The illusion of choice

Like many children of the 70s, I was raised on a diet of American cartoons. Despite being one of the least funny or entertaining cartoons I've ever seen, I strongly remember a Warner Brothers cartoon where a sophisticated city mouse took his country bumpkin cousin to meet a professor mouse. In between being chased and almost eaten by a cat, Herr Professor Mouse taught bumpkin mouse all about supply and demand, capitalism and the free market. Ho hum.

And yet, a quarter of a century on, I still remember it.

The cartoon was made in the glory days of post World War Two America, when it looked like capitalism and the Free Market would usher in a paradise on Earth. Naturally, one of the biggest selling points to the new middle class (or at least working class with disposable income) was the ability of capitalism to provide consumers with more choice.

Unfortunately, much of that choice is illusionary, as Michael O'Hare explains.

However, the potential variety of inventory in most big stores is an illusion, and the less specialized they are the more this is true. Take CompUSA, which does have a presence near you, and many thousand square feet of it. CompUSA has a computer that watches sales like a hawk, and ruthlessly prunes slow-moving items, so the large rack of cables actually has no specialized or rare ones, but twenty hooks with the same five fast movers, the cables you already have two or three of . If you want something the least bit arcane, you are out of luck, because the maximum straight-face selling price of a special item does not capture its real value to the customer. I believe CompUSA no longer stocks any SCSI cables in its stores at all, though it has every known brand of blank CD in five different package sizes each.

Of course in general we have more choice today, thanks to free markets, than (say) the old Soviet Union could offer its citizens. But much of that choice is trivial: in Australian supermarkets I can can choose between twenty different brands of soap offering fifty nominally different scented soap, but most people would be hard pushed to really tell them apart and there is not one unscented soap amongst them.

Free markets don't necessarily lead to freedom of choice, and that freedom of choice is vulnerable to supply-driven changes, leaving demand unfulfilled or removed.

A classic example of this was the appalling and limited food in the UK for much of the post-Industrial Revolution period. The need for cheap food which could be stored for long periods to feed the city workers quickly lead to a reliance on cheap, stodgy, bland (apart from salt, sugar and grease) preserved foods. Canning technology accelerated the process, leading to a generation which neither had the ability nor the wish to buy varied food, which destroyed demand. Reduced demand caused even less supply, and so on 'round the vicious circle the British went. Only the upper classes had the ability or desire for "exotic food", and even then the limit was French for the real nobs and Indian for those who had served in the subcontinent and got a taste for it.

Only the post-WW2 influx of migrants who refused to give up their traditional foods broke the vicious circle.

The ever-increasing concentration of retail sales in the hands of a few near monopolies risks repeating the British experience, but not just with food. O'Hare's example is with hardware; other examples are easy to find. There is a paralysing choice of (say) cars out in the market, but they are virtually all the same. The choice is between the green jelly mould or the red jelly mould with the pizza tray (spoiler) on the back. But where is the real innovation and real choice? A few smart cars, a few giant gas-guzzling Hummers for idiots, and that's it.