption period consists of the medium of exchange exchanged for physical items in the categories discussed above.
Consumption is constrained by the amount of medium of exchange that the household owns at a particular time.
Since people hope to live for as long a period of time as possible, they must plan for the future. Part of this planning is deciding an appropriate balance between consuming resources now or in the future.
The constraints of the human condition are essential to the proper planning process.
There are only 24 hours in the day. An individual must sleep, drink and consume food to survive. Different climates require differing amounts of shelter and clothing. Humans are born helpless and require the dedicated resources of others until they are capable of producing at a level sufficient to provide for their consumption needs. This period of providing for themselves most likely will be interrupted by sickness, which too requires the assistance of others and the withdrawal from productive activity. Eventually, if they don't die from sickness or accident, they reach old age where their productivity declines to the point where they require the assistance of others to live until they die. Each of these stages in life will require different consumption patterns.
There is limited availability of land, labor and production functions at any point in time. One needs to imagine what will be available in the future and what his/her consumption patterns will need to be.
To provide for the future, one needs to consider whether one wants to consume at a rate higher or lower than the previous rate. Part of this planning takes into account the current stage of life and one's physical health. One also needs to consider his or her productive capacity now and in the future.
A simple way to provide for the future is to save some of the consumption goods in existence. This assumes there is some sort of storage facility and that the consumption good is not perishable over the saving period.
If production is designed so that it provides sufficient consumption goods for each time period, then savings are required only for needs between acquiring the next batch of consumption goods. For example, if one shops for groceries once a week, one needs to purchase enough groceries for use each day between shopping trips.
Another example would be a farmer who saves seed grain from this year's harvest to be planted for the next year's crop.
Saving some of current consumption may also be done because of the desire to improve one's standard of living. We can use our settlers as an example. The settlers have a tent. This tent is not satisfactory for a cold Nova Scotia winter so they want a log cabin with a fireplace. To build it they will need to spend time cutting logs, finding stones and building the structure. They will need saved food to cover their physical needs during this production period.
This is an example of using savings as an investment. Investment implies that current production is diverted to creating something new that would provide more utility in the future than its use for current consumption. It also implies that there is a surplus of consumption goods that can be invested.
In summary, consumption is the reason for production. Humans consume to survive and for other reasons. This consumption needs to be planned over the span of a lifetime. To meet future consumption needs, savings and investment are required.
Copyright 2014-2019 Richard A. Cornell, PE