Laws of physics are universal!
As regards freedom of choice the conventional wisdom, which I have always been opposed too, is that consumers have a right to choose.
Consumer choice is very pricey was always the sole, but logical reason for this aversion.
Whence facilitated by easy access to debt, such as via credit cards, consumer choice becomes pricier; unbridled choice generally results in uncontrolled consumption leading eventually to unmanageable debt, which by the way defies another age old adage, live within your means.
Remarkably, debt is addictive, not only at the individual level, but also at the national level.
Our penchant to consume might have resulted in an exciting GDP growth, but there is always a price for freedom; and we are paying it now when the creditors want their money back with interest.
The biggest component in our GDP is still private consumption at 82%.
Uncontrolled consumption is why we have a fiscal deficit, and we still want freedom of choice; we especially love to travel in foreign airlines!
Have always held the view, publicly, that even if consumption had been limited domestically, financed by domestic debt, the party could very well have continued much longer and the solution might have been extremely less painful; imported choice financed by external debt is what did us in.
But the theory of comparative advantage has always been the counter, the nemesis even, for any suggestion in support of tariff hikes to control foreign consumption.
Unfortunately, what they don't tell you is that, freedom of choice, as afforded by comparative advantage, will eventually result in trade deficits which invariably will have to be financed by external debt, and the result of prolonged deficits and increasing debt is always currency depreciation; the end state being back to buying domestic goods, but with a huge debt obligation in foreign currency, which we probably can never pay back.
How does that even make sense? Why not stick to buying domestically in the first place?
Well, one reason surprisingly is that IMF does not want us to stop importing, despite that fact that our current economic stress is entirely because of our trade deficit and everyone including IMF is aware of this fact!
Having systematically been brainwashed that consumer choice is a right, is perhaps another.
Surprisingly, we do not even want to debate why IMF wants all regulatory duties on imports, including on luxury goods and all other policy steps to manage the balance of payment deficit, eliminated.
Something does smell in Washington; but why did we readily agree to that condition?
Perhaps we never had a choice.
Notwithstanding all of the above, Barry Schwartz, in his book, "The Paradox of choice" provides another angle to why consumer choice may not be good at all.
On a personal level, I absolutely agree with Barry, that buying a pair of jeans has become extremely stressful now a days; I have no clue about what exactly is the difference between easy fit and relaxed fit, or how much more baggier is extra baggy compared with just baggy.
And how can you have various options in black!
Buying a simple bag of potato chips becomes an ordeal in a super store; who even thought up those crazy flavours and designs for potato chips; and some are not even potato chips I am told.
Most of us are not even competent to make the right choices when it comes to buying more complicated goods or health services; health services for one, as rightly pointed out by Barry.
Barry's conclusion is that people are shopping more but enjoying it less; he is right, I am not sure I bought the right smart television since I am not able to judge whether the options I went for are indeed superior to options I rejected, because I really do not understand either!
All decisions involve a trade off, our decisions are a reflection of our choice and we remain ultimately responsible for decisions we make on our own, plus downward counterfactual thinking are some of the reasons why multiple choices and freedom of choice make people unhappy. We are free to choose the stocks we invest in, but as soon as we lose money, we are unhappy and want the government to do something about it. Are you not responsible for your freedom?
Thank you Schwartz for providing further ammunition for my argument!
Freedom of choice is armed with a double jeopardy, not only does it make a nation poor, it also makes it unhappy.
So is it not wise to suggest, that the government, as the collective conscience of the populace, should through policy actions curtail the freedom of choice?
(The writer is a chartered accountant based in Islamabad. Email: [email protected])