Affluenza, Preference Ratcheting, and Social Spoiling

This article is about a single concept which can be described concisely or named a few ways. I think about this in common parlance as getting spoiled. It’s a negative subsidiary of the income effect where the preference change can be viewed in some sense as inefficient.

To illustrate: I recently got an email for 7 free drinks from 7-11. Their coffee is arguably poor in flavor but technically effective. My family, however, has gotten into an expensive Starbucks habit. We agree that Starbucks is of generally better flavor, but no more effective in terms of generating focus, wakefulness, and so on.

Functionally, then, we should prefer the free drinks. One caveat here is transaction costs. It is a small, although non-zero, cost to visit 7-11. We have yet to break economic theory that a free good is always bought. I do point out, though, that 7-11 is significantly closer than Starbucks. 7-11 is arguably in walking distance.

Clearly, there is a simple preference for Starbucks, but this preference didn’t always exist. There was a time when we had never tasted Starbucks. One interesting idea is that the latent or contingent preference always existed. Otherwise, economics has little to say here. Preferences change. Move on.

Instead of taking this preference change as neutral, suppose we take it as bad. Effectively, an individual’s living costs have gone up. While their short-term life satisfaction on occasion obtains a jolt, their long-term satisfaction is likely no different, or perhaps lower on average if this person is genuinely becoming spoiled. The social impact here isn’t clear to me, because if everyone adopted some preference one would expect the price of the preferred good to fall. This seems to be a relatively contained microeconomic concern.

Three hypotheses:

  1. The negative side of the income effect is inseparable from the total income effect. The only way out of being snobby or spoiled is to be humbled through poverty or tragedy.
  2. It is possible to create a pseudo-income effect by locking away money in an untouchable vehicle for some time. Possible problem: Trust fund kids.
    1. Locking away wealth could be more effective than locking away dollars. The former seems equivalent to point 3.2 on participation with the poor.
  3. Being snobby or spoiled can be viewed as lacking a trainable skill.
    1. Fasting is one example. A truly spoiled mind considers basic food a bad, unpleasant to eat or even smell, but fasting makes an individual appreciate even basic food and water after some time. Bonus, fasting cuts life expenses to benefit a skill, in contrast to the typical training expenditure story. I’m thinking about water fasting here, but deprivation of luxury for a time, in general, may be beneficial.
    2. Participation with the poor may develop an appreciation for some of the goods they consume. Volunteering or intentional social engagement may help by exposure or cultivation of empathy. One approach is to serve the poor, but another is to act as a poor person does. Working a menial job, for example, may cultivate humility and empathy.
    3. Economic, financial, or opportunity cost mindfulness, and education may also deflate appreciation for luxury goods.

I’m specifically interested in the effect of fasting or volunteering on HEXACO personality, which in part measures humility.

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