Money, Surpluses and the Diderot Effect|ManualTrader

Money, Surpluses and the Diderot Effect

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The Diderot Effect is an economic phenomenon associated with consumer goods. It refers to the relationship between how much a product costs and the way it satisfies consumers. According to the famous French philosopher Denis Diderot, the purchase of things that are easily accessible is the essence of economic life. The second idea is that consumers will adhere to social norms, and set self-imposed limits to the consumption of commodities.

It has been noted that people tend to purchase something new when they feel that it has some inherent value. For instance, the French buy a new car every two years when they feel that they have the financial resources to do so. They also make repeated purchases of fashionable items. However, they never buy the car simply because they want it; they do it for the effect it has on other people. They are not consciously aware that the car was purchased in order to increase the social status quotient of the purchaser.

In a paper entitled "Spiraling Consumption: Why Do We Want Things We Cannot Afford?" behavioural economists Elton Mayo and Quentin Koffmann argue that the Diderot Effect leads us to believe that we really need things that are highly costly. This spiraling consumption leads to the familiar 'throwaway society', wherein the wealthy buy what they know that they cannot afford to buy, and the poor buy only that which is affordable to them. The authors explain that there is nothing wrong with being 'thrifty' if the pursuit of this goal helps to alleviate poverty.

How can the Diderot Effect help you in alleviating poverty? For starters, if you can demonstrate that the Diderot Effect influences the way that you shop, then you can convince your friends and family that you really need something new. In the previous example, the purchase of new clothes was sufficient to change the wearer's status, but only if the new clothes were very much more expensive than the old ones. When you spend less on something, you do not make a status statement out of it, but merely reduce the impact of the Diderot Effect by choosing cheaper clothes. In other words, the Diderot Effect may make you buy things that you otherwise would not have.

Another way that the Diderot Effect influences buying decisions is through the effect it has on the purchase of assets. The French call the 'buying of existence' an anglaise-faire culture. They state that the French people are naturally inclined towards abundance rather than scarcity. The wealth of the nation is thus not necessarily due to natural riches, but is the accumulation of wealth over time by the accumulation of capital. The Diderot Effect shows that a wealthy person may spend millions, but his children will never be able to enjoy the possessions without having spent the same amount.

In the previous example, the purchase of new things may be enough to lift the economic status of the French philosopher; however, this is not necessarily the case in the real world. It follows that if you cannot afford to buy new things, then you should buy old ones instead. The only exception to this rule is when the old possessions are as a result of inheritance tax. In this case, the Diderot Effect would say that the people who possess the new things are less poor than the ones who do not possess them, because the new things are an inheritance. The Diderot Effect therefore shows that buying should increase happiness, whereas spending should decrease happiness.

Finally, we note that the Diderot Effect also shows that the Diderot System can also lead to economic prosperity, and this again depends on the situation. If you are wealthy and you need to buy new things, then you will be happier than the person who has to pay for everything, even if the new things do not necessarily represent a greater wealth. However, the Diderot System shows that the consumption often leads to the opposite, i.e., to excessive debt. This is because the person who buys does not have any surplus, so he must spend the money that he acquires. On the other hand, the person who saves does not necessarily have any surpluses either, so he must save what he can and spend what he gets.

All in all, the Diderot System shows that the wealthy buy new things, while the poor are able to acquire things that they need, for the necessities of life. This is the opposite of the previous example where the purchases were the cause of poverty. Nevertheless, it can also be used to prove the point that the wealthy buy new things, while the poor must save what they get, although this is the reverse of the previous example. Therefore, we find the Diderot Effect at work in many situations. It will be very useful to anyone who wants to use the model, but I would like to mention that, because the economy is not very closely linked with the theory of evolution, there is no chance that I will present the Diderot Effect in this article.

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