I just saw an interesting piece on Catalyst (on ABC2) about the effects of choice on our psychology.
Our entire market economy is based on one idea, the more choice you have the happier you get. But science suggests we’re going against human nature. In fact, too much choice can actually make you sick.
From here: “Choice”
You can see the vast amount of choices we are faced with when taking a trip to the supermarket. Do we really need half an aisle of toilet paper to choose from? How about 20 different brands of olive oil?
I think there are a couple of factors that affect our response in the face of “over-choice”:
- The importance of the item - If we’re faced with a large number of choices for a trivial item, such as toilet paper, it induces frustration. One ply, two ply, or three ply? Plain, or pictures of dolphins or puppies? Who cares!
- Our knowledge of the items - If we can’t distinguish between the choices, then more frustration. My favourite example is olive oil. Who knows the difference between the different types and brands, and who could be bothered learning when we just want something to cook with? I just want some oil!
- The cost of the item - High cost and high choice is the worst, for me at least. The Catalyst piece spoke about how this leads to anxiety, and for some people depression.
This topic has been playing on my mind a lot lately, mostly because I’m a chronic over-thinker. I think the turning point was truly realizing that, for small items, the choice really doesn’t matter. Just pick one, whichever captures your attention first - it’s not that big a deal!
It’s been harder to deal with choice in the face of high cost items, such as when buying a camera for my US trip or my recent purchase of a new TV. I’ve been working on trusting my instincts and not second guessing myself, which appears to be working. Formulate what it is you want, find what is available in that area, and see what other people think. Internalize as much information as possible, and see what decision “bubbles” to the surface.
3 comments ↓
Choice of toilet paper would be a more diffiuclt choice without the neverending brands in a way.
More brands are usually a sign there’s more competition, which me=ans there’s more incentive to be cost effective and cost prices, which results in better prices for a consumers.
The choice you have really is a proxy for good times and happiness - in the form of savings in your wallet. Would you rather too much choice of a cheap item or no choice whilst $5 per roll of tp???
See your point though - am I a Coldpower or Fab man??? I’ll never really know, the choice is often made for me.
Good point Al. I agree that more choice is a good indicator for prosperous times.
Let me play devil’s advocate for a minute, and give you a chance to shoot down my ECON1010 level of economic knowledge. The benefit of competition is based around the premise that people have enough knowledge to make the best choice out of what’s available.
In the scenario’s described above, I don’t have the desired level of knowledge to make a choice. For TP, I really don’t care enough to want to form an opinion; for the oil I don’t have enough domain knowledge. Yet in both cases I’m being forced to make a choice with incomplete knowledge.
What’s the prevailing economist thinking on this sort of thing?
PS. Don’t get me wrong, I don’t want to live in a communist country where I get what I’m given and don’t have any choice. I’m more interested in the psychological effects of being exposed (or over-exposed) to endless, meaningless choicec.
Not necessarily a communist country - check out Amway/Network 21 for the same sort of deal
Benefit of competition is firms competing for consumers business. How do they win that?? Through providing the best quality products at the cheapest prices possible. Those firms who don’t provide this will not get any market share and will have to change something, or will simply drop out of the market. You can see combinations of best product/cheapest price in this market also. Quilted - expensive. Nasty rough stuff - cheap.
To get back to your point - perfect compeition is premised on the idea that all market participants have perfect information about everything occurring in the market. An unrealistic asumption, given you can hardly know about a tp discount in toowong given your in southport. Nevertheless, it has value in helping approximate how markets will respond to market forces.
Thoerys of imperfect information have been pushed considerably by some economists as the reasons why markets fail. In a perfectly competitive market with relatively homogenous products (e.g. tp), rpcies should drop to marginal cost in the long run. Joseph Stiglitz is the reference for this stuff if you want to read about it. World Bank economist, big name.
By not having the pre-requisite info to make an informed choice about the best value tp, markets won’t work perfectly.
For the economist - if you perfect information is provided, markets will work perfectly and the best value tp will naturally occur in the market such that you won’t have to make a choice - it will already be made for you.
Think about all the consumer choices you would have made differently with the benefit of hindsight - i.e. the stereo you bought for 300$ when another was on sale for $150 elsewhere. Make this vision absolute across the world in every situation, and assume transport/transaction costs don’t exist.
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