By Philip Pilkington, a journalist and writer living in Dublin, Ireland
Store clerk in transsexual shop: “Oh, look who’s back… are you going to buy something this time, or are you just curious?”
Tobias Funke: “Well, I guess you could say that I’m buy-curious!”
Mitch Hurwitz, the creator of Arrested Development – possibly the best comedy show ever produced for television – once said that the funniest things about people are their blind spots. We all possess these psychological blind spots and yet we usually have no idea. Caught up in our own little worlds we see or hear one thing while just about everyone else sees or hears something else. Just like poor, confused Tobias Funke – except, hopefully, in most instances a little less extreme.
At a dinner gathering one day an economics student was somewhat nonplussed when I told him that I thought that pretty much the entire edifice of economics as taught in most university departments was rotten. He tried to convince me of the theory’s value, not through reasoned argument about certain tenets as I tried to engage him on, but by appealing to the authority of those who teach it.
“There are some very smart people teaching this stuff,” he told me candidly. “You should really give it more of a chance.”
I reminded him that smart people are often those who say the stupidest things. They, like everyone else, have blind spots but, being rather intellectually resourceful, they are even more apt at covering them up and rationalising them to themselves. They construct obtuse abstractions that even they themselves find hard to grasp in order to cover up their blinds spots. Add to this some ill-defined (or, conversely, too precisely defined) jargon, and they’ll set the heads of everyone in the room spinning so fast that everyone forgets what outlandish things they are in fact saying.
When you witness these fireworks of sophistry you cannot help but think that Freud was right: intelligence really is just one giant enterprise in repression.
And it was this that I kept thinking when responding to certain criticisms of my piece on the theory of marginal utility the other day.
“Dammit,” I thought as I typed replies. “I’ve made the mistake of being too subtle. I’ve made the mistake of getting caught up in the neoclassical discourse in order to try to poke holes in it. But in doing so I’ve become enmeshed in the giant repression of reality that is neoclassical economics – I’ve quite literally become entangled in this collective neurosis.”
Then I realised that I was not going to convince anyone who subscribes to the faith and that I would have been better off not engaging with the theory on its own terms at all. Instead, I should have just weighed it against reality and let the neoclassicals spin out their rationalising jargon to no end against my representation of how people really shop.
So, here instead are my confessions. The confessions of a shopper who doesn’t seek to maximise his utility. There are many like me – many billions. Most will not shop in exactly the same way as me; indeed, one would expect as many different shopping ‘styles’ as there are shoppers. And one would also expect that none of these shoppers try to maximise their utility in the way the neoclassicals say they do. Not even the neoclassicals themselves, I’ll bet! But they will not think in these terms. They will not test their intellectual constructions against their actual behaviour any more than poor Tobias Funke will tune into his actions and words and come out of the closet.
Where to shop?
Let’s look at something rather banal. Whereas we could have a look at how I shop for clothes, this would be far too complicated a discussion. So, let’s instead follow me on a trip to the food/grocery shop. This will be pretty standard day-to-day sort of activity and since I make these purchases every other day, so if I habitually try to maximise my utility anywhere it should be here.
There’s something of a selection of where to shop for food in my area. But it really comes down to three choices. I could go to the ‘high-end’ supermarket that has really nice stuff, but charges way too much; I could go to one of the many mid-range supermarkets that have reasonably good quality goods; or, finally, I could go to one of the German budget stores that carry stuff on the cheap.
I occasionally visit all of these outlets but mostly I go to one of the mid-range supermarkets.
So, far so utility maximising, right? Well, not really. Unless I make a very conscious decision to stock up on vegetable oil for some very specific reason – say, I’m having a large party – and I go to the budget supermarket, I will, in fact, purchase most of my vegetable oil in the mid-range supermarket along with my other purchases, as this will be more convenient. Again, in the case of the high-end supermarket, I will often only go there if they carry a specific product that I cannot get elsewhere.
The neoclassical will, of course, say that I’m maximising my utility in line with the time I wish to expend on shopping. He will say that when I don’t chase down the best value products like a creepy freak I’m trading off losing out on certain lower-prices against less time expended on making my purchases.
Fine, for the most part that is true. But in many instances it isn’t.
Occasionally I get a strange urge to go to the budget supermarket to just kind of poke around. I see many other people doing this too. Indeed, the marketers seem to have caught onto it because they sell a host of crappy, useless budget products from week to week that people buy and then throw in the attic never to be used. In fact, I would say that it is this occasional urge that drags me to the budget supermarket far more often than it is a rational decision to stock up on a certain product. To go even further, I’d say that the vast majority of the time when I do stock up on a certain product it is as a by-product of these unusual occasional visits to the budget supermarket.
This behaviour has nothing to do with utility maximisation. Absolutely nothing. I am not consciously trading off prices for greater time spent or anything else. I’m bored and, like many consumers, I’m acting on a whim that I can barely explain.
This is just the first of many instances in which we will see shifting psychological moods as being the key determinate of my consumption. They have nothing to do with utility maximisation and they cannot be explained by the theory. We will see much more of this as we continue shopping.
So, I’ve kinda sorta chosen where to shop in line with my utility. But then this wasn’t so hard as the choice was between three places. Things get a little more complicated when I hit the shop. But first, I’ll get a pen and paper and take note of what’s missing around the kitchen.
As a fairly irrational consumer I’m quite blasé about shopping lists. But as a fairly dreamy sort of person I do tend to write down a couple of things that I see definitively missing from the kitchen so that I don’t forget to buy them when I go shopping.
This all seems very rational, but is it utility maximising?
Today a friend of mine is coming over and I’ve promised to make them some of my excellent pancakes (none of this is true, but it could well be – I do make damn good pancakes). So, I write down the ingredients: egg, flour, milk etc.
I rarely make pancakes. And I wouldn’t be making them today were it not for a completely unpredictable encounter with my friend who was recently eating pancakes at lunch.
“I’ll bet I can make a nicer pancake than that,” I said boastfully.
“Oh, I’ll hold you to that,” she replied.
And so I’m stuck making pancakes today.
Now, I bought milk yesterday; but I drank it all. It’s important to note that the value I place on milk today has changed completely from the value I placed on it yesterday. Although – as we will soon see – I’m a fairly irrational consumer and so I’m not sensitive to price fluctuations, but in the case of a major fluctuation I might not purchase something. If for example, there was a targeted terrorist attack on dairies across the country by disgruntled sufferers of lactose intolerance and milk prices quadrupled, under ‘normal’ circumstances (whatever they might be) I might reconsider my milk purchase.
But today it doesn’t matter. I’m going to prove myself as a cook of pancakes and no matter what the price for milk is I’m buying it, damnit.
This, of course, substantially impacts my demand for milk on this particular day and will consequently have major effects, for example, on any indifference curves mapped against another commodity (say, apples). I contend that many consumer decisions are subject to such completely random variables. It could be a friend coming over for pancakes. It could be biscuits for a political meeting-cum-tea party. Or it could simply be a random whim or desire.
Beyond this though, it seems that such an example calls into question the very notion of ‘utility’ itself. The idea of ‘utility’ seems to imply that there is some fixed amount of satisfaction that we derive from each commodity and that we ‘map’ this against price when determining what to consume. True, the neoclassicals do not consider such satisfaction to have a numerical value, but it is still assumed to be relatively fixed. I contend that it is not fixed at all and that it is subject to an infinite number of random variable; from random occurrences (friend coming over for pancake), to ever-changing tastes and whims. And this indeterminacy, if we are to be honest, eliminates the concept of ‘utility’ itself.
How on earth are we, as consumers, meant to maximise our utility if our desires are so fleeting? If we don’t derive a fixed amount of ‘satisfaction’ or ‘utility’ from a given product, but instead desire this product for different reasons, in different quantities, at different times, then how are we supposed to do any ‘calculations’, implicit or otherwise, at all? Desire for goods and services is relative, but relative to the point where trying to consider it in terms of quantity is completely meaningless.
The simple fact is that ‘utility’ does not exist. It is a phantom. It is, to quote the great Bishop Berkeley, a ghost of a departed quantity. A quantity once vaguely thought to have existed which then went on to be allowed not to exist, yet was able to live on in a sort of afterlife where it sort of existed and sort of didn’t.
Let us exorcise this superstition right this moment: ‘utility’ does not exist and it never has. (And don’t tell me that indifference curves are an antidote to the shadowy concept of ‘utility’, they too are based on the premise that consumer will trade fixed numbers of one good against fixed numbers of another). Instead what we are left with is the random flux of consumer desire against a background of ever changing social and psychological reality.
I arrive at the shop. I have no very pressing financial constraints and I am likely to browse readily and pick up a few things that catch my attention. Thankfully, the sales-people in the shop are helping me in this regard. They’ve placed the milk and eggs at the back of the shop so that I have to trawl through various isles to get to them. This will, of course, get me to buy more stuff and… erm… generally ‘enhance my shopping experience’.
The retailers display special offers all around me. There’s one on for donuts today. I don’t usually buy donuts, but now that I see they’re on special offer I think I’ll pick up a few.
“Aha!” says our eager economist. “Since the price has fallen on donuts they are now in your ‘basket of maximum utility’. The price decrease has incentivised you to buy them where you found greater utility in other goods and services before.”
Alas, such is not the case. In actual fact I never knew how much donuts cost before. And I didn’t even look carefully at the price as I pulled them off the well-highlighted discount stand. In all honesty, the retailer could be tricking me; they could well have raised the price and simply said that they’d lowered it and I’d still be suckered in. Why? Because the idea that I might be saving money overlapped with a weak desire for donuts and so I bought them.
The vague idea that one is saving money is more powerful than any real price decrease that is badly marketed. And marketers know this well.
I move from the donuts stand to the fruit section. Again, I’m not really sure what I’m looking for but I follow my whims. “Apples,” I think, “I ate the last apple in the kitchen this morning and more apples would be nice.” Little do I know that spontaneously combusting apple trees have caused the price to rise by 40% since yesterday. Do I even take note of this? No. I, like many consumers, don’t even check the prices of things in the supermarket. Indeed, I’ll never know of this particular price increase because when I glance at the receipt after paying (if, indeed, I do) I will not even notice the increase as I have literally no idea what apples generally cost.
On I march, picking various items off the shelves that appeal to me on some fuzzy level of sentiment. At one point – purely coincidentally – I notice that coffee has gotten more expensive and I opt for the cheaper brand. But it was pure coincidence. I looked in my basket at how much crap I had that I didn’t truthfully need – indeed, some of it I barely wanted – just before I approached the coffee section and when I looked down at the price (coffee being a fairly expensive food product) I opted for the cheaper brand.
A utility maximising operation, surely? I’d like to think so, but if I’m honest with myself it was more so to make me feel better about not having spent too much on this particular outing. It was more so a reaction to protect myself from guilt feelings than it was a rational utility-maximising action undertaken with full clarity.
I get to the checkout. Damn! I forgot to take money out of the ATM.
“We take credit cards,” says the helpful shop-assistant.
But I promised myself that I wouldn’t charge anything else to my already overburdened credit card. After all, the interest rates are a rip-off these days. But hand over the card I do – even though I’ll regret it next week when I get the bill.
The economists will chastise my actions today. They will call me a heathen and a profligate. They will insist that I will bankrupt myself someday with my debauch non-utilitarian ways. Yet, so many others in the shop were doing likewise – and I would never be so stupid as to bankrupt myself.
But I need not justify my actions in front of the neoclassical authorities, because do you know what? It was a rather enjoyable shopping trip. Much better than if I’d turned up in a raincoat and dishevelled hair with a list of yesterday’s prices in my pocket cross-checking every purchase like an obsessive loner.