Psychology Behind Consumerism & Economic Growth
Not without a Price
Malcolm Gladwell has written an interesting article about the philosophy behind economic growth.
Embracing certain philosophies such as moving away from the “scarcity to abundance” mindset had its own positive and negative effects on society. Consumers are driven by the word free. Whether it is free technology, free products, or free information. Free basically means having things and information in abundance without paying the high cost. The problem with such a philosophy is downward pressure on the price of all things, long-term impact on economic growth, and free is not without cost. There is always a price to pay.
Let’s analyze the psychology of the customers because products are sold by meeting the needs of the customers. It is a fact that consumers tend to buy more when it is labeled free. Many companies motivate buyers by offering them price breaks or convincing them that the product is actually cheap. Some companies deceive customers by convincing items are on sale. Originally there was no significant price drop, only a label that says sale. Another example is Amazon which offers free shipping to a customer who spends more than $25. This offer basically motivates buyers to purchase more items than needed. Preferring free or cheap stuff is not a passing trend. Consumers searched for the benefits and wanted to get the most out of their money.
In the article, Anderson argues, that “the magic of the word free creates instant demand among consumers, then Free (Anderson honors it with a capital) represents an enormous business opportunity”(Priced to Sell”).
The M.I.T Behavior economists have conducted an interesting experiment to analyze the reaction of the consumers towards free and cheap offers, “Subjects were offered an option to choose between two kinds of chocolates-Hershey kisses, for 1 cent and Lindt truffles, for 15 cents. Subjects choose truffles. After redoing the experiment price was reduced to 1 cent for both chocolates offering Hershey’s kisses for free 69% of the subjects chose the kisses. The price difference between the two chocolates was exactly the same, but the magic word was free” (“Priced to Sell”).
The magic word free attracts customers and boosts profit but businesses cannot flourish by offering free products. A large investment is needed for production and marketing. The negative impact of this philosophy “ Scarcity to abundance” on technology is a price drop. For example, Amazon offers content and books on Kindle, which cost a fraction of the price of original material. It is cheaper, faster, and almost free to read books these days. Besides a free and faster download of books and other reading materials. Access to videos is extremely easy and convenient, but it has negative effects on businesses such as Google. If Google was a company it could have been bankrupted since they have failed to make a profit. According to Anderson, “ An estimated 75 billion videos will be served up by YouTube this year” (“Priced to Sell”). Furthermore, “Today it costs about $0.25 to stream one hour of video to one person. Next year it will be $0.15”(“Priced to Sell”).
Everything comes with a price, nothing is really free. It is a different matter that the effects of free consumption are not visible immediately, but there are consequences and long-term impacts. For example, Anderson pointed out in his article, quoting Lewis Strauss, the former head of Atomic Energy Generating and distributing electricity, however, requires a vast and expensive infrastructure of transmission lines and power plants — and it is this infrastructure that accounts for most of the cost of electricity”. In order to produce stuff that is cheaper and easily available to consumers, it costs long-term negative effects, compromising the ability of the companies to boost profit.
It is true that the digital world has created challenges and created such a transformation in society that new rules and laws need to be established. There is no Iron law, old rules and regulations can no longer be applicable to the Music Industry, pharmaceutical industry, or changing technology. There is a constant demand for change and nothing is really free. It is yet to be seen how technology will shape the future and what price will be paid for the cost of free technology.
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There are positive and negative effects of consumerism on our life and psycho-spiritual well-being.
Negative Effects of Consumerism on Society:
- Environmental Impact: Consumerism often results in overconsumption, which contributes to environmental problems such as resource depletion, pollution, and climate change.
- Debt and Financial Stress: Excessive consumerism can lead to individuals taking on high levels of debt to finance their purchases, which can lead to financial stress and bankruptcy for some.
- Materialism: Consumerism can promote materialistic values, where people prioritize the acquisition of possessions and wealth over other aspects of life, such as relationships and personal well-being.
- Social Inequality: Consumerism can exacerbate social inequalities, as those with greater wealth can afford to consume more, while those with fewer resources may struggle to keep up with societal expectations.
- Psychological Impact: Constant exposure to advertising and consumer culture can lead to feelings of inadequacy and dissatisfaction, as individuals may feel pressured to conform to unrealistic standards of beauty, success, and happiness.
- Wastefulness: Consumerism often leads to the disposal of products that are still functional, contributing to a culture of wastefulness and landfill accumulation.
- Loss of Cultural Identity: In some cases, consumerism can erode cultural traditions and values as globalized consumer culture becomes more dominant.
It’s important to note that the effects of consumerism can vary across different societies and individuals. Some try to be mindful of the impact consumerism has on our lives.
While consumerism can contribute to economic prosperity and individual satisfaction to some extent, it also poses significant challenges, particularly in terms of sustainability, psychological and spiritual well-being, and social equity. Balancing the benefits and drawbacks of consumerism and promoting responsible consumption is a key societal challenge in many modern societies.
