What Nutella Says About Us

“See, their morals, their code, it’s a bad joke; dropped at the first sign of trouble. They are only as good as the world allows them to be. I’ll show ya, when the chips are down, these civilized people, they’ll eat each other”. This was said by the Joker during the interrogation scene with Batman in the movie “The Dark Knight”. And I have to say, this kind of moral relativism perhaps best explains the Nutella riots. But there is a complementary explanation in economics, which seems to spark controversy with respect to human psychology, but fits well with the Joker’s philosophy. Of course, moral relativism and economics are far from the only possible perspectives to explain this event, (see more), but this event can provide a fruitful example of a controversy in economics.

Economic Perspective


The standard definition used by most economists to explain economics is one from old; birthed by the brilliant economist named Adam Smith, the definition goes as follows: “Economics is the study of the use of scarce resources to satisfy unlimited human wants”. This standardized image of economics frames the Nutella incident quite nicely.

The shoppers wanted Nutella, which was a scarce resource, and their extreme behavior reflected their level of desire. They were more than willing to smack one another with boxes, push-and-shove one another with hostility, and scream wildly into each other’s faces to get their Nutella.

But the economic perspective, far from exhausted, has yet more to offer. That is, although Adam Smith’s definition explains quite vividly the factors involved with the Nutella incident, so too can the law of demand draw for us a clear image of the relevant variables.

The law of demand states: when concerned with the willingness to pay, more people will pay when a good or service is cheap than expensive. And so, we should see that, of 10 individuals, a small fraction would pay $10 for a good and a large fraction would pay $1 for a good. Thus, the Nutella incident occurred because the price threshold dropped to a point where a large majority were, so evidently, willing to pay.
.

The Controversy: Egoism, Purchases, and Blank Slates


The economic perspectives just discussed have, like all worthwhile ideas, a few basic assumptions, and we must either accept these assumptions or do away with the model entirely. If we opt to sweep into the dustbin these economic models, might I add, we will do so because of philosophy and not efficacy; that is, these models tend, as we have seen, to accurately predict behavior, though it has given no account, as we will see, of human psychology. Therefore, the economic models impressively predict consumer behavior, though disappoint us in their ability to explain human psychology.

The first of the two assumptions is that a purchase reflects a want and its severity. In the law of demand, willingness to pay is determined by desire, and so someone who pays $10, in some respect, wanted the good more than the person who, though made no purchase, wanted the good for only $5. This model, nevertheless, predicts well the behavior of consumers, but for those who possess even the remotest understanding of human psychology and the harsh conditions of life should know, the explanation that accompanies the above-said assumption oversimplifies human psychology. Indeed, when a person of great wealth purchases a Ferrari, they may think little of the Ferrari because it, in comparison to their amounted wealth, is unimpressive; comparatively, if the person of average wealth had the fortunate opportunity to acquire a Ferrari, they will have a fervor much greater than the wealthy consumer. So, we then see from our example, purchases cannot represent desire alone, for there are other variables which interplay with how a consumer makes a purchase.

On top of the over-simplifying of human psychology, the idea that humans are egoists comes with the above-mentioned model. When we bring up the Nutella incident, we assume that each person wanted a resource: namely, the Nutella. The consumers pursued their own self-interest, and the pursuit of self-interest defines the essence of egoism. However, this assumption ignores other plausible explanations for why a consumer purchased a good.

By a slight stretch of the imagination, we can see some consumers purchase for others; that is, some consumers may buy large sums of cheap goods to feed the less fortunate, or to aid their family and friends. If we venture even furthermore, examples which fit well as a possible explanation of the behavior shall be found flourishing, so egoism need not be assumed. And for those who will conjecture that genes are selfish, I say that this is too reductionistic. Although genes are self-interested, they may develop phenotypes that rely on altruism to fulfill self-interest, which means the emergent psychology of an organism will be altruistic rather than egoistic.

Whatever the choice made, be it the rejection of the model or accepting the assumptions, there are incentives for both perspectives. Prediction can be useful, though so too can a philosophical explanation. Perhaps now, after some reflection, we may opt to use the economic model more tactfully; that is, be cognizant of the weaknesses and seldom push the model beyond the evident limitations. Or even further, some of us may be so brazen to develop our own explanation as to why these predictions can be made; meaning, what aspects of human psychology does the demand model really capture? But, in either case, we all now know something about the behavior around the Nutella incident.

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IdeasInHat

I like to write and read, a lot. That's all.

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