The Paradox of Choice
Sergey Piterman

I spent a couple of days trying to decide whether to respond to this version or the other one. :) It was a difficult decision because both versions are very similar… but with a few key differences! After seriously considering, weighing, judging and analyzing the pros/cons and the benefits/costs…. in the end I obviously decided to reply to this version. Heh. I’m kinda kidding around.

Consider these two questions…

A. How does the presence of consumer choice in the private sector affect the supply of private goods?

B. How does the absence of consumer choice in the public sector affect the supply of public goods?

Well… it’s kinda the same question…

A. What effect does consumer choice have on the supply of goods?

Even simpler…

A. What are the effects of consumer choice?

I think that you were trying to answer this question…

B. What are the side effects of consumer choice?

Sure, consumer choice does have side effects. Sometimes it’s hard to choose and we worry about whether we’re making the right decisions… and we certainly regret making the wrong decisions. Mistakes can easily be eliminated though simply by eliminating choice.

We don’t have consumer choice in the public sector but we do have consumer choice in the private sector. Consumers can make mistakes in the private sector but they can’t make mistakes in the public sector. This fundamental and blatant disparity between the two sectors leads me to believe that people really don’t understand or appreciate the effects of consumer choice. So if the effects aren’t truly understood or appreciated… then how can the side effects be effectively judged?

For example, let’s say that Medium created a pragmatarian market. Each month each member would pay $1 dollar… but they’d have the freedom to choose which stories they spent their 100 pennies on.

  1. What would the effects of consumer choice be?
  2. What would the side effects of consumer choice be?

The effect of consumer choice is that I’d know which stories were most important to you… and you would know which stories were most important to me. Knowledge of each other’s priorities would influence our own priorities… which would certainly shape the supply of stories. So the effect is that the supply of stories would far more accurately reflects people’s priorities.

The side effect is that… if we truly want other people to know which stories are important to us… then we would have to use our time, energy and brainpower to figure out and decide which stories are truly important! And for sure we could make plenty of regrettable mistakes.

Of course I think that the pros far outweigh the cons. Yet, clearly Medium is not a pragmatarian market. So either I’m missing something and making a mistake… or else lots of other people are missing something and making a mistake.

Let’s consider an example from nature. Hummingbirds are only native to the Americas. If hummingbirds were introduced to Africa… what effect would their introduction have on the supply of plants in Africa? Today I observed a hummingbird in my garden drinking nectar and potentially pollinating some different species of Aloe. Aloes are primarily native to Africa.

How much pressure would each group of consumers (humans in Medium and hummingbirds in Africa) exert on the supply? It’s a given that there would be some pressure exerted on the supply. So it’s a given that the supply would change. The question is whether this change would be beneficial or detrimental from the perspective of the consumers.

Here’s another natural example. There didn’t use to be any parrots in California… but now there are quite a few flocks that have successfully naturalized here. Each year parrots swarm my fig tree and eat the fruits. When they fly off they poop out the seeds wherever they go. So the parrots clearly exert some pressure on the supply of plants. Thanks to the parrots, there are more fig trees. You’d figure that, from the perspective of the parrots, this change in the supply of plants would be beneficial.

What do you think?

Here are a couple of relevant passages…

If anyone insisted on deliberating with maximum scrupulousness every one of the economic acts he undertakes every day, if he insisted on rendering a judgment of value throughout to the last detail concerning the most trifling good that he has to deal with by way of receipt or expenditure, by utilization or consumption, such a person would be too much occupied with reckoning and deliberating to call his life his own. The correct maxim and the one which would be observed in economic life is “Be no more accurate than it pays to be.” In really important things, be really exact; in moderately important things be moderately exact; in the myriad trifles of everyday economic life, just make the roughest sort of valuation. — Eugen Böhm-Bawerk, Capital and Interest


Moreover, men’s desires when left to achieve their own satisfactions, follow the order of decreasing intensity and importance: the essential ones being satisfied first. But when, instead of aggregates of desires spontaneously working for their ends, we get the judgments of governments, there is no guarantee that the order of relative importance will be followed, and there is abundant proof that it is not followed. — Herbert Spencer, An Autobiography