Economists are not immune to the rather pleasant feeling of self-pride that may follow overcoming a hurdle, even if overcoming said hurdle involves deciphering hidden messages in an article making a case for an efficiency tax, and published on April 1st. Once the reader realizes that the article is not well-founded, the hurdle is crossed, and the reader may spot several pieces of misleading information to ease any qualms. The Economist’s cleverly crafted April 1st hoax starts by exposing an idea that may appeal to many people’s emotions: Innovations, mainly technological ones, are making life too easy, to the point where too much efficiency may be harming society. The writers introduce this idea by devising the term “facile externality”, a term for which a search in academic databases, including Scandinavian outlets in which the theorists to whom they attribute this idea may publish, returns no results. Risking, or perhaps inciting, an outcry by the economists among their audience, they explain that according to this theory, “less efficiency would actually be more efficient.” Why? Because the friction derived from investing more effort in completing a task would give individuals more utility and make society better off. The article goes on to list noteworthy examples, some real and some creatively fabricated, of how technology is doing away with effort. The writers assert that advances such as credit cards, voice-activated assistants, drone deliveries, and one- or zero-click payments are resulting in value-erosion of goods and services and people’s expectation of instant gratification. At this point, many readers, particularly those working in customer service, those concerned with the information age, or those who ever dealt with frustration while learning how to use a new technology, were probably nodding their heads. The article continues to attempt its convincing case for the benefits of hassle or slygge—a word yet to be added to the Danish dictionary—by referencing Danilov P. Rossi—an anagram for Poisson d’Avril, or the French tradition known as Fish of April. Mr. Rossi is affiliated with the non-existent “Don’t Nudge, Tell” office (DoNuT)—possibly an antagonist of the United Kingdom’s Behavioural Insights Team—and is asking readers for solutions. Teasingly enough, the article invokes the IKEA effect, a real notion studied by behavioral scientists, as a way to bring hard work back. The IKEA effect is a cognitive bias that may lead consumers to value self-made products disproportionally higher because of the effort invested in making them. Giving this article momentary serious consideration, we can draw a parallel to food policy and marketing. For example, the idea behind “facile externalities” might be present in fast and processed foods. Technological advances that help increase the offering of unhealthy food items in the fast food industry can negatively affect not only consumers of fast food, but, depending on what share of their health care is paid for by the government, other taxpayers as well through higher public health care costs. Perhaps not an example of how “less efficiency would be more efficient”, but of how innovations that increase a private firm’s efficiency do not necessarily take us closer to social efficiency when the external costs to society are not internalized. As to the IKEA effect, it might be present in two growing consumer trends that may be influencing food preparation at home. First, the increasing availability of local foods may be increasing (albeit indirectly) consumers’ willingness to invest effort in cooking, thus making them value their food creations more relative to convenience foods. Although consumers buying non-local ingredients must also invest effort in cooking, local food shoppers may have additional motivations to buy raw ingredients; locavores may want to cook with ingredients they perceive to be healthier or of a higher quality, or may experience a form of warm glow from perceived giving, that is, they may gain utility from the perception that they are giving back to the community or the environment. Second, the IKEA food effect might be directly influencing the proliferation of meal-kit delivery companies such as Blue Apron or Hello Fresh. Different meal-kit companies are catering to different customer segments by offering ingredients that are local, hyperlocal, vegan, organic, or non-GMO, but their business model typically involves an online subscription for premeasured ingredients that are delivered right to the customer’s door, which customers then assemble themselves following step-by-step cooking instructions. It is worth noting, however, that these and other reinvented approaches to food preparation are possible because of technological advances that have facilitated commerce, such as mobile apps that connect buyers and sellers, online payment gateways, and improved delivery logistics. Hence, in many cases, technology drives progress, facilitates transportation, and leads to productivity growth and increases in consumer choice, while in others it can lead to unhealthy outcomes or facilitate consumer deception. Fortunately, economists can help weight the costs and benefits of emerging technologies to society as well as ways to regulate their consequences. In addition, and despite any love-hate relationship with technology, readers of The Economist may have quickly realized that becoming full-time do-it-yourselfers is certainly not the answer. As Norton, Mochon, and Ariely (2012) showed, the IKEA effect comes into play when labor results in the successful completion of relatively simple tasks, but it dissipates when individuals build and then destroy their creations or fail to complete them. Thus, if the all-local or perfectly premeasured ingredients do not turn out the way we intended, investing labor in cooking may still not lead to love. This somewhat puzzling article, spiked with a bit of humor and a quote by Jerry Seinfeld, makes for an entertaining read. This is not the first article that The Economist has ran as an April 1st hoax and hopefully not the last. This year’s article provides food for thought as well as a refreshing way to jolt readers into questioning what we read every day on the Internet, including any elaborate-sounding yet undefined economic terms we may encounter, such as the IKEA food effect. Reference Norton M. I., Mochon D., Ariely D.. 2012. The IKEA effect: When labor leads to love. Journal of Consumer Psychology 22 3: 453– 460. © The Authors 2017. Published by Oxford University Press on behalf of the Agricultural and Applied Economics Association. All rights reserved. For Permissions, please email: email@example.com
American Journal of Agricultural Economics – Oxford University Press
Published: Mar 1, 2018
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