Welcome to The Conversation’s series on megatrends, on six of the most compelling economic, social, environmental, political and technological changes Australia must grapple with, according to the CSIRO.
In our final article of this series, Stefan Hajkowicz asks a simple question with a difficult answer: how do we fulfill our greatest desires?
So don’t get your hopes up about this last megatrend. It might not be everything you wished for. Seriously though, the “great expectations” megatrend has been the hardest to articulate but has probably captured the most attention. We had originally come up with the title “The way you make me feel” but the CSIRO Futures team felt Charles Dickens was more up-market, and more CSIRO, than Michael Jackson.
The Great Expectations megatrend rests on the economic theory of diminishing marginal returns. What’s that? Well it’s best explained by an example.
Imagine you’re heading off to the pub for drinks with friends. You enter the bar in a neutral state of happiness.
Beer 1 to 2 gives you a modest boost of utility. So you’re feeling happier. Beer 2 to 3 improves your happiness again, but to a lesser extent. Each additional beer provides less utility until we reach the maximum. After that each beer provides negative utility.
Economists call happiness “utility”. Just about anything you consume (for instance, shoes, food, and watches) will have diminishing marginal returns to utility. That’s why people switch from consuming physical products towards the consumption of material-free experiences (holidays, movies, a walk in the park). People of the future will have great expectations for experiences.
And it makes sense. Laboratory experiments in the field of psychology have found that people feel happier after an experiential purchase compared to a product purchase.
The preference for experiences is one factor contributing to the decline in material consumption relative to population, while income growth material consumption is declining in countries with advanced economies.
Data from the OECD supports this observation by showing material consumption has declined on a per-capita and per-GDP basis over the past few decades.
This will also happen in line with income growth in Asian countries - see the Silk Highway megatrend. In Asia, more than one billion people will transition out of poverty and into the middle income classes. These people will be in a position to look beyond the basic necessities of life in search of higher level services and experiences.
It’s also happening in Australia. Over the past two decades Australian households have substantially increased weekly expenditure on art, culture and entertainment. Film, digital media and literature have experienced the biggest jumps.
According to the Australian Bureau of Statistics, from 2003-04 to 2009-10, average household expenditure on cultural services rose from A$36 to A$45 per week; a 25% jump compared to the general consumer price index rise of 19% over the same period.
Another angle on great expectations is the desire for real-world face-to-face human interaction. This might be what creates a glass ceiling for online expansion. Single person dwellings are growing most rapidly of all household structures.
There is also evidence in emerging social science studies that the friendships people have on social media sites are not fulfilling. We think that the ability to have real-world face-to-face interactions with other humans will be an increasingly important driver of societal and consumer decision making into the future.
Lastly the Great Expectations megatrend is written from the perspective of a wealthy country. Even though the situation is improving many of the world’s people, including some disadvantaged demographics in Australia, live in survival mode.
They have an expectation not for higher-order experiences but for basic necessities (food, water, shelter, clothing, personal safety).
Tragically these expectations are unfulfilled for far too many of the world’s people. For example, the United Nations found that in 2008 around 24% of the world’s population lived on less than US$1.25 per day (down from 47% in 1990).These people don’t have great expectations. They have basic expectations.
So this takes us to the end of all six megatrends. We’re going to update them around the same time next year - or a bit later on if we’re busy on other stuff. But we do aim to have regular updates. If you’ve got this far thanks for coming along. We hope we can continue to provide you with insights and ideas that inform, entertain and engage.
More in the megatrends series: