Inefficient Consumption

· October 26, 2018

I was thinking through waste in a simple production-consumption model, and got a little stuck when considering an aspect of waste on the consumption side.  

Sometimes we consume badly, for want of a better term, and it seems like that constitutes a form of waste - much like with misallocated resources there is room for a net improvement,  holding everything else constant. The hard thing is getting a fair estimate of utility, and therefore the impact. 

For example, overconsumption often has a social signalling component. The elephant in the brain has an excellent chapter on the social aspect of overconsumption of healthcare - we consume more healthcare than generates improvements in actual health because of the social support signals it generates, which makes us feel good. Similarly, it’s well know most people would pay less for presents they receive than the gifter paid for them, yet presents are often given, as part of the value for the gifter is being seen to be generous. The question is - how much does that social signalling constitute real waste? I would say, that is does so in proprtion to which the same social effect can be generated by different means, which with something like generosity is hard. 

Another kind of consumption waste is a quality mismatch. This could be buying three medium quality things that break over one high quality one that lasts the same overall time, for example. This also remains tricky as an accounting of the waste requires an understanding of how the lesser quality items are further used or processed. 

Time frames can come in to play - a chocolate bar for a dieter can be positive short term but negative long term utility, and it’s unclear how and when that represents waste. 

Finally, there can be straight misallocation. Buy a movie ticket but miss the movie. Buy clothes that don’t fit and don’t return them. These are mistakes, and are clearly wasteful. One question around them though might be how much are these mistakes intentional on part of producers? For example, rebates are often hard to claim, so consumers don’t bother, and arguably make a mistake in overpaying for a product. This difficult is very intentional on the producers part though, as they want the marketing benefit of the rebate without paying the full cost. Effective advertising might induce purchases by people the producer knows have a low probability of actually using the product (see most infomercials). In that case the waste is somewhat actively sought, which feels like a very different problem space. 

A lot of my own thinking around productivity and the future of work centers around the production side, but the consumption side has as many interesting and valuable spaces to explore!