Economists need to mend their craft, learn how to measure consumption

The experience I narrate here drew my attention for the first time to the question of measuring consumption among people whose earnings are characterised by precarity – both temporally and in terms of magnitude.

Question of food frequency

One set of questions in our survey questionnaire was about the frequency of food purchase: how frequently do you purchase potatoes? Wheat? Milk?

The rural poor's 'budget' is small and erratic, and the allocation is done by the spender based on what is needed, what is available and what is affordable. This decision is made with only one consideration – survival.

As the responses came in, we were to check boxes in a table with options starting with never, moving on through daily, couple of times a week, etc., and on to less often than once a month, and never.

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Additionally, we were to make a note of the quantity purchased in the appropriate box.

We never questioned the wisdom of this arrangement. Everyone associated with the project appeared to agree on this format and confidently cleared the questionnaire for the pilot survey.

What else?

Strangely, the answer that we met with was a series of "hōr kya? (what else?)”.

We were flummoxed. Not a single respondent from the 20 households we interviewed answered this question in any other manner. There was no “What else?” column in our form. So, we did all we could to press on for clearer answers in the interest of science.

Based on a change in the National Sample Survey Office’s (NSSO) household consumption expenditure survey methodology about 25 years ago, it is now accepted that recall questions over shorter periods get more accurate answers. Accordingly, we reframed our question to inquire about their most recent visits to the market.

But what we found was an absolute lack of any kind of response, not just an answer that seemed unsatisfactory or inaccurate in some way. The responses were invariably along the lines of “if I have the money, I buy what I need”, or “if I can afford the asking price, I buy the potatoes”, or “if I’m in the market and I find something I need, I get it”, or some variant of these.

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None of these responses found a place in our data collection app. We gaped, helpless. The respondents seemed resolute in their determination to not give an answer we could use. My two-and-half decades of the study of economics yielded no explanation for these odd responses.

Our inability to evince an answer, I accepted. But the respondents also seemed to be adding insult to injury by giving me incredulous looks, as though thinking: ‘I have never heard such a ridiculous question’, or ‘was she hit on the head as a baby?’

Different worldview

The project went on. We used a different technique to get nutritional information and eventually found interesting results to share with the tribal department of the Madhya Pradesh government and the academic community. Life went on. But those conversations rankled.

People who do not have a regular source of income do not keep track of how frequently they purchase food and other items, as people on regular wages may.

I approached scholars, friends and family for an explanation for this strange phenomenon and got several responses. They ranged from ‘they’re illiterate – what do you expect?’ to ‘they didn’t understand your question’ or ‘they don’t know how to plan expenditures’.

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None of these sounded right, because it was clear to me that the families we interviewed were not cognitively deficient. Indeed, they appeared to be surviving under difficult social, geographical and economic conditions.

Two problems

One acceptable explanation was about my premise. I had assumed that the concept of frequency of food purchase was sufficiently important for these families to keep track of.

After all, though I may not have the relevant figures on my fingertips, a little jogging of my memory would yield quick answers: milk: 1 litre daily, bread: 2 loaves a week, potato: 1 kg a week, etc. In the context of the rural poor, who were my study group, there were two problems with this assumption that I had not foreseen.

The first is that the concept of frequency exerts a particular type of cognitive demand. Thinking about the frequency of our actions is not an obvious or natural way of negotiating our lives and the world. Formal schooling teaches us this skill. I have had 24 years of formal education. And no sooner was I done, than I found myself back in the classroom, on the other side. The same held true for the survey team.

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For example, we do not envision things in four or more dimensions for two reasons: one, it is cognitively difficult; and two, it is most often not needed. Not so for physicists and mathematicians whose minds are trained to visualise abstraction, their bread and butter.

Intermittent incomes

The second problem is more tangible. Tribal incomes are intermittent, highly dependent on seasons, and local social and economic conditions. People who do not have a regular source of income do not keep track of how frequently they purchase food and other items, as people on regular wages may.

That effort, though possible, would only cause stress from too often failing to maintain that frequency. People not doing certain things is often a natural result of them not needing to do them. Women have evolved to stop menstruating in their 40s or 50s so that our bodies can use the conserved energy to survive and support the tribe.

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The frustrating ‘hōr kya’ answers we got were pointing to an equally natural phenomenon. These families are conserving cognitive energy to use towards somehow procuring regular food from an irregular income.

Blind to reality

These two problems together reveal the basic nature of rural expenditure patterns and, more importantly, how much at odds it is with the academic economist’s view of their “budgets”.

Now, one may claim that with a little bit of effort, anyone with moderate intellectual capabilities should be able to arrive at an answer to that simple frequency question. I know that may be true were I asked to conceptualise a 4-dimensional version of a cube – I may at least be able to make a respectable attempt.

If one of our respondents had thrown her mind back to the purchases she made in the previous few weeks or months and tried to ascertain a pattern, she may have been right in not finding one. The frequency may be just too erratic.

The very word ‘frequency’, whether in the context of economics or physics, gives the impression of a regular routine, something reasonably constant. And this is problematic in the context of the rural poor.

Fragmented consumption

Shops in rural areas often stock small-size portions of things that are sold in larger containers in the cities. Shampoo sachets are a good example. Sachets and other small-portion sales are a logical corporate marketing strategy.

Someone who lives in a remote village and has an irregular source of income is more likely to purchase the shampoo sachet when she has a little money to spare than to ever consider the big bottle.

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Being an economist, I feel obliged to question a basic assumption of my ilk. Economists believe that people make rational decisions: that is, they behave as if guided by a model which maps what they would like to purchase (a preference map) on what they can afford to purchase with income on hand (a budget line).

Idealised notion

This idealised notion of a rationalised budget is ingrained in economics teaching and thinking.

Earlier this semester, I got my students to construct their personal budget lines and understand the concept of budget allocation across goods.

But this conception of the budget allocation process is made to stand on its head in the case of the tribal family, and probably equally so in the case of poor families anywhere whose incomes are irregular and meagre.

Since the budget, if it may be called that at all, is so small and erratic, the allocation is done first by the spender based on what is needed, what is available and what is affordable. This decision is made with only one consideration – survival.

Economist, mend your craft!

Any understanding of the magnitude of the budget and what formula, if any, is employed to allocate it across goods can be undertaken by the academic if they so desire, thank you very much. But this refined understanding of the academic is not something that at all models the lived realities of these people.

These families I had the chance to meet appeared to be functioning, surviving, thriving, without a budget set, without a regular income, and without an obvious plan of expenditures.

Mainstream economics seems unable to accommodate this kind of behaviour as rational.

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For decades, there have been voices within the discipline of economics – Professor Amartya Sen’s being a prominent one – advocating for new modelling techniques that can accommodate a range of observed behaviours.

Why should rationality be defined so narrowly? The behaviour observed in these villages is rational; corporate marketing executives seem to have understood this. In the process of knowledge creation, which forms a basis for societal progress, it is the economist who needs to learn a thing or two, not these resilient tribals. Hōr kya!