re: #114 publicityStunted

The Paradox of Choice: Why More Is Less

Here’s the opposite view:

… Take grocery shopping. The typical supermarket today stocks 40,000 different items, twice as many as 10 or 15 years ago. You no longer have to shop at specialty stores, live in a big city, or travel the world to eat things like mangos, arugula, or edamame.

There’s been a variety revolution. And now we have a new definition of quality—finding the perfect fit.

I recently went shopping for a bathroom faucet set. There were hundreds. Ten years ago, I would have been impressed with 20. The more I looked, the pickier I got. This faucet was beautiful, but the handles were too bulbous. Those handles were nice and sleek, but the faucet looked like a glorified pipe.

Then, just as I was about to settle for second best, I found the perfect combination—a gracefully curved faucet with simple cylindrical handles. Somewhere out there was a designer whose imagination matched my own. I was thrilled.

And here’s where the variety revolution collides with conventional economic statistics.

To buy that perfect set, I would have happily paid about 25 percent more than the price tag. But I didn’t have to.

That 25 percent savings is what economists call “consumer surplus.” It’s the value that consumers get for free—the difference between the actual price of a good and what they would have been willing to pay.

By giving us exactly what we want without charging extra, the variety revolution generates a lot of this hidden value. Thanks to greater choice, we can live better on the same income.

But variety’s benefits are hard to measure, because they exist only in our heads, not in accounting records. In official statistics, the standard of living looks more stagnant than it really is.

Economists have recently estimated just a few examples of the value consumers are getting from greater variety. The numbers are enormous: A whopping $280 billion a year just from imported goods. A billion dollars a year just from the obscure books on amazon.com. These huge gains include only a tiny sliver of the whole economy.

By catering to our individuality, the variety revolution has made us richer. For now, however, you won’t find those improvements in the official statistics. To them, coffee is coffee, and when you’ve seen one faucet, you’ve seen them all.