In his book In Praise of Slowness, the journalist Carl Honore says that all the world's a store and all the men and women merely shoppers. Particularly at Christmas it can feel like that.

I think we all know what consumerism is. Consumerism is the belief that personal happiness lies in the purchasing of material goods. Sometimes that idea motivates our behaviour without us consciously believing that consumption is the source of happiness. But I have to say that I regard "consumerism' as merely a euphemism for "materialism'. Materialism means a devotion to material rather than social or spiritual considerations. I've done a lot of thinking about materialism in recent years, so please forgive me if I use that term more than consumerism.

The material is an important and, indeed, inescapable part of our lives. You can't live a life of utter unconcern for the material aspects of life - unless you've got someone who worries about them for you. You can't avoid spending a fair bit of your life buying things in shops unless you're the Queen. And it would be foolish to spend all that time and money with complete disregard for the choices available, the prices being charged, the amount we have available to spend and the need to get value for money. So it's really a question of how high a priority you attach the material business of life. A question of whether you view the material as a means to some more important end - to staying alive and healthy so you can be of service to others, for instance - or as an end in itself. A question of where your heart is. As Christians like to say, it's not money that's the root of all evil, it's the love of money. Materialism and consumerism are about the love of money - for the things it will buy. Some people are open about their love of money and material possessions, but I think there's a much larger group - perhaps including many of us - who, while never espousing materialism as the great guiding principle of our lives, nonetheless end up allowing material concerns to crowd out relational and religious obligations that, in principle, we've always held to be more important. The material is seductive. Why? Because it's tangible - you can see it, it's always there and its importance is readily apparent, whereas the relational and spiritual are intangible. You can't see them and it's easy to underestimate their importance. And, since they're less likely to have deadlines attached, they can be pushed back in the queue for our time and attention.

All of us are materialist to a greater or lesser extent. And in seeming to preach a sermon against consumerism, I don't mean to imply that I'm impervious to its temptations. I suspect that Christians are particularly susceptible to the temptations of consumerism. Why? Two reasons. First because, with so many of the pleasures of the flesh declared off-limits - smoking, drinking, gambling, illicit sex - there's a tendency to break out in areas that, for reasons I don't quite understand, our preachers seem reluctant to speak out against. But second because the Christian life of sobriety, honesty and diligence is conducive to material success. I suspect many of you would be in the position of saying, well, yes, I do have a comfortable income and our family does live well, but I don't love money, I'm not a materialist. There's a good test of this claim: how generous are you? If all your money isn't important to you, how much of it do you give to people who need it more than you do? From my reading of the psychological literature I've discovered another test: how much do you throw away? Some research suggests that people with materialist values are reluctant to give up all the stuff they've acquired.

There's nothing new about materialism or even its trendier brother consumerism. That's why you can find a fair bit about it in the Bible if you've a mind to. But I think it can be demonstrated that we're more materialist than we used to be and that at present we're going through a period of what I call hyper-materialism. Sometime over the past 20 or 30 years we suddenly became a lot more preoccupied with money than we had been. Materialism is the dominant characteristic of our era. Our descendants will look back on the last part of the 20th century and the early part of the 21st as The Age of Materialism. That's true not just for Australians, but for people throughout the developed world. Such claims about changes in people's values are hard to prove, but a leading American social psychologist, David Myers, has produced impressive evidence for the United States.

In an American poll that regularly asked people what factor was most important in a job, "high income' rose to second highest between the early 1970s and the early 1980s. Now consider the evidence from the American Council on Education's annual survey of over 200,000 newly entering college students. Asked about their reasons for going to college, the proportion agreeing that an important one was "to make more money' rose from half in 1971 to almost three-quarters by 1990. And the proportion believing it "very important or essential' that they become "very well-off financially' rose from 39 per cent in 1970 to 74 per cent in 1990. Over the same period, the proportion who began college hoping to "develop a meaningful philosophy of life' slumped from 76 per cent to 43 per cent. This reversal stayed unchanged throughout the 1990s. Professor Myers calls this cultural shift "the greening of America'. And though our bank notes are multicoloured, I don't doubt it's true of us, too.

If we have become more materialist over the past 20 or 30 years, what has changed to bring this about? I don't know. It's tempting to blame it all on economists, especially that evangelistic brand of economist known as the economic rationalists. But I think it would be wrong to blame economists for starting the trend to hyper-materialism. The economic rationalists in the bureaucracy have been proposing the same policy prescriptions to their political masters for many decades. The question is, why was it that, from the early 1980s, the pollies began accepting the advice they'd ignored for so long? Perhaps because they sensed some change of attitude - some more materialist tendency - in the electorate. But even if it's wrong to blame economists for starting the trend, there's no denying that, by the policies they have persuaded the politicians to adopt, the economic rationalists have considerably heightened the trend. Take the rationalists out of the picture and we wouldn't be as materialist as we are today.

Economic rationalism turns out to be the religion of materialism and rationalists the high priests in the temple of mammon. Economics is the study of how best to achieve humankind's material objectives. It's meant to be all about means, and say nothing about ends. But it's about material ends, and the best way to maximise those ends. It's on about efficiency in the use and allocation of physical resources so as to maximise consumption. Even an economist as sensible as Keynes, for instance, wrote that "consumption - to repeat the obvious - is the sole end and object of all economic activity'. This is why economists are obsessed with promoting economic growth - which means continuously increasing production and consumption of goods and services, and involves an ever-improving material standard of living.

Now, I think you have to agree that, given their objective, the economic rationalists' advice on policy has been very successful. Over the past 15 years of economic expansion since the recession of the early 90s productivity has grown strongly, real incomes have grown strongly and consumer spending has grown strongly - all of them more strongly than during the 70s and 80s. So what's the problem with economics? The problem is that it's one-dimensional analysis. It focuses exclusively on our material objectives - on factors whose value can be expressed in dollars - while ignoring the non-material. In consequence, non-material ends - such as family life, relationships more broadly, and the spiritual - tend to be sacrificed to material ends. We should be optimising our material objectives, given the competing claims of our non-material objectives, but instead we maximise the material at the expense of the non-material because the nonmaterial is excluded from our calculations. At one level the economists say, sorry, the material is all we're professionally competent to advise on - which is true - but they're always tempted to forget the limitations of their model - all the factors they have deliberately abstracted from - and lay down the law about what we must do to maximise efficiency as though consumption was our only goal.

If we had any sense as a community we'd take advice from economists about the material, but then weigh it against the advice of people who specialise in the social and spiritual. Why don't politicians seek wider advice? Why do they allow people whose advice is so narrow so much influence? Because they're responding to what they believe is the materialist preferences of the electorate. Why is almost every politician - Labor or Liberal - a vocal believer in rapid economic growth and rising material living standards? Because they're convinced that's what the punters want. Why do even Green politicians rarely express any doubt the supreme objective of maximising economic growth? Because they believe their opponents would wipe the floor with them if they did.

Conservative politicians are always lecturing us about the evils of envy. Say that a tax cut is unfair because high income earners got disproportionately more than middle and low income earners and you'll be accused of indulging in "the politics of envy'. Trouble is, they never lecture against the opposite vice, greed - of which there's a fair bit about. So their message on behalf of the well-off is, "it's immoral for you to envy the fruits of my greed'.

The main device the economic rationalists have used to increase economic efficiency has been increased competition - competition from imports, or competition from other domestic players because of reduced government regulation of markets. But one of the consequences of the increased competitive pressure to which business people have been subjected has been to make them more aggressive in urging governments to change laws in ways that benefit producers. Businesses are in the business of satisfying our material needs. So the pressures on politicians from business are also pushing them in a materialist direction.

Many people imagine that capitalist economies must exist for the primary benefit of the capitalists. But, as hinted at in that quote from Keynes, one of the tenets of conventional economics is the doctrine of "consumer sovereignty'. This is the belief the chief beneficiaries of the economy should be - and are - consumers. So production isn't an end in itself, it's a means to an end - consumption. And consumers are the king of the capitalist economy because the operation of markets means that producers maximise their profits only by giving their customers exactly what they demand.

If you find that hard to believe - so you should. It simply doesn't fit with the pervasiveness in modern market economies of advertising and other marketing techniques. Advertising is an embarrassment to economists. They don't like thinking about it and try to tell themselves it's purely informational - that the purpose of advertising is merely to make sure consumers know what you're selling, how much you're charging and where your shop is. But we all know advertising is persuasive. The advertiser is seeking to persuade us to purchase his product and he does this not by intellectual argument but by appealing to our emotions. In the old slogan, advertisers sell the sizzle, not the steak. The ads for margarine, for instance, are trying to persuade us that buying a certain brand of marg - or sliced bread - is the way to have a happy, healthy family. Ads for menthol cigarettes used to associate themselves with good-looking women on pristine tropical beaches. At an intellectual level, these propositions are absurd. At an unconscious level, however, they work - which is why advertising persists. All of us are far more influenced by advertising than we realise.

And it's not just the ads that promote consumerism. Most of the TV shows and films we see do it too. They do it by portraying a totally unreal world in which most people are very good looking, slim and fit. They live in beautiful, always-tidy homes, in leafy suburbs. Families always get on well together and no one's ever boring or bad-tempered. All this exposure to the beautiful people leaves many of us perpetually dissatisfied with our own far-from-perfect lives and unconsciously trying to attain the beautiful life by buying things. The trouble with all this is that it turns consumer sovereignty on its head. This is not the producers as servants of the consumers, it's producers seeking to con consumers into buying more stuff - stuff they didn't know they wanted and that won't satisfy the crazy aspirations the advertisers have excited.

Another device the modern economy uses to promote consumption is the greater availability of credit, particularly through personal loans and credit cards. In principle, credit should produce only an essentially once-only drawing forward of consumption, not a continuous increase. I suspect that those people who make heavy use of credit cards don't consume all that much extra at the end of the day. Rather, their impatience to draw forward their consumption means they end up devoting a lot of their income to interest payments. It's true that household debt has grown amazingly over the past decade, and that some people will get into difficulties. Even so, I think the extent of problem with household debt is easily exaggerated. The great majority of the growth in debt is due not to credit cards but to increased borrowing for housing - including for investment housing.

That raises another spectacular demonstration of rampant consumerism in recent years, the record housing boom with its doubling of house prices. House prices and mortgage debt doubled for various reasons, but by far the greatest reason was the halving of mortgage interest rates following our return to low inflation. The halving of rates roughly doubled the amount people on a given income were able to borrow. They didn't have to respond by borrowing more to move to a bigger and better house, but many people did. Because they all did it at pretty much the same time, however, they main thing they achieved was to bid up the price of houses. It was, as I say, a spectacular display of rampant consumerism. Australians idolise their homes.

Another manifestation of the Age of Materialism is the longer hours some of us are working. Not every person with a full-time job is working long hours, but a significant minority are. It's fashionable to see longer hours as something that's been forced on us by grasping employers, but I believe most long hours are voluntary and are paid for by employers, directly or indirectly. People are doing it for the money, either because they want to buy more stuff or because they need to pay off the debts they've already incurred from buying more stuff.

People often ask what happened to all that extra leisure time the experts predicted back in the 70s would have come our way by now. The answer is that we've had plenty of productivity growth that would have permitted us to work fewer hours without loss of pay, but we've preferred to take those productivity gains in the form of higher pay rather than shorter hours. Another sign of our increased consumerism.

Perhaps this is the time to point out that all the increased consuming we've been doing has done nothing to make us any happier. Surveys of how satisfied people are feeling about their lives don't go back far in Australia, but they do in most other developed countries and the conclusion from all of them is the same: the population's average level of subjective wellbeing hasn't budged in decades - it hasn't fallen, but it hasn't risen despite very much higher material living standards. Why not? Psychologists advance two reasons.

First, because of a pervasive human trait psychologists call adaptation. We do feel happier after we've had a pay rise, bought a new car or dress or house, but that feeling of pleasure doesn't last long. It doesn't take long before we get used to our newly improved circumstances and come to take them for granted. They get absorbed into the status quo and we go back to being about as happy as we always were. Studies show that even people who win the lottery return to their earlier level of happiness within a few months. To put this point another way, soon after we achieve a higher level of material success, our aspirations move up another notch and we go back to being dissatisfied with our achievements. Surveys show that a lot of people believe they'd be happier if only their incomes were "just a little bit higher'. Trouble is, they always believe that. Their income rises over time, but they're still saying, I'd be happier if only I had just a little bit more. Talk about the donkey chasing a carrot. Actually, the psychologists call it the "the hedonic treadmill' - you keep running and running to earn more and spend more, but you never get anywhere.

The second explanation psychologists propose for the inability of general increases in the standard of living to make us happier is our tendency to compare ourselves with those around us. When I get the same pay rise as everyone else, that doesn't do a lot for me, but when I get a bigger pay rise than other people that does make me feel good. Trouble is, the people I've passed in the status race now feel worse. And when we all engage in an eternal struggle to get ahead of each other - a kind of arms race - no one feels better off for long.

Australia is a prosperous country. Most of us managed to satisfy our most basic needs for food, clothing and shelter a long time ago. So what have we done with all extra income we've enjoyed since then? I believe most of it has gone on what economists call "positional goods' - goods (or services) that, as well as doing whatever it is they're designed to do, are also intended to demonstrate our superior position in the social pecking order. Why do we buy an expensive European car when an old Toyota would get us from A to B just as comfortably and reliably? Because we want to display our socio-economic status. Why do we send our kids to private schools, dress toddlers up to the nines, keep moving to bigger houses in better suburbs? Because we're trying to impress people. The older term for it, of course, is "conspicuous consumption'. Why do we pressure governments to cut taxes? So we can devote more of our incomes to conspicuous consumption.

I said earlier that the modern emphasis on reforming the economy to make it more efficient and so raise living standards even higher gave priority to the material at the expense of social and spiritual objectives. The man who's done most to make me conscious of the price we're paying for our material success is Dr Michael Schluter of Britain's Relationships Foundation and now our own Relationships Forum. Consider the way WorkChoices' attack on penalty rates seeks to continue the abolition of the weekend - or the sanctity of Sunday, if you like - begun by the deregulation of weekend trading. There's no doubt that the way to raise the productivity of capital is to keep factories working and shops open for as close as we can get to 24/7. But there's equally no doubt that the more we move away from having common days when most members of a family aren't working or at school, the more strain we put on families and other relationships. Similarly, there's no doubt that economic efficiency and living standards are raised by having resources, including labour, as mobile as possible. But there's equally no doubt that moving people around the country is deleterious to our relationships - relationships that psychological research joins the Bible in proclaiming to be of the highest importance to our lives.

But let's say we were successful in persuading people to be less materialistic and consumerist. Or say we banned all advertising. Wouldn't the economy collapse? You often hear people say that - and there are plenty of business people who'd be happy for you to believe it - but the answer is no, not really. They're just displaying their ignorance of economics or lack of imagination. The first point is that the economy exists to serve us, not we it. It's true that if everyone suddenly slashed their consumption, this would plunge the economy into recession and rising unemployment. But the economy would eventually adjust. In any case, it's hardly likely that everyone would slash their consumer spending at once. It's more likely to be a gentle slowdown in the rate of growth of consumption and hence in the economy's rate of growth. And that wouldn't be a bad thing if, in return, we got the benefit of more stable and satisfying relationships and more room for the spiritual. Assuming the same thing wasn't happening in all the economies with which we trade, we could move to a position of lower consumption, but higher saving, increased exports and falling foreign debt. Does that sound bad? But let's assume the worse and imagine a situation where the economy wasn't growing fast enough to generate sufficient additional jobs for people joining the workforce. We could then engage in the job-sharing economists have frowned on as being not particularly efficient. But that's the point: we'd give up some efficiency - some growth in income - in return for better relationships - with man, and God.

Ross Gittins is Economics Editor of The Sydney Morning Herald. This article is adapted from his address to the Baptists Today conference at Collaroy in August, 2006.