Is consumer the king?

Standard theory in Economics assumes that consumer’s preferences, through market mechanism, have an important role in determining the success of firms. As John Kenneth Galbraith states in his address of the President of the American Economic Association: “The business firm is subordinate to the instruction of the market and, thereby, to the individual or household. The state is subordinate to the instruction of the citizen. There are exceptions but these are to the general and controlling rule, and it is firmly on the rule that neoclassical theory is positioned”.

It seems intuitive that firms, in order to survive and attain a certain success in the market, must follow consumer’s preferences. The economist tends, then, to find a causality going from consumer’s preferences to firms’ success (the successful firm is the one that is able to better serve consumer’s needs). Nevertheless, economists like Veblen or Galbraith himself show that, sometimes, other social influences (status, advertising…) can influence consumption via their influence over consumers’ preferences. In his book The Painted Word, art criticism Tom Wolfe gives a more radical example of this vision by showing how in arts the public hasn’t any influence in determining the successful artistic movements or artists. The process develops in two phases that the author describes as follows:

“(1) The Boho Dance, in which the artist shows his stuff within the circles, coteries, movements, isms, of the home neighborhood, boehmia itsefl, as if he doesn’t care about anything else (…)

(2) The Consummation, in which culturati from that very same world, le monde, scout the various new movements and new artists of bohemia, select those who seem the most exciting, original, important, by whatever standard -and shower them with all the rewards of celebrity.”

The restricted character of these culturati integrating le monde is explicitly described when Wolfe writes “(…) [le monde]  is made up of (in addition to the artists) about 750 culturati in Rome, 500 in Milan, 1,750 in Paris, 1,250 in London, 2,000 in Berlin, Munich, and Düsseldorf, 3,000 in New York, and perhaps 1,000 scattered about the rest of the known world. That is the art world, approximately 10,000 souls (…) restricted to les beaux mondes of eight cities”.

It seems than in some environments the consumer lost his/her scepter and the title of the chapter from which the previous quotation was extracted cannot be more explicit: “The public is not invited (and never has been)”.