His complaint is not totally without support from professional psychologists. According to well received research in this field, too much choice can actually be debilitating. These scholars study this matter and conclude that there results “analysis paralysis,” “pushing people around,” “self-doubt,” and “dread.” Well, they don’t have this problem in the good old USSR, where Bernie spent his honeymoon.
Of course, “one man’s meat is another man’s poison.” Not everyone will go off the deep end with the same number of (presumably excessive) options. But still, too many is indeed too many. Does the socialist senator from Vermont have a valid point? Does capitalism (or at least the vestiges of that system we still have in this country) constitute a threat to mental health from this source?
Not likely. Before we say why not, let us briefly reflect upon the fact that people the world over would give their eye teeth to be confronted with this “problem.” In their necks of the woods, the difficulty is the very opposite situation. Maybe we ought to be more thankful for the terrible problem Bernie is trying to rid us of.
But there really is no problem at all.
How would an economist look at this situation? Picture a diagram with price on the vertical axis and number of options on the horizontal. There are two curves on it. The first one, marginal cost, rises from the lower left, the origin, to the upper right. At the left-most point, there are no choices whatsoever, and thus there are zero costs of options, since there are none available. The fact that this curve rises illustrates the psychologists’ claim to the effect that as the number of different opportunities increases, people become more and more psychologically debilitated, other things equal, at least after a given point. The second curve indicates marginal benefits. It slopes in a downward direction from the upper left to the lower right. This exemplifies the fact that for both the grocer and the customer there are indeed benefits for more choices, but the additions thereof bring less and less gain the more of them there are.
Where the two lines cross is where profits, and also consumer satisfaction, will be maximized. Too few choices and the benefits of increasing the number of options will exceed the costs of so doing. Too many alternatives and the opposite consideration will prevail. In either case, the entrepreneur will be led by Adam Smith’s “invisible hand” to move in the direction where these two curves cross.
Firms that err in their “locational” decisions, in either direction, will tend to lose out to companies that hit the spot, dead on. No business necessarily hits the bull’s eye in this regard, certainly not always; but there are continual market pressures for all of them to move in the optimal direction.
Now, who do you think will optimize consumer well-being? The free-market system that continually grinds away at industries that offer either too much or too little choice? Or an outside busybody? If you think the latter, you really ought to retake your economics 101 class.
