The error of generosity

by Rob Horning

6 June 2006


In the perfect world of econometric models, everyone would be forced to pay as much as they were willing to in every exchange, bringing about what economists would deem perfect efficiency—maximizing not the usefulness of the world’s resources but the accuracy of economists’ supply and demand curves. Economists like Tim Harford in The Undercover Economist assume that since we are willing to pay a certain price, we consider that price fair, even if, say, the person sitting beside us on a plane paid half as much for his ticket. This seems strange to me—it seems patently unfair. If democracy now finds primary expression not in the voting booth but in the marketplace (if historian William Leach’s notion of the “democratization of desire” is accurate; if the way we feel equal in America derives from the fact we can all shop in the same stores and dream about owning the same things; if purchasing power means more than the franchise; if we vote with our dollars) then this kind of pricing is a subversion of democracy. My votes in the marketplace are beign devalued if I am induced to may more for a good than some other American. I suppose it would be wrong to go around holding a grudge about every time I was duped into paying more than somebody else; the reason I’ve paid more is that generally, ultimately (hopefully) I have benefited from other past privileges that gave me more purchasing power in the first place than the people who paid less, and my overspending eventually will help level that playing field, distributing the privilege that accrued to me around to the underprivileged people out there catching discounts. (This is the paradigm that makes drugs cheaper for Africans than they are for my insurance company.) But a look at the way money tends to be accumulating at the top of the income pyramid suggests this is too hopeful. Often benefits, discounts, privileges beget further privilege, and disadvantaged people in the economy are merely more vulnerable to exploitation, both in their jobs and in their consuming—just pop in to a grocery store in a rundown area and see what deals are to be had on the stripped-down, limited supply of goods there.

And if we always paid what we were willing, we would experience not perfection but some sort of dystopic misery, as one of the main pleasures of shopping (and shopping is itself our main pleasure) would be robbed from us—the feeling of getting a deal. When we pay just what we’re willing, we are never getting to enjoy the experience of knowing we would have paid more but didn’t have to. That difference between what we would have spent and what we did is a kind of happiness dividend that comes to us at serendipidous times and may just have the kind of slot-machine like randomness to it to help keep us addicted to consumerism.

Also, more important, when I receive attentive service at a coffee shop, where the leverage of my upcoming tip has no business attracting it, I end up feeling a warm glow of gratitude for the human race, a sense that people are willing to be polite and friendly not because economics compels them but because their humanity does. It’s irrational and unpredictable, but it seems perfectly natural when I am enjoying my lunch because of it, and makes me want to do some irrational things myself, like write a long encomium to such behavior in a blog that no one pays me to write. It’s a beautiful thing when sheer sociability trumps the logic of price targeting and positional-good selling, creating an environment wherein people seem to be enjoying their work for the sake of preofessionalism, for the sake of the comfortable interaction it brings. I know that is a bit utopian. But it’s a scenario that for better or worse can’t ever be modeled, predicted. You can’t script unmotivated “random acts of kindness” (the best you can do is promote them with glib bumperstickers). If economists had their perfectly efficient world, I’d never get that service in low-priced establishments, just the surly indifferent service that admittedly I typically get. Perfect pricing, perfect efficiency, presumes nothing can be given, but thankfully the world isn’t that perfect and people make the error of generosity every now and then.

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