How much choice is too much?

There is an idea in classical microeconomics that says if we want to maximize the welfare of individuals, the way to do that is to maximize the choices available to those individuals and their freedom to choose among them.

Aside from the idea that freedom is fundamentally something that makes people happy, the assumption is that no one knows what will make you happy better than you.

If I give you a bunch of choices, you’ll choose whichever one makes you happiest. The more choices available to you, the more likely it is that you’ll be able to pick one that makes you even happier.

In practice, this idea may be too good to be true.

Barry Schwartz, a psychologist, professor at Swarthmore College and frequent contributor to the editorial page of The New York Times, studies the intersection of psychology and economics.

One of his findings says in many cases a finite amount of choice is welfare maximizing, but maximum choice is not.

He found individuals often don’t choose efficiently when faced with a large number of choices — they either fail to do what makes them happiest, or else what would have made them happiest doesn’t make them as happy anymore.

Bottom line — in a developed nation rife with consumption choices, people end up less happy than they should be.

The Wharton School at the University of Pennsylvania came to a similar conclusion.
In 2003, the school studied 401(k) enrollment rates across more than 800,000 employees.

They found the more plan choices employees were offered, the less likely they were to enroll.

Other studies have had similar results, even when failing to enroll means losing as much as $5,000 a year in matching contributions from the employer.

It’s probably fair to say foregoing $5,000 in matching funds for your retirement and not having a plan to fund it is not good for your welfare.

Now imagine you’re shopping for jeans. You walk into the store and you’re confronted with a wall of denim.

The decisions you have to make to purchase even one pair of jeans start piling up.

Boot, straight, slim, ultra slim or relaxed fit?

Should they sit at the waist or below it?

How many pockets?

Zipper fly or button?

Do you want jeans named Alice or Kate or Jake or Brad?

What about color? Jeans aren’t just blue anymore.

If you’ll be wearing these jeans in 2005, you’ll have to think about holes. Holes at all? Holes at the knee? Holes at the thigh? More hole than jean?

All this and we haven’t even started on sizes.

The process is exhausting. Even if you managed to find a great pair of jeans, you probably aren’t terribly happy about the hour you just spent being harassed through the dressing room door.

Modernization leaves us mired in an abundance of choice. When email gets pushed to your phone in an instant, every moment becomes a work/leisure choice.

Yet, paradoxically, it would seem consciously foregoing these choices — removing ourselves from the culture that requires these constant consumption decisions of us — wouldn’t be optimal either, considering we know those choices are still available and are choosing to ignore them.

Perhaps modern production is impossible without this expansion of choice.

And if this production increases our well-being more than the accompanying expansion of choice decreases it, it would follow that we are still maximizing well-being by maximizing choice — we just got the net number wrong.

It’s like agreeing jean shopping is frustrating, but at the end of it all you’re still net happier with the choice you were able to make than you would have been if there had only been two pairs to choose from.

So does a solution exist?

I’ll leave that choice to you.

­— drlreed@indiana.edu