What Is Household Consumption?

Household Consumption

• Household income can be loosely defined as "the earnings from productive activities and current transfers," according to the World Bank, or the resources that allow people to purchase goods and services. Contrastingly, household consumption can be considered as the sum of resources spent on those goods and services. The World Bank draws a distinction between household consumption and household expenditures. The latter includes all nonmonetary transactions that still constitute some form of consumption. Additionally, if a good or service is purchased, it may not be consumed right away, and one of the tasks of those who measure household consumption is to approximate the value of goods when they are actually consumed rather than when they are purchased.

Measurement Difficulty

• According to the European Environment Agency, "understanding household consumption patterns is about understanding human behavior." People live in an increasingly globalized world, which means, among other things, that you have more access to goods that you can consume. The European Environment Agency also cites technological breakthroughs, smaller households, aging populations and increased international mobility as factors contributing to the increasing difficulty in making accurate determinations of household consumption.

Measuring Household Consumption

• According to the Organization for Economic Cooperation and Development (OECD), anyone measuring household consumption should disregard consumption by the public sector as well as immediate purchase of goods and services by the private sector and focus on household expenditures alone. A household consumption measurement should include all goods and services expenditures within the financial market but should also include transactions that take place outside of financial markets, such as interfamily transactions and consuming goods directly from the environment.

Sustainable Consumption

• Household consumption has become a key issue in the context of sustainability and environmental impacts. The European Environment Agency points out that the savings offered by technological advances that make industrial production more efficient have been offset by increased availability and consumption of a more diverse range of goods by consumers. Similarly, because consuming directly from the environment involves no monetary transaction, household inhabitants can overconsume goods directly from the environment. Because of the many negative impacts of unsustainable household consumption -- personal bankruptcy, large-scale financial mismanagement, environmental harm -- many groups that measure household consumption strive for sustainable household consumption. This is defined by the Norwegian Ministry of Environment as "the use of goods and services that respond to basic needs and bring a better quality of life, while minimizing the use of natural resources, toxic materials and emissions of waste and pollutants over the life-cycle, so as not to jeopardize the needs of future generations."