I have been reading Robert Sugden’s book The Community of Advantage: A Behavioural Economist’s Defence of the Market in preparation for an upcoming webinar with Robert about the book, facilitated by Henry Leveson-Gower.
I’ll also post an in-depth review later, but the book is a mix of philosophy, technical economics, and critique of applied behavioural economics. The critiques are great reading, the philosophy is interesting but tougher, and the technical economic sections are for aficionados only.
Here’s one snippet of critique as a taster:
An extreme version of the claim that choice overload is a serious problem in developed economies has been popularized by Barry Schwartz (2004) in a book whose premise is that when the number of options becomes too large, ‘choice no longer liberates, but debilitates. It may even be said to tyrannize’ (2004: 2). Researchers who investigate choice overload sometimes suggest that their findings reveal a fundamental failure of the market system—that it provides too much choice.
[T]he idea that markets offer too much choice seems to have some resonance in public debate, as evidenced by the success of Schwartz’s book and by the fame of Iyengar and Lepper’s experiment with jams. My sense is that it appeals to culturally conservative or snobbish attitudes of condescension towards some of the preferences to which markets cater. This may seem harmless fogeyism, as when Schwarz (2004: 1–2) begins his account of the tyranny of choice by complaining that Gap allows him to choose between too many different types of pairs of jeans (‘The jeans I chose turned out just fine, but it occurred to me that buying a pair of pants should not be a daylong project’). But it often reflects a misunderstanding of the facts of economic life, and a concealed interest in restricting other people’s opportunities to engage in mutually beneficial transactions.
Imagine you are asked to describe your ideal shopping environment. For many people, and I suspect for Schwartz, the description would be something like this. Your Perfect Shop is a small business, conveniently located in your own neighbourhood (perhaps just far enough away that you are not inconvenienced by other customers who might want to park their cars in front of your house). It stocks a small product range, tailored to your particular tastes and interests, but at prices that are similar to those charged by large supermarkets. There are some categories of goods (such as jeans if you are Schwartz) which you sometimes need to buy but whose detailed features do not much interest you. The Perfect Shop stocks a small but serviceable range of such items. There are other categories of goods (breakfast cereal might be an example) for which you have a strong preference for a specific brand and feel no need to try anything different; the Perfect Shop sells a limited range of this type of good, but your favourite brand is always on sale. However, there are a few categories of goods in which you are something of a connoisseur and like to experiment with different varieties. Here, the Perfect Shop offers a wide range of options, imaginatively selected to appeal to people who want to experiment in just the kinds of ways that you do. No shelf space is wasted on categories of goods which you have no desire to buy.
Compared with such an ideal, real shopping may well seem to offer too much choice, not to mention clutter and vulgarity. But, of course, in a world in which there are economies of scale in retailing and people have different tastes and interests, the idea that each of us can have a Perfect Shop is an economic fantasy. A less fantastic possibility is that there are Perfect Shops for some people, but everyone is constrained to use them. Because these shops are well-used, prices can be kept low. But then the viability of what are some people’s Perfect Shops depends on the absence of opportunities for other people to buy what they want. Restricting other people’s opportunities to buy goods that have no appeal to you can be a way of conserving your preferred shopping environment without your having to pay for it. Describing these restrictions as defences against the tyranny of choice can be a convenient camouflage for a form of protectionism.