Sunday, March 04, 2007

Mandatory Currency and the compulsion to buy...

In my last post I talked about that the problem that we have is not too little in life, but too much. Or more correctly, too much of the wrong thing through some very perverse incentives. This has become clearer to me as I struggle with my gift certificate and FSA problem. Lately I've been receiving more and more "gift cards" as presents. (In full disclosure, me and my lazy ass have been giving an increasing number of gift certificates lately as well). The premise is that they are easy and convenient to use, and in many ways they are. It has eliminated the tackiness of giving cash (which if you are Chinese is not considered tacky at all but de rigeur with those little red envelopes), yet freeing the giver the hassle or pressure of making a decision or giving the wrong gift.

But what does it do to the receiver, well it basically forces the receiver now to go shopping. This is particularly difficult for me as I'm a terrible shopper, not knowing what I want (this is the root of much unhappiness), parsing out the information about the best buy. (Have you tried to buy a light bulb lately, I'm converting 50% of my lightbulbs to CFLs and what use to be an easy purchase decision has become absurdly difficult -- but I digress).

The dilemma becomes this, I the receiver has virtual money, it's not real money because it's not legal tender that's exchangeable. One way to think about it, is that a gift certificate is like going to a foreign country for vacation and forgetting to spend all your money and coming home with a pocket full of souvenirs. Except the foreign country is Barnes and Noble, and basically you have to head back Visa in hand to redeem them. So back to the gift certificate, right now I have a souvenir, unless I use it. And here is the problem, most souvenirs end up as clutter, and I'm not into clutter.

So the alternative is I NEED to spend the gift certificate, but what do I want or need. And can I get that at the place of the gift certificate is issued. So what do I do instead, I buy things just to buy things. Result more clutter. Arghhh! I can either flush the gift certificate, or go shopping. Consumption is built into the system.

The same thing happens every year with those Flexible Health Spending Accounts, we buy a Tax Free gift certificate for health stuff at the beginning of the year, and at the end, we need to spend in order to not waste it. Consumption is built into the system.

Now, I have to say that some people probably do need to spend more money, need to live it up. One of the gift certificates I got, ended up getting converted to some nice casual shoes, I would not have bought on my own. It's a way of motivating people to buy something "nice" for themselves, so gift certificates can be a good thing. That's probably a minority report.

I think that we have a larger gift certificate problem in our society, the feeling that we have to spend. I'll go into that more in the next couple of posts as I try to figure out why I (and perhaps others) buy.

It's interesting to see how people feel about gift certificates. Sitting Pretty talks about the same things, and refers to the freakanomics guys.

In a more wonkish note, extending the currency metaphor. It is interestng to see how on eBay people are trading a selling gift cards and you can end up seeing the buy - sell spread on different merchants. It would be interesting to look at how the different vendors are looked at in terms of cash equivalence as a measure of company perception. I just did that and for Best Buy and Circuit City. You basically pay 90% of value for Best Buy card and 80% for Circuit City cards, so people in effect feel that Best Buy is a more safe place to buy something. What's interesting is for the seller, there is a high cost between market making fees of eBay and the spread to convert a gift card into cash. Another argument for giving cash.

Last comment is that some locales are setting up their own local currency to encourage shopping. Ithaca, New York their Ithaca Hours is probably the most well known.

Long post, but it's not hard to see that sometimes we feel forced to shop. If consumption is carbon foot print, let's explore why we consume in the next few posts.


Post a Comment

Subscribe to Post Comments [Atom]

<< Home