More is More
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Historically, most increases in consumption have lead to higher standards of living, so increasing consumption has been pretty well correlated with increased happiness. But in the developed world today the median individual has all of his or her basic needs taken care of with lots of expendable income sloshing around to buy luxuries besides. I think this warrants taking a critical look at the role of consumption in our individual lives. If you're far enough up Maslow's hierarchy that your day-to-day worries are mostly related to esteem or self-actualization, I would highly encourage taking the opportunity to look at what you're actually spending money on, and cutting out anything that doesn't actually bring you satisfaction and is perhaps only on the list out of habit, or to keep up appearances. By cutting those things out, you'll have more time and cash to spend on the things that do matter to you both now and in the future. Saving money that would otherwise be spent on something you don't care much about anyway feels really good -- give it a try!
Sure, if something you're spending money on currently does increase your happiness, then don't cut it out! But even within the categories of essentials you listed, different peoples' spending levels vary drastically. To your point, my wife and I drive a 12-year-old Hyundai Elantra that I bought in good condition for $4k on Craigslist. When I add up depreciation, gas, repairs and insurance, it costs us about $220/mo all-in. A new mid-market SUV, under the same analysis, might cost $600/mo. Now, I would probably enjoy a newer, nicer bigger car some, but I certainly wouldn't enjoy it $400/mo more, especially when I compare it to the other things I could spend that money on that I care about more, like buying a nice new deep-learning rig (4 months of smaller-car savings), or a cool extra $750k in retirement ($400/mo for 40 years compounding at 6%).
The point is, decide what's most important to you, and spend your money on that. For some people it will be buying a new car every 4 years, but I'm willing to bet that if we really thought hard about our priorities for most people it wouldn't be.
1] https://www.amazon.com/Early-Retirement-Extreme-Philosophica...
We could easily generate arbitrary amounts of production, very easily with things like software now but sandbags work too. Production is only beneficial if it is useful, which requires consumption.
An increase in consumption without an increase in production drives the price up, making business target that area for expansion and giving the store owners a windfall of money they could invest. While an increase in production without consumption leads to prices dropping, so store owners need to sell more for the same profit, businesses could face losses due to storage and waste costs, and other products could be more expensive due to resources used.