Monday, December 15, 2014

The Paradox of Choice

In economics, an expanded choice set from new goods, increased income, lower prices, etc. is generally a good thing.  You can more easily satisfy your desires when there are more things to choose from.  However, with more choice come more decisions to make, more information to gather more things to compare.  All of this is costly to an individual and these costs can sometimes outweigh the benefits of expanded choice sets, particularly when that expansion comes from additional goods.

There is a good example of this in today's New York Times in the form of an Op-Ed by a former independent record store owner, Sal Nunziato, who laments the lack of a filter for music that the old big label led industry used to provide.  As Mr. Nunziato states "I don’t want thousands of choices. Some choices would suffice, and the suits made that happen." Now we are flooded with choices because there are fewer hurdles to music being made available to consumers.  But the only way to tell if it is any good is to sort through it all and listen to it.  I am sympathetic to this.  I am a child of the vinyl album and this new era of Spotify (I subscribe) is difficult to deal with. I have limited time to search around for reviews and recommendations and have a hard time finding new music that I like - there is just so much to sort through.

I feel the same way about the decline of the mainstream media.  I talk a lot about the demise of real in-depth investigative reporting, but the biggest loss is of the editor whose job it was to make the decisions about what was most important for readers to know.  Now I have too much choice about information from all kinds of edited and un-edited sources.  Ironic that I say this in a blog, but I never intent to be a news source.  My only hope is that my training as an economist lends some value added to discussion of policy and economics news.

But I digress. The big point here is not particularly novel: in the era of information technology we are so flooded with news, entertainment, sports, etc., it can actually make us worse off than we were when there were a few big music labels, a flagship daily newspaper in every city, and a few television networks.  I don't actually believe that on the whole we are worse off.  Far from it, I think we are tremendously better off (as a lover of european soccer I am massively better off now than I was a few years ago), but I do think a good business to be in in the near future is the 'filtering business' - helping consumers weed through the morass of information, entertainment and so on.    


The Oriole Way said...

For music, you should try Beats. It's curated by both humans and algorithms, so it really helps with finding new music that you will enjoy; I've had great success. It's actually designed to specifically solve the problem you identify.

Patrick Emerson said...

Thanks, I'll give it a try.

BJCefola said...

There's a paradox in the idea that filtering will be a good business. Who will pay for it?

If consumers were going to pay for it, we wouldn't be losing editors and record labels. We'd be supporting "whole" products like albums and magazines instead of breaking them down piecemeal. If someone else is going to pay, who will trust the filtering enough for it to pay off?

Fred Thompson said...