The Great Economic Mix-up of the 20th Century

Why is our economy powered by activities and purchases that we later regret?

We have two very different views of human nature, depending on whether we focus mainly on what we are often lured into doing or what we embrace having done and wish we had done earlier.

While we can be lured into surfing newsfeed, we feel really good about adventures with friends, working on creative projects, and quiet time.

Which says more about human nature? Advertisers often think our vices—or the things we can be tricked into doing—define us, rather than our loves.

Mostly, our economy and our businesses (especially internet businesses) are not able to make this distinction. We will come to regret many of our clicks, views, and purchases, but these are measured—in our economy as consumer demand, and in our businesses as success—just the same as the things that really helped us. We treat our vices and our loves as identical, in the economy.

Few businesses or internet sites have any idea whether their customers and users feel the hours they spent were fortuitous. While many companies have some kind of lasting positive experience in their mission statement, there’s just not data to pull apart this kind of demand from the more sinister kind that takes advantage of people or sells them a false dream. It’s not surprising we all end up with unfulfilling clicks and views, and purchases we regret.

And consumers, also, are helpless to distinguish except by running their own experiments. Comparative shopping by price has become frictionless. Comparative shopping by what we’ll actually feel best about doing? That’s almost impossible. Within certain product categories—Amazon for books, Yelp for restaurants—we have review data that can help us choose. But when we are choosing between unlike activities—for instance, between a gym membership and a meetup, or between going out to eat and cooking at home—we are choosing between what economists call credence goods. It becomes very difficult to know which will be best for us without trying both and tracking our own experience over time.

This blindness puts many of us in a difficult place.

Some things that almost everyone regrets—like Farmville and cigarette smoking—are billion dollar industries. Other things are undervalued: empathy, creative thinking, and even simple activities like picnics or learning a musical instrument. Why is that? Is it human nature? Or have we been neglecting to ask people what they really want in their lives? Many smokers don’t want cigarettes. Cigarettes would get a lot of poor reviews on yelp. Perhaps we should start measuring demand with the question “what are you glad that you bought?” instead of “what did you buy?”, and “what are you glad you clicked?” rather than “what did you click?”

Perhaps if we could gather data about which lives people wish they had managed to start living earlier, and what activities we feel lastingly positive about, we’d be able to incentivize a healthy economy.