THE CONSPICUOUS CONSUMPTION PHENOMENON IN EGYPT: Consumption Rationalization

Consumption Rationalization

The economic theories are based on the hypothesis of rationality of consumer. Rationality means the consumer compares between the benefit money which he pays in buying the good and the benefit of the purchased good. If the good benefit exceeds the benefit of paid money or sum, he can carry out the purchasing process and vice versa. The benefit differs from a person to another according to the type and pattern of consumption. With the increasing rates of inflation and prices from a year to another, then the consumer has the desire to buy and consume by the quantities he used to consume before the rising prices on the one hand and the desire to reduce consumption on the other due to the higher benefit of money which he has against the decrease of goods and services which he buys because of their rising prices. The former is affected by what is known or called the permanent income hypothesis which differs from the current income which is the return income of work and job only.

The consumer attempts that his permanent income exceeds his current income to maintain his consumption level despite the rising prices of goods and services. The stimulus of mimic and imitation forces some consumers to have luxurious and conspicuous consumption despite their low income (annual car change, wedding parties and banquets in luxurious hotels) as many consumers reply on the permanent income in a compensation for the current income. The stimulus of mimic and imitation in consuming goods and services for the purpose of b oasting leads to borrowing and indebtedness. This contradicts the economic rationality behavior supposed in the consumer. Under the protection the consumer has from the concerned authorities, the result will be further and continued rising of prices as long as the consumption behavior of individuals does not change through saving which represents a means to reduce daily automatic consumption in order to increase tomorrow’s consumption at the same saving rate. Or it is in other way the transfer of part of today’s consumption to tomorrow’s consumption. The over consumption without observing the increase of production and resources will inevitably lead to the economic problem exacerbation.

Therefore, the regular and planned consumption rationalization will lead to the optimal use of the families’ incomes as it will lead to the spending on the needs based on rational consumption awareness. The radical solution of this problem dwells only in the consumer’s behavior under the rising prices and the current market anarchy. Therefore, there should be a boycott of those temper with the market rising prices, consumption rationalization, selecting moderate-price alternatives and lessen the complementary and luxurious consumption. However, the demand of income increase and legislations amendments will not be vital as unless the consumer changes his behavior to the spending rationality behavior.