We have just returned home. Physically, we were in Vermont, working by remote for two weeks and vacationing for a third. Psychologically, we were in numerous locales. Caloric IPA City. A day trip to Diminished Parental Vigilance Island. Touring the Drug-Addicts-Are-Merely-Annoying,-Not-Dangerous District. But also: relaxing in the Land of Substantially Reduced Price Sensitivity.
We overpacked and had to leave the impulse to equivocate over every purchase at home. For me, this is an important part of vacation. Throw on an order of fries, grab a maple candy at checkout, opt for the nicer AirBnB. This is supposed to be fun!
But now we’re back, and the house is full of fruit flies (forgotten nectarines make poor housesitters), and I’m primed to think about Matt’s article on price discrimination. Really, I’ve been thinking about it for a while, because it’s a question that sends me in circles when I ponder it. My cursor hovered over the choices in his poll for a long time–and not because I hadn’t thought about it before.
Matt runs through the usual and correct explanation for why price discrimination is good: it produces economically efficient outcomes, excavating both the consumer surplus and deadweight loss triangles on a traditional supply/demand graph and converting the extracted material into supplier profits. People don’t like this process because they feel the lost consumer surplus more easily than they feel the gains from reducing deadweight loss or the improvements to their wages, retirement accounts, and municipal tax revenues. But this might be unwise of them.
Matt goes on to point out that even if everyone if left better off overall, there are other costs:
There’s something very oppressive-feeling about the idea of being constantly surveilled and having every micro-imperfection in the competitive environment (of which there are many, the real world is full of frictions) turned against you.
This strikes me as correct, but not the whole story. There’s something queasier about it.
Price discrimination is about gauging willingness to pay. For every purchase, there’s some price at which it’s no longer worth it. A price at which you’d rather keep the money and buy something else.
Matt grounds his discussion in reality, positing a fantastical but coherent brain-scanning technology for understanding the limits of consumer demand, while acknowledging the practical imperfections of retail surveillance and the complications introduced by substitutability. This is clearly the right way to argue about the advancement of information technology-enabled pricing tactics.
I want to excuse myself from that complexity, though, and instead will posit the Price Goblin. The goblin knows exactly what you are willing to pay in every circumstance, and informs the seller as you’re walking to the register.
(Apologies to whoever holds the rights to the presumably-formerly-extant Price Goblin dot com intellectual property.)
In this world, there’s no such thing as a good deal. As your eyes scan across the contents of your grocery cart, you feel uncertain. The brand of bread you got isn’t your favorite, but you would not feel any better about buying your favorite, because it has been perfectly priced. The laundry detergent you selected is expensive enough to make you feel like you might as well take everything to the dry cleaner, even though doing so is less convenient. The goblin knows exactly how inconvenient it would be–he empathizes with how much you hate having to recycle the wire hangers you’ll get back. He empathizes with quantum precision.
But perhaps good deals are overrated. How much of our mental energies do we devote to acquiring stuff? The goblin would liberate us from those concerns. No more bargain-hunting. No more careful budgeting. Think of all the tabs we could close! Maybe we would finally take guitar lessons.
And it’s not like undoing consumerism would destroy capitalism. The goblin knows how much each person would enjoy a given product, so producers will still compete on quality, subject to the goblin’s extensive QA testing. Of course, freedom from thinking about prices means we need some other way to prevent people from consuming more than their fair share. I guess we’ll assign overall consumption quota management to the goblin, too. He’s already going to have to build models for diminishing marginal utility, after all.
The standard move at this point in the essay is to make a pat observation about communism, ideally including a reference to an old Star Trek episode about a dystopia run by a supercomputer. That’s fine as far as it goes for defining the goblin end of this argument’s spectrum.
But more important than that, I think, is what happens when you get a raise or a better job under a goblin regime. The answer is: nothing. The goblin factors that in. In fact it’s extremely easy for him to do this, because your new income is probably being sold between various data brokers. No arcane magicks are necessary. He knows you’ve got the new job, and can afford to pay more, and so you are going to. Suddenly everything in that grocery cart will be a little more expensive. But don’t worry: you won’t notice. There’s nothing for you to notice.
I am now undeniably middle aged, and enduring the accompanying introspection. Sometimes I wish my young, clever self hadn’t been quite so arrogant, and had undertaken some of the paths toward credentials that he excused himself from back in the day. It would be nice to feel like a big shot.
I understand at least some of why he didn’t. When I was growing up I felt very anxious and jealous about money. I had everything I needed, but noticeably less than my peers (living, I should mention, in the richest region in the richest country in the richest era in human history). Not exclusively, and probably not optimally, but in various ways, I have chosen paths that pay well and don’t require student loans. This is not because my tastes are exotic. I do insist on air conditioning and a refrigerator with an icemaker. But otherwise they’re similar to the ones I was exposed to growing up. I drive a Kia, I take domestic vacations, and I save about as much as financial explainer articles tell me to.
What I really want from money is not to think about it–in particular, not to feel anxiety about it. In a sense, this makes the goblin sound pretty good. In another, he sounds terrible. There’s no way to better your situation under the goblin’s regime. If you gain a foothold, he will smooth it away.
Perhaps we could count on the goblin to do that responsibly: to allocate financial anxiety in a perfectly just manner. We’re already asking a lot of the guy, but he’s doing great so far. And people do like this idea in some contexts, like Finland’s income-based fines for speeding.
Still, I think a lot of people hate this idea viscerally. I think it’s why voters recoil from inflation: suddenly, it has become harder to win. The goalposts have been moved, as the saying goes.
It’s no coincidence that this is a classic way to escalate stakes and engender an audience’s sympathy. From the Odyssey to Save The Cat’s Beat Sheet, foiling a hero’s noble effort to achieve their goal with an unanticipated setback can be counted on to rouse an audience’s sense of unfairness and heighten their eagerness for resolution. It gets at something very deep in us, the kind of thing primatologists patiently tease from their wards with games about tokens and treats. We think games should be winnable.
Obviously, the goblin sits at an unreachably distant end of the continuum I’ve described. Price discrimination is at least somewhat good, sometimes desirable, and often unavoidable. Even so: it’s a short stroll goblinward before we humans find the dissonance unbearable. I can’t blame any politician for thinking that voters will care more about stories than triangles on a graph.