The role of communities on buying behavior…
You cannot predict consumer purchasing by looking at buying behavior from an economist point of view. Their way of abstracting the buying behavior as that of a rational individual driven primarily by personal needs, instead of looking at it from the complex social web perspective in which we actually make buying decisions, is just not realistic. As with many complex systems, you cannot understand, nor predict, a large social group’s buying behavior by abstracting the individual members of that group and studying their individual buying behavior as if they were rational players who are not influenced by their environment and the behaviors of others.
An interesting book covering this topic, which happened to be my first Kindle purchase, is : The World of Goods: Towards an Anthropology of Consumption. Authored by Mary Douglas and Aron Isherwood – it nicely contrasts the anthropological way of looking at consumption with the economic view.
A good example is to imagine what a small island might look like if it were promoted as a luxury retreat. What kind of stores would you expect, what kind of display/status purchases would people make, etc. Now imagine that same island, with the same people, after a natural disaster, or as they are all getting older, and now influenced by a deep religious movement. The whole island would look differently, people would buy differently, the type of stores that would be there would be different, etc. That is not something you would be able to predict based on the individuals.
Communities impose constraints on the individual members of that community. In some communities it is not ok to buy certain things – think buying fur coats in green communities. In other communities, people will buy stuff to exclude others from their community – think high roller communities who will make you feel bad if you don’t have your own jet, or a biker community if you do not have all the appropriate paraphernalia.
As the authors of the book suggest – “the collapse of a community frees individuals, and thereby affect inflation, spending and saving.”
Now isn’t this exactly what just happened with the mortgage market meltdown? In the past you would have bought your mortgage from a local banker, or a community member you knew. Part of the buying behavior would have been influenced by the community, which would make sure that you did not buy more than you could afford. And if you did, or hit hard times, you would have worked really hard to repay the loan one way or the other. Now, with no community to guide this process, many people bought stuff they could not afford, and many are walking away from their situation with hardship, but without the guilt feelings that they would have had in their community in the past.
Another interesting assumption from the book – which I barely started reading – is that “there is a comprehensive, fundamental set of human wants which concerns control of other humans (and also escape from being controlled).” Now this explains way more than political buying decisions.
Very insightful…
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January 28th, 2008 at 5:32 pm
I have to disagree with you re the mortgage meltdown, Francois…
From the experience of friends, and what has been reported in some news reports re subprime mortgages, many people found out about subprime brokers via word of mouth–as in “I know this great lady who can get you a fantastic deal on a mortgage. If you don’t understand it, that’s ok. She’ll do all the paperwork for you and make sure you get it.”
Many subprime lenders were operating out of small offices or home offices, serving as brokers for larger groups, and preyed on low to low-middle income folks who might have been refused mortgages from traditional banks for one reason or another. Wanting the “American Dream” so badly, they were willing to go outside traditional banking channels to get it.
And it was word-of-mouth from well-meaning friends and relatives that got people into those offices because many of the brokers never advertised.
And it’s rather inaccurate (as well as cruel) to say people don’t have feelings about defaulting on their mortgages. Many have lost life’s savings because they didn’t understand what was going on and trusted community word-of-mouth. They aren’t walking away without regret–they have huge regret and huge pain, having lost their “American Dream” and will suffer consequences to their credit for years to come.
The only ones who won’t suffer are many of the subprime brokers, who are now out of business and can’t be found by the Better Business Bureau or Chamber of Commerce.
So, you might even say that it was community–well-intentioned but ill-informed–that aided the mortgage meltdown.
January 28th, 2008 at 10:12 pm
Tish,
Thanks for taking the time to comment. I think you misunderstood the point I was trying to make, and perhaps this example was not the best of examples as it touches so many close friends and family in our immediate circles.
But when your mortgage liability is being held by a pension fund in a town in Northern Europe as opposed to by your local banker or other person in your immediate community, it takes away a lot of the local accountability that you find in closed communities. And the fact that deceiving bankers or representatives of those bankers infiltrated local communities just makes the point that in this case the community was non-existing or very weak.
Again, this was not meant as a debate about the mortgage crisis, but rather on the impact of communities on buying behavior.
Let me use another, and less emotionally laden example, that I ran into during an animal documentary last night (sorry I do not remember the program’s name nor the channel). It showed how in nature the hierarchy within monkey communities is based on very complex social rules and interactions. When you take those monkeys out of their habitat and you throw 5 random ones into a cage, a hierarchy will establish itself as well – but this one will be based on relative aggressiveness only. So when you weaken the social norms of communities, or when you eliminate the community all together, the behavior of members change. And in the case of humans, where buying behavior is intrinsically intertwined with social norms, the buying behavior will change radically as well…
That’s all I was trying to point to…