Predictably Irrational: The Hidden Forces That Shape Our Decisions
Revised and Expanded Edition, Dan Ariely, Harper Collins 2009, 322 pages
In short, this book was an enjoyable read. It offers a stinging retort to the bedrock wisdom that underlies markets and economic thinking today and it offers tremendous value for anyone who wants to know about rationality . This book is a good base level retort to the idea that we are all biological calculators, rational and cold. Ariley quotes Shakespeare who is speaking highly of the rationality of mankind:
What a piece of work is a man! how noble in reason! how infinite in faculty! in form and moving from express and admirable! in action how like an angel! in apprehension how like a god! The beauty of the world, the paragon of animals. – From act II, scene 2, of Hamlet. (pg.xviii)
I think on one level we all know that’s not true, folk psychology informs of us that sometimes emotions influence our decisions in an irrational manner. Ariely takes it a step up, it’s not just dust storms of emotion that cloud us from the rational prize, it’s more that the way we think, our biological circuits are made in a way that preclude us from making rational decisions. It’s not that we are occasionally irrational, but we are in many ways systemically irrational.
The book The Consumer Culture: a reference handbook, is a goldmine of information on consumerism and consumption. I’m providing a series of summaries to help educate people on topics about consumerism.
Douglas J. Goodman, Mirelle Cohen, ebook 251 pages, 2003 ,ABC-CLIO
Chapter: 2, economics of Consumption (part of the larger chapter of ‘The contradictions of consumer culture’).
The supremacy of the market has become the natural law of the land in our liberal society. With that, we also have the general public becoming more suspicious of government, seeing it more as a bureaucratic interference of the economy, rather than a moderating force from the excesses of our economic system (pg.28).
Historically the actual role of the consumer gets limited treatment in classical economic texts, yes, they do get some mentions, but very limited expanded thought. Goodman & Cohen quote Adam Smith who wrote this about consumers (pg.28):
“consumption is the sole end and purpose of all production and
the interest of the producer ought to be attended to, only so far as
it may be necessary for promoting that of the consumer. The
maxim is so perfectly self-evident, that it would be absurd to attempt to prove it” (Smith 1937, 625).
The consumer in early texts was treated as important, but as I already said, did not receive much analysis. Consumption was just seen as consumers meeting needs, increase in income usually resulted in more consumption because consumers could meet more needs or increases in consumption was the result of greed. I think the view is very consistent with the classical liberal view of people and the emphatic view of the individual as the most important unit in the economy.
I had this interesting conversation with a colleague at work. My colleague was telling me adrenaline pumping tales about how he became a vegetarian. But he had an odd caveat, he still ate eggs. He was careful to note that he only purchased eggs that were “free run”, he lit up and told me that the hens that laid his eggs were treated well, could go outside and were better off than what everyone else is eating. I thought that was neat, but I was fairly suspicious. First, he bought his eggs from a very large international grocery store. I thought immediately that any supplier that was able to supply this chain isn’t a ma and pap operation. In fact, the eggs in question are “Gold Egg”. From what I gleaned, Gold Egg is a label under the National Egg Inc. coalition. In each province a different egg provider provides eggs under the Gold Egg brand, in Ontario it’s Gray Ridge farms, a fairly large egg operation. But it’s worse than that. Here’s what I came up with:
Free Range and Free Run
The truth of the matter is rather simple, free range eggs are eggs that come from hens that live in open barns i.e., no cages. This ostensibly seems great, but some of the population densities in these barns are packed tightly. Free range eggs have some access to the outdoors. This seems to be legally ambiguous, as in, there is no strict legal threshold to how many hours would constitute free range vs not free range. There are some hurdles to offering hens outdoor access, such as the weather and winter.
Free run on the other hand, sometimes known as “barn eggs” are from hens in open barns. They do not have access to outdoors and do not necessarily have more room than birds that are in battery cages.
Both labels are not audited or externally verified unless it is certified organic. This is an example of industry regulating itself. We can see here, that most of the buzz around free range and free run eggs is mostly marketing bluster. Free run sounds great, but doesn’t offer much except a cage-free experience. Free range is better, but there is no legally binding definition of outdoors time. This is all compounded if you buy eggs that are not externally verified, which they do not have to be to carry those labels.
In the end, this is a clear example of marketers trying to capture the anti-consumption market.
Cage-free eggs: A comparison of labels Canadian Coalition for Farm Animals
Photo credit: bgottsab via VisualHunt.com / CC BY-NC
If you haven’t caught on yet, I listen to a lot of NPR. Yesterday I heard a very interesting podcast about Minimalism on the program On Point. Joshua Fields Milburn and Ryan Nicodemus, co-founders of the blog The Minimalist discussed the minimalist life. They both discussed how people should arrange their lives by getting rid of things that do not all value to your life. They remind us, that it’s not a categorical race to the bottom, but it’s about getting rid of things that do not add value to our lives. Instead of focusing on physical possessions, it’s about focusing more on things that matter, such as relationships. We spend much time focusing on the paycheck, life isn’t just about the money.
Let’s say you’re looking for a new blender. Why do you need a blender? I don’t know, something about “healthy smoothies” or something. You go on Amazon you look up blender and because you want super duper crush technology and “total annihilation mode” you find the XF-8756 Samurai model. The blades were fashioned by ancient Japanese Samurais, curved blades that look like katana blades. The Samurai blender slices up bananas and protein powder like ancient Samurais did during the Sengoku period. So this blender is like $200, while most other ones are $30, but again, you want that total annihilation mode. So you get this one, you read the reviews because you a smart, independent consumer who ain’t need no salesman. Basically 90% of them are 5 star, now you can rubber stamp your purchase and be on your way.
I listened to another interesting podcast by WBUR’s On Point program. Tom Ashbrook et al discussed how rent has been increasing in many cities and the effect it has had. They also explore the causes of this new rent increase. The amount of people who spend more than a third of their income on rent has been increasing. This may turn out to be a much larger policy problem than it is already presenting itself to be.
The bright minds at Quicken Loans put out this border-line satirical ad about mortgages. Quicken Loans want mortgages to be as easy to get as buying music off iTunes, all within your phone. Get a mortgage in eight minutes.
Totally tone-deaf, and to resort to an overused piece of historical advice: those who forget history are doomed to repeat it, here we see Quicken Loans gunning for easy mortgages, 2008 is hardly in the rear view mirror.
I also thought it was funny, they suggest that more mortgages means more consumer buying via having to fill their homes. I actually hear this a lot, but many of the consumer good producers are overseas. So it’s not like these goods are supporting vast production onshore. While these things are sold in physical stores, stores that employ and pay taxes, that is not what the ad is suggesting. But anyway, here’s the ad in question.
Blocking internet ads, I know, controversial. Some say ads are literally Hitler, others say that if you use ad blocker you are literally Hitler and are embarking on a transfer of wealth by stealing from the great websites of the world.
There is lot to be said, but I’ll leave that for another time. I’m skipping the manifesto stage and handing out weapons. Here are a few browser add-ons to keep advertisers off your back. You can block ads and you can block and interrupt marketer’s infrastructure to prevent them from collecting intelligence on you.
Buyology: Truth and Lies About Why We Buy and the New Science of Desire
Martin Lindstrom,Broadway Books 2010, 255 pgs
This book has a lot of hype, no surprise because the author is a brand expert in the marketing industry. This book itself was subject to a little controversy, Lindstrom gamed the book rankings by using a bulk buying service. This service artificially bumped his sale ratings. After reading that, I was even more happy that I bought this book used.
This book is premised on a large neuro study that Lindstrom had a part in: scanning, victims, err, participants brains for activity when exposed to different types of advertisements and marketing. This book explains the results of this, the implications and looks at standard marketing cliches; product placement, sex-sells, etc.
Lindstrom does a decent job. I found it telling that throughout the book Lindstrom has to constantly remind us that he is on our side. But Lindstrom is a ‘brand marketer’, and his business depends on our willingness to part with money to buy things.
I think it’s time to talk about the experience vs. things dichotomy.
If you’re unfamiliar with what I’m talking about, here’s the cliff notes:
Forgot guns vs butter from the econ classroom, this is about vacations versus iPads. It’s about consumer goods from big box USA versus a rum fueled night at the beach in Cuba, or a stroll around the Eiffel Tower.