An alternative account of what households seek to maximize could be taken from modern consumer theory. As we saw in Chapter 2, two prominent economists who, in their respective theories of the household production function, have come up with a theoretical answer to this question are Kelvin Lancaster (1966a, 1966b) and Gary Becker (1981). To recapitulate, Becker and Lancaster hold that households can be thought of as factories, using consumer products to generate utility, much as firms use capital goods to produce commodities. Within this framework, households use product testing to gain information they can use to develop a purchasing strategy that will maximize the utility they produce. Indeed, Lancaster (1966b, p. 18), makes reference to the product testing activities of Consumers Union in his 1966 essay on technologies of consumption, noting that CU’s testing performs the function of providing information about the utility generating power of commodities, on the basis of which households can make eficient purchasing decisions.
Although this explanation initially seems straightforward, on reflection an immediate problem arises. The firm can calculate the degree to which a given set of expenditures is an eficient one by comparing money costs of production to the realized or projected money value of output. However, it is not clear how a household can make equivalent calculations about utility. For that to be possible, the quality of experience of household members would have to be quantified so that the relative benefits of diferent allocations of household resources could be systematically compared. In addition, the total utility of expenditure would have to be compared to the disutility of the work done to generate household revenue. Yet without being able to use money as a proxy for quality of experience (the expedient move economists tend to make), it is not at all apparent how those kinds of calculations could be carried out. Eficiency calculations require a degree of precision that is possible where the objective is to maximize money revenues, because money is a public, therefore observable metric. But such calculations are much trickier where the object of maximization is construed in terms of the vague, essentially psychological, concept of utility.28
More concretely, as I noted in Chapter 2, even if we accept Becker’s picture of households as utility factories, his theory, when placed in the context of actual historical patterns, runs up against the empirical time / work / income puzzle. For if we assume, with Becker, that household decisions can be, and indeed are, directed by the goal of maximizing actual utility, with consumer goods working as capital equipment in the production of this final output, how can we account for the consistent tendency, identified in earlier chapters, for households to turn increasing hourly income into more capital goods rather than more time in which to use them? Following Becker’s reasoning, if consumer goods are household analogues to a firm’s capital goods, then units of leisure time are analogues to units of labor time. Labor and capital combine in producing an output, whether goods or utility. It makes no obvious sense, therefore, for the household, following an increase in hourly wage income, to use all of the extra income to buy capital (utility-generating) goods rather than allocating some of it to increase the amount of labor (free time) available to make use of added capital goods to produce utility. For a household to spend all its available income on consumer commodities while not increasing time available to make use of those commodities is equivalent to a firm purchasing capital equipment without hiring the labor required to put it to work. The result is that the equipment is left idle—hardly an eficient outcome from any perspective (what firm would be happy with investing in capital that subsequently languishes unutilized?).
Product Testing and Product Regularization
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