Here’s an article about the idea of the “perfectly
rational consumer,” which, according to the article, is a paradox. The
perfectly rational consumer, who supposedly considers all variables surrounding
their consumption, is irrational for aspiring to have the best of everything.
The result is noticeable dissatisfaction with actual success in life. The
article highlights some recently published papers that have poked a hole in the
aspirations of perfectionists:
“The trouble with perfectionists is that, by wanting
the best, they aspire to be perfectly rational consumers in a world where we
all agree that's impossible. It's a recipe for dissatisfaction, way too much
work, and even depression. “
And thus…
“Hard-earned success in life is
wasted on the people least likely to appreciate it.”
In my
opinion (I find this piece a bit comical), this article is a remarkable
black-and-white oversimplification. In reality, theory presumes that
the rational consumer will maximize the situation (not attempt to achieve
perfection). And thus the article steps into obviously gross generalizations and logical fallacies. The takeaway: be wary of the analysis you read online that melds
sociology/psychology inappropriately with economic theory.
6 comments:
Something notable, that I am surprised was not mentioned, was the opportunity cost (time) of finding the "perfect" deal. The maximizers fail to see that there's more to life than the "most rational choice." I use this word in a different way than the economic sense, but being rational to me is making the choice that allows you to be happy, live a normal not completely price-obsessed life as a consumer—yes, I believe you can still do those things while often finding a pretty good deal. I know that my parents are willing to be "maximizers” when it comes to big ticket items (cars, vacations) but are less concerned (less "rational" by the article's standards) with smaller purchases; that is a conscious decision.
I agree with Brandon on his original post. While I find this article interesting and worth reading, it is important to approach it with a critical eye and be skeptical of articles that oversimplify and generalize to such a degree.
On that note, I think it's difficult with online articles to differentiate what's good analysis and bad when you aren't an expert on the topic. Unless you’re an expert on a topic, internet reading can easily make you believe that something is fact when it may be opinion or just completely falsified/misinterpreted information. It’s an important skill to gain, but discerning valid articles from misleading ones takes time.
I would disagree with the Atlantic's analysis and characterization of a "perfectly rational customer." A perfectly rational person seeks to maximize his/her total maximum benefit, rather than trying to find the ideal item. The Atlantic characterizes the perfectly rational buyer as one who would explore all possible options before making a choice, while a truly perfectly rational actor would stop once his marginal benefit is outweighed by his marginal cost.
In the world of a perfectly rational actor, each object (or version thereof) can be assigned a value, the difference between his evaluation and the cost of the object. If this actor is purely rational, then he would stop once his time cost exceeds that of the expected improvement in value. Most people exhibit something close to this behavior; if the cost for continuing the search exceeds the expected benefit (or estimated benefit), people will not continue searching.
What Mr. Thompson describes here is not a perfectly rational customer, but rather a naive customer. Although the Atlantic Media site lists him as an expert in economics in business, this article is overall very poorly written. He uses undergraduate and intro-to-econ concepts without regard to further intricacies that any reasonably educated econ/game theory enthusiast would have identified. One of the most important concepts in game theory and psychological game theory is that if the theoretical outcome of a game doesn't match with reality, then most likely there is some aspect of the game missing (i.e. emotion, time, societal pressures, etc.)
0/10 would not recommend.
Hmm. I am not sure which introduction to use in writing this comment. I could start with some sort of witty anecdote from my own life. That would have some benefit to me: it would make me appear smart and/or humorous. However, I am not sure that I am willing to spend the time coming up with such excesses of humor. I could spend that time working on my research paper, which has more of a marginal benefit in the long run. Or I could spend that time sleeping, which is what I see many people doing, and they seem very satisfied with that choice. Or perhaps I could read a book, or practice piano, or do Japanese homework, or study for a psychology test... Oh no. What do I decide! In every case I'm giving up something (rest, good grades, the opportunity for knowledge, possibly sanity) in exchange for getting something.
Well if I'm going to be perfectly rational, and I mean perfectly rational, I should of course create a complex matrix of the marginal benefits and marginal costs of every possible activity I could perform at this time. For the sake of simplicity, and I hope that you will forgive me for this, I will leave out various automatic actions such as breathing (although I wonder how much more I could get done if I didn't need to breathe).
I should also compare myself to others, of course. Other students obviously found the time to make comments on blogs. Kira and Nathan have wonderful introductions to their comments -- pithy and interesting -- and this post overall is well done. No matter what I do I will feel a deep sense of dissatisfaction, since I know that I will be overlooking some possible better option (I could go on Facebook!). Just think of all the wasted minutes in my life!
Oh no. I can never be successful. I can not even start a comment.
I give up. The benefit of working on my research paper seems greater than the benefit of working on this comment, so I will conclude.
Or maybe I should study for the Economics test...
Joking aside, I do think that there is value to weighing options. Particularly when making important decisions regarding jobs, higher education, family or large sums of money, prudence is advisable. It is when prudence becomes, well, imprudent that it is more prudent to leave prudence aside for the sake of the more prudent alternative of doing something marginally less prudent, which, because it leads to peace of mind, is actually more prudent.
Lovely comment, Brianne... I had quite the chuckle, though your comment about research paper (what research paper, you say?! jk) and economics test strike a chord with what I'm contemplating right now. I think that is an excellent example of what the author of the article is trying to get at: over-analysis isn't going to give you the result you desire. If anything, the opportunity cost of doing so may outweigh its benefits.
Though the article employed generalizations and simplification, I don't find it to necessarily be an issue. The idea of the consumer "wanting the best" is subjective and vague for that very purpose, so depending on your definition of best, it could incorporate "maximizing the situation", since that is the "best" you'll get out of it.
The idea that the author is not reputable based on the article having a lack of advanced vocabulary is an irrelevant argument. Advanced vocabulary and concepts certainly did the economist community no good in predicting the Great Recession. Other aspects of consideration have indeed been left out, but that's economics - it's not even close to perfect. Perhaps that is representative of what the article is getting at - this pursuit of perfectionism that doesn't exist and a relentless pursuit of perfection might just bring more harm than good.
I for one am fine with the way the article was presented. It's not an impressive piece of analysis but it's crafted in a manner that represents a general understanding of human beings and economics and presents a spot-on takeaway... subjectively and generally speaking just as economics does.
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