Rethinking the economic possibilities of our grandchildren: what is the future of consumption?

In the “Economic Possibilities of our Grandchildren” (Keynes 1933), John Maynard Keynes recognized that the extent to which economic growth delivers better living conditions in the long run is mediated by how the character of demand evolves as households become more affluent. If consumer needs are indeed insatiable, there is little reason to doubt that any extra income generated by economic growth will continuously be converted into increases in demand ad infinitum (Stiglitz 2008). This is the position adopted by much of the growth literature that typically does not consider the possibility of non-homothetic preferences. In contrast, Keynes started to outline a more nuanced approach in this essay. In line with other scholars preceding him (e.g. Menger 1871) – Keynes considered the nature of the underlying needs that motivate consumption and how rising affluence may impact their satisfaction.