Outbound Links (13 articles…)

Addiction and Economics

The way economics works for “addictive” products is, in some ways, the opposite of how it works for “normal” products. And this insight explains a lot of what happens in our modern society.

The way economics works for “addictive” products is, in some ways, the opposite of how it works for “normal” products. And this insight explains a lot of what happens in our modern society.

— Originally a toot on @secretgeek@mastodon.cloud

“Supply” and “demand” are the central concepts of Econ.

And ordinarily: it's demand that creates supply, Not the opposite.

For example, imagine a boatload of people are stranded on a beach.

Within minutes they feel thirsty so some of them go looking for water, and having found the water, they bring it back to the others.

In Econ terms, a "demand" arose, entrepreneurs performed exploration and innovation and created supply, effectively "selling it" for social credit.

Thus, the market demand has created the supply. It didn't create the water molecules, but it created the "supply" of water to the market.

We say that where demand exists it “pulls” the product into the market. Overall, between supply and demand, demand is in charge. Supply does what it can to keep up.

If the boatload of people were stranded next to a freshwater lake, with a natural abundant amount of available water, that would not increase their demand for water.

Sometimes an increase in supply may appear to “induce” demand, but this is just a revelation that demand was higher than the market realised.

Overall, the rule is: demand creates supply.

But for addictive products? demand creates supply and supply increase demand. <— that’s whacko!!

The consequences of this are gigantic!

Normal product:

Demand(X)
Demand(X) creates Supply(X)

Addictive product:

Supply(X) creates Demand(X)
Demand(X) creates Supply(X) creates Demand(X) creates Supply(X)
Supply(X) creates Demand(X) creates Supply(X) creates Demand(X) creates Supply(X) creates Demand(X) creates Supply(X) creates Demand(X) creates Supply(X) creates Demand(X) creates Supply(X) creates Demand(X) creates Supply(X) creates Demand(X) creates Supply(X) creates Demand(X) creates Supply(X) creates Demand(X) creates Supply(X) creates Demand(X) creates Supply(X) creates Demand(X) creates Supply(X) creates Demand(X) creates Supply(X) creates Demand(X) creates Supply(X) creates Demand(X) creates Supply(X) creates Demand(X) creates Supply(X) creates Demand(X) creates Supply(X) creates Demand(X) creates Supply(X) creates Demand(X) creates Supply(X) 💥

This "quirk" explains a lot of things that are going wrong over decades in our global system. Shows why normal goods are supplanted by addictive variants in every market.

It’s insidious!

Here's a specific example, a brutal pricing pattern I've noticed in many shops:

A regular product, Product A:

Buy 1: $5
Buy 2: $10 (save $0)

Addictive product, Product B:

Buy 1: $7
Buy 2: $10 (save $4 !!)

...pushing a "rational" person to buy more of the addictive product. Increase addiction.

Where I live) I’ve noticed that alcoholic beverages are not sold with these same tactics. Curious?

This seems like evidence contrary to my theory.

I looked into it — the laws around how alcohol is promoted and sold explicitly bans “bogof” (buy one get one free) and huge array of other such techniques.

Exactly the techniques you see over-used for less-regulated addictive products (such as chocolate bars and Coca Cola) and not used for selling water (as a non-addictive example)

Coca-cola, Pepsi, any chocolate bar (what do you call them, candy bars?) — pricing at corner stores and major shopping centres — uses patterns like this.

Non-addictive commodities like bread however… are supplanted by addictive high sugar high fat variants, and then also have this pricing model.

Bottles of water do not.

We have this pristine view of capitalist economics, where markets are efficient, and resources are allocated fairly, by the “invisible hand” etc.

But then, in practice how does it work? It’s dominated by: monopolies and addiction, breaking the whole thing, causing ever-tightening traps.

wiki.secretGeek

Addiction and Economics

References