Leisure Spending-Behavior 9781512815917

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Leisure Spending-Behavior

Leisure Spending-Behavior

By George Fisk

Philadelphia University of Pennsylvania Press

© 1963 by the Trustees of the University of Pennsylvania

Published in Great Britain, India, and Pakistan by the Oxford University Press London, Bombay, and Karachi

Library of Congress Catalogue Card Number : 63-7854

7359 Printed in the United States of America

To Orin E. Burley and Irwin Friend

Preface This monograph attempts to meet the need for a comprehensive analysis of the determinants of the demand for leisure. Leisure spending is growing in importance from a social welfare as well as from a marketing management standpoint, but few studies are available to serve as guides for long-range market planning or social policy determination. Most of the marketing research available is confined to geographic market area analyses or simple extrapolations of existing data showing unusually rapid increases in expenditure for some particular leisure commodity or service. More penetrating analyses of the effects of population characteristics on leisure spending are needed because the private sector of the market has grown in unforeseeable ways, creating problems as well as opportunities for executives concerned with market planning. Similarly peak period demand for public recreation facilities has outstripped the supply so that in some areas public recreation promises to become a major political issue. Consequently a deeper understanding of the effect of measurable family characteristics on the slope of the leisure expenditure curves is indicated. To meet the demand for public and private leisure goods and services in the years ahead also calls for a look at the effect of the "population explosion" and the "income revolution" on the foreseeable state of the market. Those things are considered in this study. Many persons contributed to the author's thinking and it is a pleasure to acknowledge especially the help of Professors R. W. Clelland and Morris Hamburg of the Wharton vii

viii

Preface

School, who read this paper and suggested numerous modifications of the statistical techniques employed. The manuscript has benefited from the comments of Professors Irwin Friend and Reavis Cox, who made many helpful suggestions. Mr. W. R. Stevenson assisted in calculations, and Mrs. Sarah Parker patiently and painstakingly typed the manuscript through several successive revisions. The author is of course responsible for all errors and any other blemishes which mar the presentation.

Contents

Preface

vii

List of Tables

xiii

Chapter

1. Concepts and Measures to be Used in the Study of Leisure Spending-Behavior Purpose Significance of Market Segmentation Accounting Concepts of Leisure Expenditures Comparability of Time Series and Cross-Section Accounts Limitations of the Total-MeasuredLeisure Accounting Concept Estimates of Statistical Relationships Reliability and Validity of Estimation Statistics Summary 2. Aggregate Leisure Expenditures: Past and Projected to 1965 and 1970 Purpose Measured Leisure Expenditures, 1929-60 Distribution of Total Recreation Expenditures by Type of Product, 1929-60

1 1 5 7 7 8 19 22 25 28 28 29 35

X

Contents Growth Products Expenditures for Participation Sports Expenditures for Travel Projections of Measured Leisure Expenditures to the Year 1965 Uses of Projections Projection Model Sources of Variability in 1965 Leisure Expenditure Projections Projections of Expenditures for Leisure Goods to the Year 1965 The Relationship Between the Consumer's Price Index and Leisure Expenditure Summary 3. Consumers' Financial Position Purpose and Scope Market Segmentation by Income Class Effect of Income Redistribution on Leisure Spending Market Segmentation by Net Change in Assets and Liabilities Market Segmentation by Income Change and Income Expectations Consistency Tests of Empirical Relationships with Explanatory Hypotheses Summary 4. Market Segmentation by Social and Demographic Characteristics Purpose and Scope Market Segmentation and Occupational Class

40 40 46 50 50 52 54 67

74 80 83 83 85 87 97 104 108 115 117 117 118

Contents Occupational-Class Hypothesis Market Segmentation by Occupational Class Market Segmentation by Race Color-Caste Hypothesis Details of Market Segmentation by Race Implications of Market Segmentation by Race Expenditures by Demographic Class Family Life-Cycle Hypothesis Market Segmentation by Age of Family Head Role of Family Size Population Hypothesis Market Segmentation by City-Size and Region Summary 5. Applications of Consumer Expenditures Studies to Market Planning Applications Market Entry Decisions Allocation of Marketing Effort Selecting Marketing Policies: Income Elasticity and the Marketing Characteristics of Goods Effect of Technological Change on the Demand for Leisure Goods Twenty-Hour Week Change in Public Attitude Toward Use of Leisure Time

xi 118 120 135 135 136 149 150 150 160 164 169 173 178 180 180 181 183

184 188 188 192

List of Tables

1. Comparison of Expenditure-Category Definitions Used by the U.S. Department of Commerce, the Bureau of Labor Statistics-Wharton Study of Consumer Expenditures, Incomes, and Savings, and the Life Study of Consumer Expenditures 2. Comparison of Per Capita Expenditures for Recreation, Reading, and Alcoholic Beverages, from 1950 Study of Consumer Expenditures, Incomes, and Savings, and Average Per Capita Expenditures Based on U.S. Department of Commerce Accounts 3. A. Comparison of Per Household Expenditures for Recreation and Alcoholic Beverages in 1955-56 Life Study of Consumer Expenditures, and Average 1955 Household Expenditures Based on U.S. Department of Commerce Account B. Comparison of Life and SCEIS Income Elasticities at $4,000- $5,000 Income Level 4. U.S. Total Measured Leisure 1929-60 in Current Dollars

Expenditures,

5. Relationships Connecting Leisure Expenditures with Disposable Personal Income and Personal Consumption Expenditures, 1929-58 xiii

xiv

List of Tables

6. U.S. Per Capita Expenditures for Recreation, 1935-56 in 1947-49 Constant Dollars

36

7. Distribution of U.S. Total Recreation Expenditures by Type of Product, 1929-50, 1960

38

8. Number of Participants and Total Expenditures Estimated for Participant Sports in 1958

42

9. A. Expenditures of Persons Who Fished or Hunted in 1955 B. Estimated Expenditures of Fishermen and Hunters in 1955

43 44

10. Estimated Retail Expenditure on Boating, and Number of Boats in Use from 1947 to 1959

45

11. Distribution of 1955-56 Household Expenditures for Sport Goods and Equipment by Income Class

47

12. Expenditures by U.S. Citizens for Travel at Home and Abroad from 1935 to 1957

48

13. Distribution of 1955 Expenditures for Travel by U.S. Citizens at Home and Abroad

49

14. Distribution of Foreign Travel Expenditures by U.S. Residents, 1929, 1937, 1957, 1958

49

15. Per Capita Income Elasticities Based on 194856 and 1954-58 Time Series for Recreation, Reading, Alcoholic Beverage Products, and Foreign Travel

58

16. Projections of Expenditures for Recreation, Reading, and Alcoholic Beverages, by Type of Product, to the Year 1965, Based on Assumed 1965 Population, Income, Income Elasticity, and 1958 Expenditures

68

List of Tables

XV

16a. Projections of Expenditures for Recreation, Reading, and Alcoholic Beverages, by Type of Product, to the year 1970, Based on Assumed 1970 Personal Consumption Expenditures and Distribution of Measured Leisure-Spending as in 1960

72

17. Relative Importance of Leisure Items Priced for Consumer's Price Index as of December, 1954

75

18. Recreation Price Index and the Consumer Price Index, 1935-59

77

19. Annual Price Indexes for Selected Recreation and Alcoholic Beverages, 1953-59

78

20. Relationship Connecting Per Capita Recreation Expenditures to Per Capita Disposable Income, and Price Index of Recreation Relative to the Price Index for All Goods in the Consumer's Price Index in 1947-49, Constant Dollars 1935-41, 1947-56 21. After-Tax Per Capita Income Elasticities for Total Recreation by Income Class, Occupation, and Age of Family Head

86

22. Comparison of 1950 and 1956 Expenditures for Recreation, Including Reading, by Income Class

88

23. Comparison of Shares of Total Expenditures for Conceptually Adjusted Leisure-Expense Categories by Before-Tax Income Class in 1950 and 1955-56

90

24. 1950 Per Capita Expenditures for Recreation, Reading, and Alcoholic Beverages, by Type of Product and Income Class

92

79

xvi

List of Tables

25. Per Capita Expenditure Coefficients for Recreation, Reading, and Alcoholic Beverages, for Families with 1950 Income from $1,000 to $9,999, by Net Change in Assets and Liabilities as Percentage of Incomes

98

26. Per Capita Expenditures for Recreation, Reading, and Alcoholic Beverages, by Income and Net Change in Assets and Liabilities During 1950

101

27. Per Capita Expenditure Coefficients by 1949-50 Income Change and 1950-51 Income Expectations, for Families Having 1950 After-Tax Incomes from $1,000 to $9,999

106

28. 1950 U.S. Urban Per Capita Expenditures for Measured Leisure as a Percentage of After-Tax Income, by Income Class

110

29. Current Consumption Elasticity of Demand for Leisure Goods, Based on Frequency Weighted Regressions for 1950 U.S. Urban Families with Incomes from $1,000 to $10,000 and Over, and 1955-56 Total U.S. Households with Incomes from under $2,000 to $10,000 and Over

111

30. Per Capita Expenditures for Recreation, Reading, and Alcoholic Beverages, as a Percentage of U.S. Average Per Capita Expenditures for Income Classes from $2,000 to $7,500, by Age, Occupation, and Income Class

122

31. Distribution of Total, Measured Leisure Expenditures for Recreation, Reading, and Alcoholic Beverages, by Age, Occupation, and Income Class

125

List of Tables

xvii

32. Per Capita Income Elasticity for Recreation, Reading, and Alcoholic Beverage Expenditures, by Occupation for Income Classes from $1,000 to $7,500

127

33. Per Capita Expenditures for Recreation, Reading, and Alcoholic Beverages, as a Percentage of U.S. Average Per Capita Expenditures by Income Class from $1,000 to $15,000 and Over and Occupation of the Family Head

129

34. Per Capita Expenditures for Recreation, Reading, and Alcoholic Beverages, as a Percentage of Per Capita, Total, Measured Leisure Expenditures by Occupation for Income Classes from $1,000 to $7,500 and $10,000 and Over

132

35. Per Capita Income Elasticity of Expenditures for Selected Leisure Expenditures, by Income Classes from $1,000 to $10,000, by Race

137

35a. Negro-White Differences in Family Size up to Incomes of $6,000

138

36. Per Capita Expenditures for Recreation, Reading, Alcoholic Beverages, and Total, Measured Leisure by Race, Family Size, and Income Class; Expenditures in Dollars and as a Percentage of Income

140

37. Per Capita Expenditures by Negro Families as a Percentage of Per Capita Expenditures by White Families in the Same Income Class for Recreation, Reading, and Alcoholic Beverages

145

38. Distribution of Per Capita Expenditures for Recreation, Reading, and Alcoholic Beverages, as

xviii

List of Tables a Percentage of Total, Measured Leisure Expenditures, by Race and Income Class

146

39. Relative Direct and Joint Correlation Effects of Per Capita Income and Education of Family Head on Selected Leisure Expenditures Among White and Negro Families

148

40. Per Capita Income Elasticity of Expenditures for Recreation, by Family Type and Age of Family Head, for Income Classes from $1,000 to $10,000

153

41. A. Average Per Capita Expenditures for Recreation, Reading, and Alcoholic Beverages, by Family Type, for Income Classes from $1,000 to $10,000 B. Average Per Capita Expenditures for Recreation, Reading, and Alcoholic Beverages, by Age, for Income Classes from $1,000 to $10,000

155

158

42. Per Capita Income Elasticity Coefficients for Recreation, Reading, Alcoholic Beverages, and Total Measured Leisure, by Age of Family Head and Family Income Class for Income Classes from $1,000 to $10,000

161

43. Average Family Expenditures for Recreation, Purchase of Radio, TV, and Musical Instruments, Admissions, Other Recreation, Reading, and Alcoholic Beverages, as a Percentage of U.S. Average Family Expenditures, by Income Class and Age of Family Head

163

44. Dollars and Percentage of After-Tax Income Spent Per Capita for Recreation, Reading, and

List of Tables

xix

Alcoholic Beverages, by Family Size, Age, and After-Tax Family Income

166

45. Summary of Relations Between Leisure Expenditures, Family Income, and Population of Five City-Size Groups and 91 Cities, Population, and City-Size Class

171

46. Family Personal-Consumption Expenditure Elasticity of Demand for Recreation Products and Services (by City-Size and Region for 1950 U.S. Urban Population)

175

47. Distribution of Average Per Capita Expenditures for Recreation, Reading, and Alcoholic Beverages, by Region and City-Size in 1950

177

48. Arbitrary Ordinal Scale for Marketing Characteristics of Leisure Goods, Arranged in Decreasing Order of Magnitude of Current Consumption Elasticity

187

49. Calculation of the Value of Leisure on Two Assumptions, U.S.A. 1869-1948, 1929 Prices

190

CHAPTER 1

Concepts and Measures To Be Used in the Study of Leisure Spending-Behavior

PURPOSE

Leisure expenditures promise to expand even more than other consumption outlays as family income rises to a prophesied 1975 average of $7,100 per year and as the average work week declines toward 20 hours. 1 This prospect has encouraged many business firms to contemplate entry into the industries providing leisure goods and services. Public policy makers are likewise confronted with planning problems in meeting expanding demands for leisure as they allocate funds for national and state parks, the highways needed to reach them, and municipal recreational facilities of every kind. Thus the question of how much to budget for production of leisure goods and services is part of the larger problem of mobilizing the nation's productive resources. To meet demands of the leisure market in both public and private sectors the first step is to estimate what that demand 1 "Economic Growth in the United States, Its Past and Future, Statement on National Policy," Research and Policy Committee of the Committee for Economic Development, February, 1958, p. 36; and "The Twenty Hour Week," in The Hidden Revolution, text prepared in cooperation with the Ohio State University for broadcast in 1958-59; CBS Radio Series narrated by Edward R . Murrow, Office of Public Relations, Nationwide Insurance, Columbus, Ohio.

1

2

Leisure Spending-Behavior

is likely to be in some future period. Hence, the first purpose of this paper is to provide projections of aggregate demand for leisure goods and services to the year 1965 and 1970 under a variety of assumptions about income, population, and income elasticities, which may prevail at that time. Orderly market-planning calls for the ability to distinguish between groups with different expenditure characteristics. Therefore, the second purpose of this paper is to examine market segmentation in terms of economic and demographic characteristics of families. Consumer units with homogeneous characteristics tend to have similar buying specifications, but aggregate demand is composed of heterogeneous groupings of consumers whose life cycle position, income, occupation, and other characteristics vary widely. Tabulations in the B.L.S.-Wharton volumes are basic to much of this study. These data are organized in such a fashion as to permit fairly detailed analyses of expenditure variations for a number of family characteristics that have been viewed by market, sales, and media analysts as bases of market segmentation. Of course market segmentation itself is a useful concept only when the segments have differing spending characteristics. The present study employs a number of tests to identify family characteristics closely related to spending, and consequently can be used as meaningful bases for segmentation. The identification of such bases is a necessary first step in any market analysis since product and market-planning depend on estimates of the magnitude of expenditures within market segments. From a research standpoint it is fortunate that there is much evidence indicating that expenditures within income and other classes are fairly stable over time. For while the proportion of income spent on leisure items within any class tends to remain relatively stable, the proportion of families

Concepts and Measures To Be Used

3

within each class tends to shift. By reweighting the proportion of families within each income or population class it is possible to obtain up-to-date estimates of aggregate expenditures that are not substantially different from aggregate estimates provided by the Department of Commerce or trade association sources. Thus, a reasonable estimate of market segmentation can be made for any year for which income and population distribution estimates are available. A third purpose of this paper is to test hypotheses that purport to " e x p l a i n " why the observed market segmentation of aggregate d e m a n d exists. By providing an understanding of the relationships between the determinants of spending behavior and market demand, hypotheses that express relationships between family characteristics and leisurespending can reduce the uncertainties in adjusting marketing and public policy to the vagaries of consumer demand when current empirical d a t a are lacking. Tests of spending behavior hypotheses can also serve to point out explanations that stand in need of improvement if they are to be used for prediction. T h e analyses to follow will be based on time series and on cross-section data. Time series statistics are d r a w n principally from the National Income Supplements to the Survey of Current Business. Cross-section analyses are based mainly on the 1950 Survey of Consumer Expenditures conducted among 12,489 families by the Bureau of Labor Statistics, and tabulated and published in cooperation with the W h a r t o n School of Finance and Commerce in eighteen volumes entitled Study of Consumer Expenditures, Incomes and Savings.2 This study will henceforth be referred to as SCEIS. A second source is the Life Study of Consumer Expenditures, 2 Study of Consumer Expenditures, Incomes and Savings, Volume I - X V I I I , (Philadelphia: University of Pennsylvania, 1957, 1958).

4

Leisure Spending-Behavior

conducted by Alfred Politz Research for Life in 1955-56. 3 This study will hereafter be abbreviated as SCE. T h e family characteristics by which recreation, reading, and alcoholic beverage expenditures are to be analyzed are as follows: Predispositions Income expectations Enabling conditions Current after-tax income (or current consumption) Income change Net change in assets and liabilities Situational determinants Social Occupational class (and inferentially social class) Race Demographic Family life cycle Age of family head Family size Environment Region City size Analyses by after-tax income will be presented for individual product categories, and analyses by other family characteristics found to differentiate between market segments will be presented for subcategories of total recreation but not for individual products. However, family characteristics that fail to identify market segments will be considered only in the preliminary tests on total recreation. Where some question exists as to the discriminating power of a family 3 Study of Consumer Expenditures, conducted for Life by Alfred Politz Research. (New York: Time Inc., 1957.)

Concepts and Measures To Be Used

5

characteristic, the analysis will be extended to expenditures for reading and alcoholic beverages also. SIGNIFICANCE

OF M A R K E T

SEGMENTATION

Chamberlin defines product differentiation as "any significant basis for distinguishing the goods or services of one seller from another." 4 As distinguished from this idea, market segmentation refers to the disposition of buyers to establish different criteria of satisfaction of wants for a commodity or service. Side by side with product differentiation designed to bring about the convergence of demand for a variety of products upon a single or a limited offering, the strategy of market segmentation can improve the market position of individual firms by finding the divergent existing demands for which products can be designed and produced. 5 Thus Smith refers to the demand for refrigerators without freezer compartments, which originates with the segment that owns freezers. 6 Manufacturers could endow their refrigerators with extrinsic, psychologically differentiating characteristics, but unless they recognized the difference in the nature of market segments they would not be aware of the market opportunity to manufacture some with and some without freezer compartments. It is the recognition of market segmentation that in this instance leads to intrinsic product differentiation. This difference between differentiation and segmentation strategies is sometimes elusive but unquestionably real, because market segmentation always 4 Edward Chamberlin, The Theory of Monopolistic Competition, 6th ed. ( C a m bridge, M a s s . : H a r v a r d University Press, 1950), p. 56. 5 W e n d e l l Smith, " P r o d u c t Differentiation and Market Segmentation as Alternative Marketing Strategies," Journal of Marketing, J u l y 1956, p. 4. 6 Ibid., p. 5. See also, " I m p e r f e c t Competition and Marketing Strategy," Cost and Profit Outlook (Philadelphia: Alderson & Sessions, O c t o b e r 1955), V o l u m e V I I I , N o . 10.

6

Leisure Spending-Behavior

starts with the consideration of differences in the d e m a n d specifications of consumers whereas product differentiation may occur either because of the manufacturer's initiative or because of his awareness of the existence of market segments. Specifications for profitable market segmentation from a seller's standpoint have been stated as follows: 1. existence of differences in demand elasticity among buyers because of disparities of income, tastes, ignorance, and competitive alternatives; 2. means for segregating groups of buyers who differ in elasticity of demand; 3. no logical or cultural deterrents to charging prices not proportional to marginal costs; and 4. no substantial leaks between market segments where different prices are charged (i.e., selling by low price buyers to high price markets). 7 T o this list may be added the statement that preferences have to be both sufficiently continuous and characteristic of a large enough group of consumers to w a r r a n t production of commodities designed to meet specific needs of consumer units in a particular segment. Failure to recognize market segmentation has sometimes led to: . . . overgeneralization of markets and marketing effort. These are cases where intensive advertising and promotion designed to differentiate the company's products from competitors was not accomplishing its objective. . . . Determining the extent to which the market for his products may be segmented is of vital importance to the manufacturer. He has before him the task of deciding whether he should use a marketing strategy 'Joel Dean, Managerial Economics (New York: Prentice Hall, 1951), pp. 512-513.

Concepts and Measures To Be Used

7

designed to "force" the segments together by asking them to accept a uniform product, or offering products tailored to the distinguishable requirements of the segments. 8 ACCOUNTING CONCEPTS OF LEISURE

EXPENDITURES

Comparability of Time Series and Cross-Section Accounts Leisure expenditures m a y be defined as all lawful spending u n d e r t a k e n voluntarily in the pursuit of pleasure, excluding only expenditures u n d e r t a k e n to escape payments of higher costs (i.e., the do-it-yourself market). I n this study, total measured leisure ( T M L ) refers to the sum of the outlays for recreation, reading, alcoholic beverages, and for foreign travel w h e n available. I n analyses by income class, the 1950 cross-section expenditure records will include outlays for rented a n d owned vacation homes as well, although this will not be counted elsewhere as p a r t of total measured leisure. T h e rationale for this definition of total leisure was first a d v a n c e d by the editors of Fortune in a n earlier study of leisure spending: This separation [of expenditures] is primarily a matter of convenience indulged in for two purposes. First, it gets the massive component for liquor off to one side, lest it obscure the more interesting changes that are taking place in other smaller items. And it also follows the consumer's own budgeting practice separating those items that he clearly labels as recreation from those that often show up in other parts of his budget. For example, television is generally considered a household expenditure, and outlays for alcohol—especially beer—tend to get mixed up with food purchases. 9 ' " P o p u l a t i o n Research and Market Analysis," Cost and Profit Outlook (Philadelphia: Alderson and Sessions, June 1957), p. 3. 9 Editors of Fortune, The Changing American Market (Garden City, N . Y . : Hanover House, 1955), p. 199.

8

Leisure Spending-Behavior

Except for the purchase of television sets, which is included in a subcategory of total recreation identified as "purchase of television sets, radios, and musical instruments," the present study follows much the same classification procedure. However, conceptual adjustment of the product mix included in leisure-expenditure accounts is not always possible, and this creates problems of intertemporal comparisons. Conceptual differences and similarities in Department of Commerce aggregate expenditure estimates and in S C E I S and SCE cross-section expenditure estimates are shown in Table 1. Limitations

of the Total-Measured-Leisure

Accounting

Concept

Even when conceptual adjustment of accounting definitions is made, there remain at least four limitations to the usefulness of the T M L concept: 1. The total-measured-leisure concept understates aggregate market demand for leisure. 2. The item categories are usually too broad to be used in planning the market strategy for specific commodities. 3. Conceptual adjustments indicated by combinations of items in Table 1 cannot always result in comparable leisure categories. 4. Some expenditures understanding are concept of leisure, earthy compulsions

undertaken in the pursuit of h u m a n entirely excluded from the pleasure whereas some that stem from more are included.

The first stated limitation—that T M L underrates the magnitude of aggregate leisure expenditures—is of little consequence for the individual firm, but could have important implications for the construction of dynamic economic

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JS a. «i Io j= a S J3' uV 'out-; .3 sO ".sU H tií A - Ü 0 sS S C • 3S ^ .2 Si Su «- «j« 1 ||| — < -5 f i l l i 3 "8 1 « £ «h u u , i: ^« Sï iortNv aO hu I= h . ! pî O 1a-3 ? o SSfab «i Su3 c3.2 u ,2 3 •» •d oS- «r^•"•au rt S S U to 1 . 1 - *C I a S T3 J5a=>g 2«C uu.'SQ c a M [ii

16

Leisure Spending-Behavior

models. The decision to aggregate expenditures for recreation, reading, alcoholic beverages, and foreign travel, as total measured leisure rests in part on their relatively unambiguous nature, in part on their availability in the BLSWharton SCEIS and in aggregate statistics issued by the Office of Business Economics of the Department of Commerce. If consumer expenditures are classified into " f u n , " "bodily maintenance," and "training and employment" accounts, the " f u n " category might well exceed fifteen per cent of national income. A very large share of expenditures for " f u n " are found in food, clothing, transportation, housing and household operation, and personal-care categories. For example, restaurant meals, clothing of a nonathletic type worn for leisure activities, purchase and maintenance of vacation homes, sun-tan lotions, and the like, would be classified under " f u n " and subtracted from present accounts. Because of the fact that pleasure and play are indivisible from work and bodily maintenance, such a reassignment of accounts would entail double counting. Nevertheless, there are items now classified in other categories that would have been included in this study had adequate estimates of expenditures been clearly identifiable as "fun-play" outlays. Aggregate estimates of leisure spending are underestimated to the extent that these are not included. The second limitation is that broad categories such as recreation are of relatively little use in planning marketing programs for individual products within these categories. Moreover, the data on markets are at a level of generalization that will only accidentally fit the retail distribution arrangements of a particular marketing organization, and they are obsolescent for most current planning purposes. Thus the second limitation relating to problems of planning market strategy is serious from the standpoint of the individual firm.

Concepts and Measures To Be Used

17

Nevertheless, if the information for the three major expenditure categories is imaginatively interpreted, it may be helpful in organizing marketing effort for multiproduct firms. Moreover, this limitation is not crippling since analyses of market segmentation by income class are presented for a variety of specific products, and these data may be updated by reconstruction procedures to be described subsequently. T h e third restriction on the use of the expenditure statistics in T a b l e 1 would be eliminated if addition and subtraction of categories would yield strictly comparable accounts. T h e Life-SCE concepts are broader t h a n the BLS-Wharton or D e p a r t m e n t of Commerce accounts, b u t the specific items for which d a t a have been collected are so few in n u m b e r that comparable categories cannot be created by addition of subtraction of product classes. Aggregate expenditure accounts of the Department of Commerce resemble the 1950 S C E I S categories more closely although these two are not everywhere comparable. Comparisons of time series and cross-section income elasticities are therefore held to a m i n i m u m in the analyses to follow. Additional difficulty arises from the fact that numerous seemingly homogeneous categories are defined differently in each of these studies. Magazines may be taken as an example. T h e D e p a r t m e n t of Commerce found a 10 per cent divergence between the commodity flow-Census interpolation method and simple extrapolation of aggregate expenditures. 1 0 Both methods of aggregation attempt to estimate total revenue including subscriptions, but there is no way of checking one against another because Department of Commerce statistics also include outlays for newspapers and sheet music. T h e BLS-Wharton d a t a are for magazines only but include subscriptions, and the Life study does not indicate 10 National Income, 1954 Edition, Supplement to the Survey of Current Business (Washington: U . S . Department of Commerce, 1954), p. 105.

18

Leisure Spending-Behavior

whether its estimate includes or excludes subscriptions. In none of the sources is the term "magazine" so rigorously defined that it stands out as an identifiably distinct category. Consequently, within the reading classification the magazine categories are somewhat blurred. A similar lack of precise definition results in untraceable differences in levels of total expenditures as defined by the items subsumed under other major headings. ~~ Finally, the fourth limitation is philosophical in nature. The English word "school" is derived from the Greek "schole" or leisure. It connotes the Aristotelian concept of leisure: the quest for understanding that is viewed as man's highest goal. This concept stands in direct contrast to the current view of leisure as "play" or "recreation" for the purpose of reconditioning the organism for more effective work. If followed to its ultimate conclusion, the Aristotelian concept leads to the conclusion that work is leisure and leisure is found in work. The artist, the scientist, and the scholar work at their art or science or research for their living . . . theirs is the privilege of constant leisure to devote themselves to what are for them the rightest pursuits . . . the more nearly ideal the organization of society, the more nearly every individual's work would be adopted to his abilitities and the greater would be the number of people who enjoyed similar qualitative leisure through rather than outside of their work. 11 Although this view of leisure is widely held elsewhere, the concept of leisure as " f u n " is so widespread in the U.S.A. that there should be little difficulty in understanding what is to be included in this collective term. Despite these limitations, the analyses to be presented in the following chapters can be helpful in thinking about 11

Encyclopedia of Social Sciences,

Volume 19, p. 402.

Concepts and Measures To Be Used

19

leisure consumption requirements in future decades; about the marketing opportunities currently available in various segments of the leisure market; and about the reasons why certain situational determinants, enabling conditions, and environmental influences affect the level and distribution of leisure spending behavior. ESTIMATES OF STATISTICAL

RELATIONSHIPS

The basic time series statistic to be analyzed in Chapter 2 is aggregate expenditure for a given year. The basic crosssection statistic to be analyzed in Chapters 3 and 4 is average expenditure for all families in a class whether or not they reported expenditures for an item. Average expenditures per family are calculated by dividing total expenditures by the number of sample families in each class. In most instances these averages are further divided by the average number of persons per family in each class to provide average per capita expenditures. All calculations are based on average expenditures per family or per capita. These include percentages, correlation coefficients, income elasticities in the form of regression coefficients, and projections of total expenditures to present or future universe values. Market segmentation is operationally defined as the presence of persistent differences in magnitudes of income elasticity from one class to another. Thus the operational definition of market segmentation dictates that in each analysis the cross-section statistics should be income elasticity coefficients. These will usually be presented in per capita terms. In addition, if income elasticity does not differ persistently from one class to another in all classes in which there are 25 or more observations per cell, the average propensities to consume will be examined for such differences. These average propensities will be expressed as the

20

Leisure Spending-Behavior

percentage of income spent for total recreation or for total measured leisure, excluding foreign travel, for which crosssection expenditure data are lacking. If persistent differences are not found in either set of statistics, it will be inferred that the family characteristic under analysis does not provide a basis for segmenting aggregate market demand. A few of the analyses will present propensities to consume relative to U.S. average propensities rather than in absolute form. These relative propensities are useful in indicating family characteristics that identify groups whose expenditures for leisure goods are high relative to their incomes. More specifically, average per capita propensity to consume for a particular income class will for this purpose be divided by average per capita propensity to consume for all U.S. families. If both income elasticity and relative average propensity to consume leisure goods indicate that a family characteristic can serve as a basis for market segmentation, a third analysis will be made showing the distribution of crosssection expenditures among three measured leisure categories: reading, recreation, and alcoholic beverages. As indicated above, the total measured leisure concept (TML), however, also includes expenditures for foreign travel not analyzed in the chapters dealing with cross-section statistics because of a lack of data. Average per capita and average per family income elasticities are based on the double logarithmic form of the least squares linear regression equation in which the slope of the line is equal to the percentage change in expenditures for a 1 per cent change in income: i.e., the income elasticity. This relationship is expressed as follows: log Y = a + H o g X where X represents income, Y represents expenditures, b is

Concepts and Measures To Be Used

21

the above mentioned percentage change in expenditures corresponding to a 1 per cent change in income, and a is the value of expenditures when income is unity. In this form the assumed constancy of elasticity from one class to another can be satisfied only approximately and over only limited ranges of total expenditures. This well known defect of double log Engel curves has to be offset against their many advantages such as good fit, ease of computation and assumed heteroscedasticity. 12 - 13 Experimental studies have shown that the differences between the constant elasticity and the best fit equations rarely w a r r a n t the additional computational efforts, and do not alter conclusions with respect to market segmentation. Therefore, in order to approximate the assumed but non-existent constant elasticity from one class to another, the analyses to follow include the $1,000-$ 10,000 income classes only. By summarizing results of interest in a single average elasticity, the double log form permits rapid inspection of a variety of family characteristics and thus makes possible a relatively large number of analyses in a short paper. However, in the analysis of per capita elasticities by income class, arc elasticities are calculated separately for each class. Where it is desirable to show the degree of relationship between several family characteristics and expenditures by correlation methods, a serious problem is encountered: . . . the correlation coefficient obtained from grouped observations is not a satisfactory estimator of the correlation coefficient in the population; for while a satisfactory estimate can 12

Heteroscedasticity means unequal variance from cell to cell. H . S. Houthakker, " A n International Comparison of Household Expenditure Patterns Celebrating the Centenary of Engel's Law," Econometrica, October 1957, pp. 539-543. 13

22

Leisure Spending-Behavior

be obtained of the residual variance, it is not possible to obtain an estimate of the original variance on the basis of grouped data. Correlation coefficients based on grouped data can thus only be used for comparative purposes. 14

Therefore, partial and multiple correlation coefficients are used only for rough comparisons of the strength of the relationships between expenditures and each of the family characteristics taken as independent "explanatory" variables. Other issues in the estimation of statistical relationships will be considered in the sections in which they arise. Construction of 1965 and 1970 expenditure projection models is taken up in Chapter 2, methods of reconstructing crosssection data in Chapter 3, and the construction of a "marketing characteristics of goods" rank order scale in Chapter 5. RELIABILITY A N D VALIDITY OF ESTIMATION STATISTICS

When conceptually adjusted, SCEIS expenditures for recreation are 96.3 per cent of the Department of Commerce 1950 average per capita expenditure of $70.99 (Table 2). The discrepancy in alcoholic beverage expenditures is due largely to refusal of respondents to report such expenditures and to the tendency of consumers both to consider outlays for beer as grocery purchases and to lump all alcoholic beverages consumed with meals eaten away from home as restaurant expenses. An important part of the discrepancy may be due to the Department of Commerce practice of reporting expenditures for alcoholic beverages made by business firms for gifts or for entertainment as consumer outlays. In the national accounts these are treated as costs of doing business, which the same individuals would not have made in their roles as consumers. 14 S. J. Prais and H . S. Houthakker, The Analysis of Family Budgets (Cambridge: Cambridge University Press, 1955), p. 61.

Concepts and Measures To Be Used

23

Despite serious understatement of alcoholic beverage expenditure-levels the relative distribution of alcoholic beverage expenditure appears to be consistent in the 1950 SCEIS, the 1955 SCE, and a special food survey conducted by the U S D A in 1955. 15 When income classes were ranked 2. Comparison of Per Capita Expenditures for Recreation, Reading and Alcoholic Beverages, from 1950 Study of Consumer Expenditures, Incomes, and Savings, and Average Per Capita Expenditures Based on U.S. Department of Commerce Accounts

TABLE

Average per capita SCEIS as expenditures in dollars percentage of Dept. of Commerce SCEIS* Ccmmercef

Major categories Recreation excluding Recreation including Recreation including flowers, seeds, and plants 1 ' 3 Reading Alcoholic beverages

reading reading reading, potted

$54.74 66.53

$58.17 70.99

94.1 93.7

68.33 11.79 21.67

70.99 12.82 51.95

96.3 92.0 41.7

Item detail (In dollars rounded to nearest ten cents) Commerce')' SCEISt Purchase of radio, T V sets, 15.7 musical instruments 18.2 Motion picture admissions 10.1 9.2 10.0 9.7§ Newspapers, magazines Books 1.4 3.1|| Flowers, seeds, and potted plants 1.8 3.5

115.9 109.7 103.0 45.2 51.4

Sources : * SCEIS Volume X V I I I : Recreation, Table 109, p. 10; alcoholic beverages, Table 1-3, p. 4. f National Income (1954 Edition), Supplement to Survey of Current Business, op. cit., Table 30. t SCEIS, Volume X V I : Recreation items, Table 2, Part 3, pp. 56-59; SCEIS, Volume X I I I : Flowers, seeds, and potted plants, Table 2-1, p. 69. § Includes sheet music. || Includes maps. 15 Food Consumption of Households in the U.S. (Washington: U.S. Department of Agriculture, 1956), p. 5.

24

Leisure Spending Behavior

by the amounts spent in the 1950 SCEIS, the 1955 SCE, and 1955 U S D A Study of Food Consumption for an average week, the ranks were the same in all three surveys. SCEIS expenditure estimates of individual product categories do not appear to be subject to serious memory errors for large, recurrent, or unusual expenditures. However, for small nonrecurrent purchases such as books, SCEIS estimates appear too low. T h e difference is accentuated by the inclusion of maps in the Department of Commerce estimates. Conceptual corrections cannot be made because of a lack of data. SCEIS estimates of outlays are also low for flowers, seeds, and potted plants, thus indicating that memory errors are present. These apparent underestimates may simply represent the effect of sampling fluctuations, but on the other hand the Department of Commerce estimates may be too high because of the inclusion of expenditures made for business purposes, which are counted as consumer expenditures in national income accounts. Life expenditure averages cannot be accurately adjusted to fit Department of Commerce categories. Hence they depart further from the Department of Commerce estimates than do those of SCEIS. T h e major categories shown in Part A of Table 3 are not sufficiently comparable to warrant inferences about the differences in the estimates made by Life and by the Department of Commerce. They are presented only to show that expenditures in Life categories vary more from those of the Department of Commerce than do the SCEIS expenditure estimates. Expenditures in Part B are conceptually more nearly comparable, but the same difficulties are present. Consequently, the Life data will be used primarily to test explanatory hypotheses and to analyze the relative per capita current consumption or before-tax income elasticities for a period in the recent past.

Concepts and Measures To Be Used

25

SUMMARY

The purposes of this analysis are to provide projections of aggregate demand for leisure expenditures for the year 1965; to identify family characteristics that can serve as bases for segmenting aggregate demand into fairly homogeneous submarkets; and to test hypotheses that "explain" in a correlational sense why these characteristics can serve as bases of market segmentation. Total measured leisure (TML) is defined by four accounting categories: recreation, reading, alcoholic beverages, TABLE 3. A. Comparison of Per Household Expenditures for Recreation and Alcoholic Beverages in 1955-56 Life Study of Consumer Expenditures, and Average 1955 Household Expenditures Based on U.S. Department of Commerce Account*

Major categories

Recreation and recreation equipment Recreation excluding flowers, seeds, potted plants Alcoholic beverages*

Average expenditure per household in dollars Life as Dept. of percentage of Life Commerce Commerce

$215

$265

215 47

250 184

86 25

35 42 28

27 48 36

130 88 78

81%

Item detail Games, toys, sports goods, equipment Purchase of radio, T V , phonographs Spectator fees

Sources: * Life Study of Consumer Expenditures, (New York: 1957); Times Inc., Recreation and item detail, p. 113; alcoholic beverages, p. 41; Life includes expenditures at home only; Department of Commerce includes expenditures in restaurants and bars, business gifts, etc.

26

Leisure Spending-Behavior

TABLE 3. B. Comparison of Life and SCEIS Income Elasticities at $4000— $5,000 Income Level*

Life

Recreationf Admissions Luggage Magazines Sports goods Photo equipment

0.63 0.55 1.29 1.00 1.89 1.29

SCEIS

1.08 0.87 2.25 0.86 1.69 1.29

Life as percentage of SCEIS

58 63 57 117 112 100

Sources : * Memorandum of August 30, 1957, Consumer Expenditures Unit, Wharton School of Finance and Commerce. t Unadjusted for conceptual differences in Life and S C E I S definitions.

and where available, expenditures for foreign travel. This concept is subject to four limitations: it tends to understate aggregate expenditures for leisure ; the accounting categories are too broad to be used in market planning for specific products; conceptual adjustments between different studies are often crude; and finally the American concept of leisure as " f u n " is not fully consistent with the European viewpoint stemming from the Aristotelian concept of leisure as man's quest for understanding. The basic statistic from which cross-section income elasticities are to be computed is average per capita expenditures for all families in any class. Also to be computed from this statistic are average propensities to consume, the distribution of T M L expenditures, and occasionally the relevant partial and multiple correlation coefficients. The analysis of leisure expenditures by market segments is needed to enable sellers to determine production and marketing strategies consistent with characteristics of

Concepts and Measures To Be Used

27

marketing opportunities. Market segmentation is operationally defined as the presence of persistent differences in per capita income elasticity and average propensity to consume. The double logarithmic constant elasticity formula is used throughout because experimental studies indicate that better fitting forms do not change the conclusions as far as market segmentation is concerned. Cross-section data tend to underestimate the level of aggregate expenditures but the distribution of expenditures by income class appears to be consistent among a number of studies. Much of the understatement may be attributable to memory and expense classification errors by survey respondents.

CHAPTER

2

Aggregate Leisure Expenditures: Past and Projected to 1965 and 1970

PURPOSE

A g g r e g a t e expenditure data are often o u t m o d e d for current uses by the time they arc prepared for publication. T h e r e arc, however, two ways in w h i c h records o f past expenditures are helpful: first they aid in understanding spending behavior by establishing its historical relationship to other behavior, and second they furnish the raw material for the statistically treacherous but managerially imperative practice of extrapolating trends into the future. T h e first purpose of this chapter is to provide projections of aggregate leisure outlays for the expenditure categories presented by the D e p a r t m e n t of C o m m e r c e in its N a t i o n a l I n c o m e accounts. M a r k e t planning must be conducted under uncertainty as to future population and income levels. Therefore, several different sets of assumptions regarding population and i n c o m e levels have been incorporated in the analyses to follow. Furthermore, since the assumption of fixed tastes is clearly too loose, two different rates 6f expenditure change h a v e been assumed, each of w h i c h p r e v a i l e d in the recent past. V e r y fortunately the errors in dealing with large aggregates tend to be relatively small 28

Aggregate Leisure Expenditures

29

compared to the totals to be estimated. Leisure spending's relationships both to population characteristics and to income level have been remarkably stable over time, so that given a continuation of present international political conditions the task of prediction is less bold than at first it appears. A second purpose is to show historical changes in the proportions and levels of leisure expenditures as they relate to income. Finally, since the most rapidly increasing expenditures for leisure goods are concentrated in three or four categories, more detailed consideration will be given to the distribution of past expenditures among these so-called " h o t p r o d u c t " groups. Some items in the " h o t p r o d u c t " class are not mentioned here because they are included in nonmeasured leisure expenditure groups, e.g., cookout equipment. MEASURED

LEISURE EXPENDITURES,

1929-1960

There is no evidence that "total measured leisure" expenditures ( T M L ) are expanding more rapidly than expenditures on all consumer goods in the U.S. When disposable personal income increases 1 per cent, measured leisure expenditures expand by about the same proportion. When disposable personal income shrinks, measured leisure expenditures shrink by about the same proportion. This is sobering in view of the irrepressibly ebullient trade reports of expanding leisure markets. "Explosively" expanding expenditures are confined to a relatively few leisure product groups, all of which taken together account for less than 10 per cent of the $31 billions spent on T M L in 1960. It is of course possible that some of the fastest rates of increase are for nonmeasured leisure expenditures such as dining out for pleasure. However, trade estimates of $41 billion for

TABLE 4. U.S. Total Measured Leisure Expenditures, 1929-60 in Current Dollars*

Year

1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960

Disposable personal income (d.p.i.) (000,000)

Personal consumption expenditures (p.c.e.) (000,000)

$ 83,120 74,374 63,840 48,660 45,744 51,980 58,322 66,222 71,000 65,692 70,444 76,076 92,982 117,516 133,547 146,761 150,355 159,182 169,016 187,601 188,157 206,130 226,069 236,869 250,099 254,463 270,189 287,202 307,855 316,478 337,266 351,823

$ 78,952 70,968 61,333 49,306 46,392 51,894 56,289 62,616 67,259 64,641 67,578 71,881 81,875 89,748 100,541 109,833 121,699 146,617 164,973 177,609 180,598 194,026 208,342 218,328 230,542 236,557 254,421 267,160 284,756 292,956 313,835 328,926

Recreation (including reading) Total dollars (000,000)

$

4,331 3,990 3,302 2,442 2,202 2,441 2,630 3,020 3,381 3,241 3,452 3,761 4,239 4,677 4,961 5,422 6,139 8,621 9,352 9,603 9,801 10,768 10,961 11,374 11,832 12,189 13,020 13,844 16,082 16,973 18,304 19,408

.

%°f d.p.i.

%of

5.2 5.4 5.2 5.0 4.8 4.7 4.5 4.6 4.8 4.9 4.9 4.9 4.6 4.0 3.7 3.7 4.1 5.4 5.5 5.1 5.2 5.2 4.8 4.8 4.7 4.8 4.8 4.8 5.2 5.4 5.4 5.5

5.5

p.c.e.

5.6 5.4 5.0 4.7 4.7 4.7 4.8 5.0 5.0 5.1 5.2 5.2 5.9 4.9 4.9 5.0 5.9 5.7

5.4 5.4 5.5 5.3 5.2 5.1 5.2 5.1 5.2

5.6 5.8 5.8 5.9

Sources: * National Income, 1954 Edition, Supplement to the Survey of Current Business, Table! and Survey of Current Business, July 1960, ibid., July 1961, Tables 4 and 15. f Excluding alcoholic beverages.

Alcoholic beverages Total dollars [000,000)

%of d.p.i.

%°f p.c.e.

Total dollars (000,000)

$

$

665 2,000 2,555 3,175 3,465 3,270 3,420 3,600 4,185 5,080 5,040 6,775 7,485 8,360 8,620 7,930 7,730 7,880 8,200 8,735 8,885 8,830 9,050 9,360 9,140 9,210 9,600 9,860

Foreign travel by U . S . residents

1.5 3.8 4.4 4.8 4.9 5.0 4.8 4.7 4.5 5.7 3.8 4.6 5.0 5.3 5.1 4.2 4.1 3.8 3.6 3.7 3.6 3.5 3.3 3.3 3.0 2.9 2.9 2.8

1.4 3.9 4.5 5.1 5.2 5.1 5.1 5.0 5.1 5.7 5.0 6.1 6.2 5.7 5.2 4.5 4.3 4.1 3.9 4.0 3.9 3.7 3.6 3.5 3.2 3.1 3.1 3.0

632 611 445 334 258 276 303 368 433 379 333 172 189 128 143 175 267 450 597 696 828 893 889 1,044 1,174 1,263 1,456 1,625 1,739 1,902 2,109 2,331

7.of %°f d.p.i. p.c.e.

0.7 0.8 0.7 0.7 0.6 0.5 0.5 0.6 0.6 0.6 0.5 0.2 0.2 0.1 0.1 0.1 0.2 0.3 0.4 0.4 0.4 0.4 0.4 0.4 0.5 0.5 0.5 0.5 0.6 0.6 0.6 0.6

0.8 0.9 0.7 0.7 0.6 0.5 0.5 0.6 0.6 0.6 0.5 0.2 0.2 0.1 0.1 0.2 0.2 0.3 0.4 0.4 0.5 0.5 0.4 0.5 0.5 0.5 0.6 0.6 0.6 0.6 0.7 0.7

T o t a l Measured Leisure Expenditures Total dollars (000,000) $ 4,963f 4,60 If 3,747f 2,776t 3,125 4,717 5,488 6,563 7,279 6,890 7,205 7,533 8,613 9,885 10,144 12,372 13,891 17,431 18,569 18,229 18,359 19,541 20,050 21,153 21,891 22,282 23,526 24,829 26,961 28,085 30,013 31,599

%°f d.p.i.

6.0 6.2 5.9 5.7 6.9 9.0 9.4 10.0 10.3 10.5 10.2 9.8 9.3 9.8 7.6 8.4 9.3 11.0 11.0 9.7 9.7 9.4 8.8 8.9 8.8 8.8 8.6 8.6 8.8 8.9 8.9 9.0

%°f p.c.e.

6.3 6.5 6.1 5.6 6.7 9.1 9.7 10.5 10.8 10.7 10.7 10.4 10.5 11.7 10.0 11.2 11.4 11.9 11.3 10.3 10.2 10.1 9.6 9.7 9.5 9.4 9.3 9.3 9.5 9.5 9.6 9.6

32

Leisure Spending-Behavior

leisure seem to entail much double counting, 1 and in addition, there is no evidence either that the measured expenditure component of leisure is nearly as large as trade estimates indicate or that expenditures in any of the main subcategories of leisure will attain the levels implied by trade sources in the coming decade. Consider the evidence shown in Table 4. In 1960 total measured leisure was 9.0 per cent of disposable personal income (d.p.i.) as compared to 10.2 per cent in 1939, and 6.0 per cent in 1929 excluding 1929 expenditures for alcoholic beverages, then illegal. Even though cyclical fluctuations in proportion of disposable personal income devoted to T M L are evident during the time period in question, these movements have been small. T M L has remained between 9 and 11 per cent of d.p.i. since the repeal of prohibition. Additional information may be obtained by examining the component series of Table 4. Each shows its own cyclical and secular behavior; but only foreign travel exhibits percentage increases substantially in excess of percentage increases in d.p.i. Since foreign travel comprises only approximately 7 per cent of T M L after these increases while the relatively slow-growing recreation and alcoholic beverage components constitute the remainder, there is no evidence here to suggest any rapid expansion of T M L . In addition to the fact that the aggregate amounts spent for measured leisure have failed to increase at a faster rate than d.p.i. for a fairly long period, rates of increase of expenditures in categories other than recreation have not changed substantially in the most recent five-year period (1954-1958) for which elasticity estimates have been computed. Table 5 shows that even for foreign travel the income elasticity has declined from a 1946-56 average of 1.93 to a 1 For one recent illustration, see "$41 Billion for Fun: W h o Sells Most to Leisure Market and W h y , " Printers Ink Special Report, J u l y 10 1959, pp. 22 ff.

Aggregate Leisure Expenditures

33

1954-58 average of 1.74. Moreover, alcoholic beverage expenditures are increasing at a much slower rate relative to increases in income than was true for the 1935-56 period during which consumption increases were comparatively rapid. Since Table 5 is the prototype for other summary tables in this study, a few words describing the contributing computations are in order. The right-hand portion of the table is similar to the left-hand portion with p.c.e. substituted for d.p.i. In the first row, d.p.i. is the independent variable X with five values corresponding to the years 1954-58. Total recreation expenditures for those years are the values of the dependent variable Y. The linear leastsquares regression equation of log Y on log X is then found by standard methods, and the income elasticity b = 1.526 is the slope of this line. It shows that for the years 1954-58 there was 1.526 per cent change in expenditures for recreation for every 1.000 per cent change in disposable personal income. The standard error of estimate, S = 0.003, shown in the next column is abbreviated notation for •Slog Y . log x' a statistic that measures dispersion of the points (log X, log Y) about the double log regression line. It gives the reader an idea of which linear fits are "best" in the sense of least squares. The coefficient of determination r 2 = 0.91, shown in the third column, is r2 log jr log Y measuring the degree of relationship between log recreation expenditures and log d.p.i. for the five years in question and allowing the usual interpretation in terms of proportion of variance explained. Other computations are similar, row by row.

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