Macroeconomic surprises are often caused by the Consumer. In the US, for example, the exceptional resilience of the economy in recent months is attributable to surprisingly strong consumer spending. This has led investors to refer to the current situation as the ‘immaculate slowdown’ with the 2023 GDP forecasts made in Q1 being reaffirmed this month despite tightening credit conditions.
The inability to anticipate consumer behavior despite decades of historical data, ‘nowcasting’ technology, and abundant consumer surveys highlights a simple fact: Economists still struggle to integrate human psychology into their predictions.
One of the most interesting marketing reports I have read this week suggests that 2025 consumer behavior trends rely on four groups: the ‘nihilists,’ the ‘timekeepers,’ the ‘reductionists,’ and the ‘pioneers.’ Admittedly, translating these trends into economic drivers requires some magic.
But take a more basic trend amongst consumers: the preference for quality over quantity. In fashion, a 2023 survey indicates that ‘the cost-of-living crisis combined with sustainability concerns around fast fashion is driving consumers to buy fewer, higher-quality clothes that will last longer.’ Less can be more, as more generally evidenced by the secular growth of the global luxury goods market.
Much less can even be much more. In ‘The Case of Minimalist Luxury’ (2021), the authors note that consumers wishing to display a special status can elect to buy fewer items and buy better. In sharp contrast to conspicuous consumption à la Veblen, more and more consumers adopt a conspicuous underconsumption strategy to separate themselves from the mimicking crowd (itself subject to growing societal disapproval – see ‘The Triangle Of Sadness,’ ‘The Menu’ or ‘The White Lotus.’).
In economics, much is said, too, about the opportunity to move away from quantitative, GDP-linked metrics to a qualitative, SDG*-based ‘impact economy’. But the advocated transition is too often positioned as a sacrifice that must be morally made to pay for society’s sins over the last decades.
If people are inclined to pay more for quality and consume less, why not seek instead to position the economic transition as a luxury experience? Eating local and seasonal produce, holidaying regionally, living in an eco-friendly home, owning a small car (or none), and possessing fewer, higher quality items (e.g., clothes, furniture) can be used to achieve a differentiated status consistent with minimalist luxury.
In my opinion, promoting sustainable products and services through sacrifice, morality, and shame is not an effective strategy. Rather, luxury, status, and pride must be leveraged to power the economic transition.
Let’s utilize some fundamental principles of human psychology, borrow from the marketing toolbox, and shift the narrative surrounding sustainability economics: Welcome to the ‘luxury economy,’ a world where less is so much more!
*Sustainable Development Goals according to the United Stations