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The beauty of more choices

By Mikayla Novak - posted Monday, 17 July 2006

According to the American columnist Virginia Postrel advanced economies around the globe, including Australia, are experiencing a “variety revolution”. As a result of innovations in production and distribution practices, consumers today enjoy access to far more choices of all kinds of goods and services compared to previous generations. Businesses also strive to give consumers more personalised products, more varied experiences and more choices.

However, not everybody sees this aspect of economic change as being desirable. The latest stream of anti-market thought contends that the growth in product varieties is making us feel overwhelmed, unhappy and depressed.

According to Barry Schwartz, author of The Paradox of Choice, “[f]or too many people, increased choice can lead to a decrease in satisfaction. Too many options can result in paralysis, not liberation”. Schwartz describes how product variety growth “no longer liberates but debilitates”, attributing this phenomenon to, among other things, the rise in clinical depression.


Similar anti-choice sentiments have been expressed by Robert Lane’s The Loss of Happiness in Market Democracies and Clive Hamilton’s Affluenza. For these authors, people are experiencing growing difficulties with too much economic freedom to decide what to do with our own money and our own lives.

While these critics bemoan the expansion of product varieties on supermarket shelves and specialty stores, they fail to appreciate the benefits associated with the availability of extra choices. Principally, choice - and more of it - is beneficial because people are different. For instance, the availability of different breakfast cereals on supermarket shelves, or different motor vehicle models in car yards, enables consumers to select what packages they prefer and not the package that an authority decrees on their behalf.

Extensive choice aims to accommodate the extensive degree of variation in individual tastes and preferences. It follows that the more choices that exist means that individuals with divergent needs will more likely to be satisfied, compared to a world with fewer choice options.

In the face of these different product preferences, sellers strive to diversify to satisfy the various segments of the market. One by-product of this is that producers will tend to specialise to cater for different consumer tastes. For example, a niche boutique fashion store specialising in certain types of garments will satisfy those who are intimidated by abundant choices. On the other hand, larger department stores with a broader range of items will please individuals who like plentiful fashion choices in one location.

The ensuing competition for market share gives participating sellers every incentive to introduce new product ideas and innovations that they hope will appeal more to the general public. Contrary to the perceptions of the anti-choice polemists, this variety-growth market system delivers win-win benefits for producers and consumers alike.

The assertions made by critics of consumer choices ignore other fundamentals regarding how markets work in the real world. The notion that people have real cognitive limits when dealing with a variety-growth market is nothing new. The voluminous “transactions cost” economic literature suggests that the market process may indeed entail search and information costs regarding what kinds of goods are available in the market, which offers the lowest prices and better quality, and so on.


For those people who have difficulties in dealing with growing choices, entrepreneurs have an incentive to step in and help individuals minimise their transactions costs. The fruits of these efforts are evident in everyday practices, such as advertising, establishing a market reputation as a quality supplier and providing after sales services, such as warranties or “money back” guarantees.

Some businesses, such as Aussie Home Loans Mortgage Market for example, have been established to guide people through the many choice options available, helping consumers find the options they prefer. In stores, similar items, such as compact discs through to lettuces, are grouped together to help people make their choices. Even consumer advocacy magazines, newspaper product reviews and Internet websites such as can assist.

These various tools and techniques provide information and help navigate people through market choice options. They serve to reduce the transactions costs, as well as relieve personal anxiety and stress associated with selecting goods and services in a complex market economy.

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About the Author

Mikayla Novak is a Research Fellow with the Institute of Public Affairs. She has previously worked for Commonwealth and State public sector agencies, including the Commonwealth Treasury and Productivity Commission. Mikayla was also previously advisor to the Queensland Chamber of Commerce and Industry. Her opinion pieces have been published in The Australian, Australian Financial Review, The Age, and The Courier-Mail, on issues ranging from state public finances to social services reform.

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