In an edifying blogpost Sabine Hossenfelder describes her puzzlement about how magic spells sold online can fetch a price as high as $200.
She says:
"After I figured she spent $200 on somebody sending her an email with some probably random generated "magical words" I could not but be stunned. It raised two questions for me: First, why do people waste money on entirely useless crap? Second, doesn't standard economical theory tells us that the value of a product reflects all the information about it? So why then doesn't the miracle of the free market accurately price useless spells at zero? (To be fair, they probably have some slight entertainment value and a psychological effect. But that's like saying you'd spend $200 on an iPod, and if it doesn't work the money was still well spent on making you feel better for helping the economy.)"
She goes on to answer the first question in her post. It is lack of education, more specifically, lack of understanding how science works that’s the culprit. But the second question is somewhat more perplexing. This blog post is to share my perplexity on this question and invite answers.
Here in India, astrology, palmistry etc are pretty big. Astrology/ palmistry experts usually recommend their clients to wear these rings with gems embedded on them. Different gems are associated with different planets (I don't know how they dealt with Pluto's demotion). By looking at your palm or studying your horoscope, the expert will know which stones you must wear to get beneficial effects. And behind all this there is a science!
According to one website :
"The Science of Planetary Gemology has been used in accordance with Indian astrology for thousands of years. It is the science of understanding how gem stones transmit and reflect planetary rays, and how they increase planetary influences in a person’s life. Thus, gemstone therapy can become a potent form of natural vibrational healing."
The Science of Planetary Gemology, no less!
To come back to the business side, almost every big enough jeweler’s shop has an astrologer attached to boost sales. I just went through an astrology/gem selling site to check the prices. Some gems (like Ruby, Sapphire, or Emerald) can cost between Rs. 4000 to 7000 ($80- $150) per carat, and a stone would be somewhere between 4 to 8 carats. There are very probably people who have spent Rs 60000 ($1300) on a single stone, and not because of it’s aesthetic value.
Why? How does mumbo-jumbo evade the rules of economical theory?
My own hypothesis is that people are unable to judge the value of the products. The promises the sellers make are not often specific: success, happiness, health. The users do not know the time period in which the spell/talisman is supposed to give results. If these products came with promises like ‘get your lover/box office stardom/hair back’ in a week/month or some specific time, people would know if it weren’t working. If it was a restaurant, you could judge immediately. If it was a gadget, you would know in a while. But with something as vague as a charm, it’s much more difficult to reach a definite conclusion.
And if they do eventually come to a conclusion, it will take a lot of time. By which time they will have already influenced their friends etc one way or the other.
Suppose Mrs. X bought a Ruby to boost her health. That doesn’t mean that she would give up her medicines or her yoga or whatever. Now obviously the Ruby has no effect on her health (except placebo). Her health will continue to improve and deteriorate as it would without the ring. The very next time her health improves, she’ll likely give credit to the ruby. This will induce her friends who are also looking to boost their health to buy gems for themselves. If they would study the fluctuations in Mrs X’s health on a long term and compare with that of other people who have similar health problems, take other possible factors into account then they could reach the conclusion that all a ruby does is look good on your finger. But people don’t take such long times to judge and certainly don’t show such scientific detachment.
OK, so that’s probably not a very good illustration. But hopefully you get the gist of what I’m saying. But perhaps you have a better explanation?
4 comments:
Even nominally useful products work this way. In the West, especially in the U.S. and Canada, there is a whole industry of "infomercials" designed to sell things of dubious utility by making them sound revolutionary.
For that matter, even products which *do* work are often sold based on merits other than those which can be quantified. They sell a lifestyle which is implicitly promised to accompany the product. No guarantee, or proposed mechanism, is given for when or how the customer's lifestyle will change by purchasing the product, but it works. Indeed, iPods are an excellent case study in the virtue of how making somebody feel irrationally good about your product will induce people to buy it: Apple is the mastermind/benefactor of a prodigious marketing strategy designed to get people to feel good just about buying an Apple product, even if it isn't the best piece of electronics on the market.
Astrology sells hope; and in its own way, so does all consumerist advertising.
Niel,
So you are saying that advertisements counteract the information spread that standard economics assumes?
In India, strangely, astrology sells without a lot of advertisement. Ok, so there is a huge population that has always believed in the basic soundness of astrology. But that is a little counter-intuitive to me because the products don't work and one expects the information to have spread. The answer probably is that it acquired a practically religious status at some point in history, so that a lot of people think that it's a part of Hinduism. But I don't really know.
Not only does advertisement counteract information spread among "rational agents", that is almost its exclusive purpose. Advertisement is a message which attempts to induce you to purchase something that you might otherwise not purchase. Sometimes, this is because they are trying to convince you to buy one product rather than another, to fulfill some necessary role --- and even then, one must ask "necessary for what?" --- but more often in the West it is to convince you that you should buy something which is not necessary at all, because it will improve your life in some way, which may not be easily measured.
Advertising is about getting you to think irrationally about how to spend your money, for the benefit of those who sell the advertised product or service. Its success is just one of the phenomena which undercuts the "rational agent" hypothesis which is fashionable in economics.
It sounds to me that the reputation astrology has in India is like Google's reputation in Canada and the U.S. Who needs to advertise when you have such solid viral marketing, such a tremendous "mindshare" in the market? Advertising for astrology, and advertising by Google, would only raise the unasked question of whether they actually do work well; the current assumption in both cases is that they do.
Yeah, except that Google did work well when it made its reputation.
I found this story on the net of an Indian astrologer whose method consisted of getting to know names of people, learning about them on Orkut/Facebook and then proceeding to astound them with the information he had thus learned, pretending that he had divined it through astrological methods. Unfortunately for him, he was caught quite quickly.
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