Individual consumption Planning

Self-management stipulates that consumers should have an influence over what is produced in the economy to the degree they are affected, and consumers, obviously, are very directly affected by their individual consumption. 

Consumers always possess the best possible knowledge about their own consumption preferences and their potential reactions to price adjustments and income changes. If some other instance or body; a consumer council, a federation or a distribution centre, would be assigned the task of indirectly estimating individual consumers’ consumption preferences and their reactions to price or income changes during annual planning, the consumers would perhaps be relieved of some tedious tasks and maybe experience less inconvenience but they would also lose a big portion of their influence by being further removed from the planning process. They would be stripped of their opportunity to directly affect what consumer goods and services should be produced in the year to come and in what quantities.

Also, indirect estimates of consumer preferences and consumer behaviour made by someone else, other than the consumer, always run a high risk of being intentionally or unintentionally affected by the body or agency making the estimates. And, in any case, any serious attempt to indirectly forecast consumer preferences with a high degree of accuracy and “guess” the reactions to price changes during annual planning will come with major challenges and will not be easy or uncomplicated.

In a participatory economy, consumers influence what quantities of goods and services will be produced in the year to come by actively participating in the annual planning process. They announce their best estimates of what they want to consume in the upcoming year by submitting household consumption plans in the planning iterations, considering their available income and the announced product prices. A consumption plan is basically a kind of “purchase list” with main categories of goods and services.

Households indicate their planned consumption by entering their preferred quantity of product categories in their purchase list. Consumers’ income and preferences change over time and the main purpose of asking consumers to submit proposals for what they expect to consume for the year ahead during the annual planning is to make it easier for producers to anticipate and react to changes in demand and reduce inefficiencies due to overproduction and shortages. Consumption proposals are revised between planning iterations by the consumers themselves in light of new prices announced by the IFB based on excess supply and demand after each iteration. The only constraint facing consumers is that a household’s expected income must cover the cost of planned consumption. 

Facilitating consumption planning

The process of preparing and adjusting consumption proposals must not be perceived as too cumbersome for individual consumers. If it does, it will lead to submissions of unprocessed, low-quality proposals, if submitted at all. To facilitate easy planning, the neighbourhood consumer council, or an attached support unit, should prepare and distribute best possible first draft versions of consumption plans for each member household, based on historic consumption patterns, consumer profiles and possibly, when appropriate, considering new consumption trends.

Of course, a consumer will always be free to make any adjustments she wants to a draft consumption plan before submitting it, though she may very well choose to submit the provided draft as her final proposal if she is happy with it and her expected income for the upcoming year allows for the level of consumption in question. If a consumer or household does not submit a proposal, and they continue to ignore requests for a new proposal, the council should be authorised to make necessary adjustments in the draft version until the adjusted consumption is covered by the available income. 

The consumption planning for some products will be easier than for others. For instance, future purchases of everyday consumables and services should be relatively easy to plan since purchases of such items normally don’t change much from year to year, e.g., purchases of toothpaste, shampoo, and haircuts. On the other hand, purchases of many durables, e.g., cars, motorcycles, ski equipment and television sets, may be trickier to plan since they are only purchased with years apart. And the planning of repairs and service of durables must, in any case, be based on historical statistics since it will be impossible to otherwise accurately predict the need for such services.

Consumer profiles

While consumers only have to relate to coarse main categories when preparing their consumption proposals, the number of categories will still be very large and it would be too cumbersome for an individual consumer to address each category individually. To facilitate consumers’ consumption planning further, consumer federation support units may define various “consumer profiles” for which the expected annual consumption behaviour is standardised, and the compositions of requested main product categories are based on historic consumption patterns, or new forecasts, for different categories of consumers or activities. Defined consumer profiles can have different scopes and orientations. One type of basic profile could identify relevant consumption patterns and requested products for generic and broad categories of consumers; another more specific type of profile could define compositions of requested products for more narrowly defined consumer categories or consumption related to certain activities or situations. 

During the annual planning procedure, the individual consumer could be asked to adjust her initial draft proposal by indicating which consumer profiles she associates with, instead of being asked to indicate her preference for each individual main category. A meat-eating consumer changing to a vegan diet would indicate her new preference for food products via a vegan food profile instead of specifying quantities of each individual main product category. There could be profiles for restaurant visits and travels. The planning of holiday trips could be facilitated through various customer profiles for families, young adults etc., and with different orientations, e.g., beach holidays, history, nature and with statistically defined sets of services, flights, hotel stays, restaurant visits.

Expected consumption patterns in consumer profiles may also be derived from the possession of a certain product. A holder of a certain type of car could be considered to automatically request a product mix containing specified car accessories, spare parts, service jobs, etc. 

A feasible individual consumption planning procedure

The primary goal when designing a viable consumption planning procedure for individually consumed goods and services is to create a process that, with a minimum of required time and effort, gives the individual consumer or household influence over economic decisions to the degree they are affected. The process should allow for different levels of interaction from consumers. Some consumers will be interested in preparing detailed consumption plans, others will be less inclined. Here is a fleshed-out example of how a feasible consumption planning procedure could look like: 

At the start of annual planning before the first iteration, individuals are presented with drafts of their estimated individual consumption for next year, prepared by a support unit connected to the consumer council, based on their historic consumption patterns. One can imagine an individual consumer, or a household representative, accessing a planning software client which displays all available categories of consumer goods in the economy organised in a personalised category structure together with a customised draft proposal displaying relevant main product categories.

The initial draft proposal should be based on statistics for the individual’s purchases during previous years, for instance their consumption patterns in the last 5 or 10 years. The individual may or may not adjust the initial consumption proposal before she submits it. If she wants to make adjustments, there are a number of alternative ways she could adjust the proposed initial plan. 

For instance:

1. The individual could change the suggested quantity for main product categories, either manually one-by-one or using a variety of available predefined consumer profiles.
2. The individual could specify a desired percentage change for her consumption of broad groupings of consumer goods, e.g., clothing, entertainment, technology, etc., suggesting an unaltered mix of the relevant main product categories, in the broader groups, in the year to come.
3. A planning software could ask the individual a limited number of questions to create a new updated complete consumer profile for the year. Questions would include things such as intentions to travel, change of living arrangements, dietary changes, interests, etc.
4. A mix of two or more of the above methods.

Adjustments in consumption proposals in succeeding iterations, after the initial annual planning iteration, should, on average, be relatively limited and quickly managed. It should mostly be a matter of tweaking the initial proposal slightly in response to the new announced relative prices.

Adjustments of consumption proposals in the aggregate

Once all household proposals in a planning iteration have been submitted to the neighbourhood consumer council there is a rough first estimation of the council members’ aggregate demand for individually consumed goods and services at current prices and incomes. While the individual household consumption proposal is “owned” by the household/individual, it is always the neighbourhood consumer council that prepares the final aggregated consumption proposal for their members’ consumption that is submitted in the annual planning iteration. 

There is much information affecting consumption patterns that is only available at the aggregate level, for instance statistics and demographics about expected future deaths, accidents, illnesses, marriages, divorces, births, relocations, travels, etc. and the neighbourhood consumer council should adjust its members’ aggregate demand as part of the preparation of the total consumption proposal it will submit. It could do this in collaboration with the relevant consumer distribution networks in the neighbourhood. Council adjustments should be based on historic data and statistics and take into account how individual consumption plans usually deviate from actual consumption for different product categories.

Adjustments should also reflect relevant demographics and all other circumstances affecting total consumer demand during the year in the neighbourhood. These aggregate proposal adjustments could, presumably, be easily and quickly prepared and implemented with the help of algorithms and AI based on historic trends and statistics.

The consumer council proposals should indicate relevant seasonal variations in demand for product categories. And they should adjust for additional consumption from “external” visiting consumers, both from other neighbourhoods and from other economies, which is a form of export, and they should subtract their members expected external consumption, i.e., their consumption when travelling outside the neighbourhood and to other countries, which is a form of import. Both consumption by foreign visitors and tourists from other countries and by domestic consumers travelling in other areas or countries will need to be estimated by some agency, such as a tourist board or the international trade department. 

All these adjustments at the aggregated level imply that a neighbourhood consumer council consumption proposal for individually consumed goods will not equal the sum of all submitted household consumption proposals. The necessary adjustments made by the neighbourhood consumer council should not affect individual or household consumption proposals but should be treated as a kind of collective consumption and be recorded as planned inventory changes in the neighbourhood distribution centres, which may or may not be realised as the year progresses.