ESSA

ESSA

The price of being cool


Lynette Munoz

By

March 24th, 2013


When our purchasing decisions signal status, how do we choose to spend our money?


Keeping up with current trends has become an incredibly draining task, both financially and mentally. Today’s rapidly changing society can’t stay still for a period of time, before ‘it’s out with the old and in with the new’. Whether it is the Ray-Ban aviators that make everyone look slicker, a pair of Vans or even the chino pants that all the private school boys wear, lots of money is spent on maintaining what is deemed ‘cool’ in our consumerist society.  But why do we do such things? What is the benefit that we gain from investing in these ever changing fashion and fads over and over again? The desire to conform and the security that it provides may be the reason we all continue to follow the norm.  It is in human nature to want to ‘fit in’ and not to stand out from the crowd. Yet these major brands that seem to profit more than we do. The markets tend to target age groups and in particular, those in their awkward teenage years where the importance of appearance is prioritised more. It is mainly this group that is mostly susceptible to societal pressures and isolation that can be felt for not following the general trend. As rational consumers, one makes the decision to purchase an item when the private utility overpowers the opportunity cost. Therefore, we can conclude that the private utility gained must in fact be the motivator of purchasing such items.

When a particular brand or item is in season it is more heavily demanded, and due to the law of demand, the product becomes more expensive. Many branded items can be incredibly expensive these days, and so many people choose to purchase from the parallel market instead. Fake Ray-bans are close imitations of the legitimate version and from afar, it is difficult to tell the difference. Although the major corporations profit largely from selling what’s trendy, the fast moving culture also gives greater rise to the world of the black market. It has become almost common for people to have fake branded items instead of the real item, and it appears to be a ‘win win’ situation, where you get the exclusivity of owning the product but also get to purchase it at a lower price. Thus, the parallel market becomes more attractive, even though it is illegal. Veblen goods are often the products which associate themselves with the ‘snob status’, and bring a certain sense of pride if you have such items. These luxury goods (take a Louis Vuitton handbag, for example) are perceived to be measures of someone’s social and financial status. It is a form for people to climb up the social ladder, if they are able to afford and own such goods. It is this that makes them highly coveted items, even though they may severely empty our pockets. As a result, producers can increase their prices and with higher the monetary value, signal  that status of their product and make it more attractive. Perhaps people should focus less on the materialistic items that define someone’s status, but make their judgements based on character instead.

How worthwhile is constantly acclimatising to the new ‘in’ style? It depends on how much you value your own individuality. But remember, even though the latest new thing may seem appealing, the main thing is to buy it because you legitimately like it – don’t get it mixed up with what pop culture wants you to like.

The views expressed within this article are those of the author and do not represent the views of the ESSA Committee or the Society's sponsors. Use of any content from this article should clearly attribute the work to the author and not to ESSA or its sponsors.

  • Theo Josseff

    Great article Lynette, I’m a Macro-nut, but I always love seeing how economics can be used to make sense of our everyday behaviour.

    I agree with your premise that we buy branded goods in order to signal to others that we are from a certain social group. However, many different goods are able to signal the same message, so a decision is made to determine which one of these goods would most differentiate a person within a group. The differences in similar goods distinguishes them from the crowd, and can be seen as the measure of “coolness”.

  • Anonymous

    Awesome article! I’ve personally always endeavoured to avoid following trends and found this to be a more worthwhile (and cheaper) option. You can’t put a price on individuality and it maintains its benefits in the long term. I’d always rather stand out from the crowd and appear a bit odd than look like everyone else – at least you’re guaranteed to be remembered that way.

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