Sunday, November 12, 2006

Consumer rationality and Buy Nothing Day

Kalle Lasn, a Vancouverite and the founder of Adbusters magazine, believes that consumers are irrational precisely because they consume too much. He claims that over-consumption has consequences on the environment, the political atmosphere, and so on.

He proposed Buy Nothing Day (the last Friday in Nov.) as a course of action, and he's now taking things further with Buy Nothing Season, which would extend over the Christmas holiday season.
Wait a minute. How irrational are consumers?
Here's David Altig's view, which may be a popular one:

A great deal of individual behavior appears to be perfectly rational; Most of that which does not appear so rational has small consequences for the individual decision maker (with the "irrationality" tending to disappear over time); There are always some people who persist in making apparently irrational, and costly, choices.

Altig adds that there are “plenty of behavioral anomalies...And it may not be the case that small deviations in individual rationality add up to small consequences for collective actions.”
Kalle would wag his finger at Altig. He might say that a great deal of individual behavior is imperfectly irrational. A consumer may see the consequences of her actions (eg. environmental degradation) yet irrationally assume that her independent action will not bring her dis-utility. In effect, individuals discount their actions and consequently cheat themselves, so to speak. Further, when they witness other individuals cheating, they persist in making irrational, and costly, choices forever after. It's of no surprise then that Kalle is an advocate of individualism and responsibility.
But Kalle is an extremist, an anarchist even, and his ideas go much further (case in point: Buy Nothing Day/Season). Does he believe what he promulgates or does he overshoot his message to encourage individual thought?
I agree with Kalle much less than I once did; however, I have a big soft spot for the guy who gave me my first real work experience. His passion is contagious and his ideas are fun to entertain, even if they're economically unsound (ouch, it hurts to say).

Here's Kalle, cheery as ever, speaking about Buy Nothing Day/Season on CNN (scroll to bottom of link).
Altig points to some good reading by Richard Thaler et al on the subject of anomilies in rationality and choice models.

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