26 Sep 2014
Why our insecurity costs us money
Classic microeconomic theory teaches us that prices are determined in markets (which, at their best, are assumed to be perfectly competitive). Thus, what I pay for my pair of jeans depends, on the one hand, on how much it costs to produce it and, on the other hand, on how much I am willing to pay for it. The producer should just make enough money to cover expenses and I should just pay as much as the value, which this pair of jeans adds to my clothing ensemble.
In the real world entrepreneurs have found an astute way to sell you pretty much the same exact jeans but make you willing to pay more for it: branding. Nowadays, if you’re buying a pair of jeans is not just the jeans you’re getting – you’re buying a feeling, a feeling of adventure, a bit of sex appeal and maybe some independence too. If you buy a car, it is not just a vehicle that transports you comfortably and safely from A to B. It’s a way of life, of roaring freedom and power. In terms of what they do, the jeans are still the same jeans and the car is still the same car. Yet, we are willing to pay significantly more because we think that we will be happier, socially more attractive and maybe even more successful, if what we buy has just that little brand tag on it.
What worries me is that branding often preys on the most basic human condition of insecurity. Yes, we all want to be accepted and loved and belong to the group and deep down we worry all the time whether we are “good enough” to be part of the group. We are striving for a status, physical attractiveness, career success and all those other values that we are told we need to achieve in order to be accepted by others. Companies tell us that we can actually buy our way in, that we can be better if we just buy their products. And that I think is an illusion. The new jeans might make us feel better for a couple of weeks, and even get us some compliments. Yet, we ultimately stay the same insecure person, even if we buy a hundred brand jeans.
Bottom Line: Whatever advertisement might tell us, we cannot buy a better self. Learning self-acceptance and improving our self-perception requires serious mental work. However, in the end investing in ourselves is probably cheaper than compensating for our insecurity by buying another pair of Levi’s jeans.
* Please comment on these posts from my microeconomics students, to help them with unclear analysis, other perspectives, data sources, etc.