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Here we discuss the basic economic concepts of utility and preference. At the end of this article, I’ll propose some straightforward tips to keep Internet addiction at bay (especially if you suspect your kids are at risk).
Utility is defined as the “welfare” or “happiness” one receives from consuming a product or engaging in some activity. Eating your favorite food(s), having a conversation with friends, or having sex all generate utility. Up until a certain point, consuming an additional unit of the product or engaging in more of the same activity increases your overall utility.
Because people have different tastes and desires, their utility curves differ as well. For some, such as myself, social media networks like Facebook provide no entertainment value. On the other hand, an overzealous teenager is constantly interacting with her 500+ “friends” or 10,000+ “followers” for various reasons that I don’t particularly care too much for. We can conclude the utility curve is almost nonexistent for people such as myself, while it is most certainly positive for our imaginary (or not so imaginary) teenager.
Standard Utility Curves
Background: “Jane” loves cherries. The total utility she receives from consuming cherries can be plotted as such:
From the graph, we can conclude the following:
- The first serving of cherries adds 4 “points” of utility. The second serving adds 3 “points” (4 + 3 = 7), the third serving adds 2 “points” (7 + 2 = 9), and so forth. Each additional serving of cherries provides fewer “points” of utility than the previous serving.
- Marginal utility is defined as the “change in utility” whenever we consume an additional unit of anything – in this case, a serving of cherries. Marginal utility is downward sloping (decreases over time), as we shall soon see.
- At some point between 4 and 5 servings of cherries, Jane maximizes out her utility. She no longer gains utility from consuming an additional serving, and in fact, her utility begins to drop after serving #5.
- In layman speak, we consider “Jane” to be full from eating cherries, and we would expect her to stop eating cherries at somewhere between 4 and 5 servings.
The point I would like to make is that typically, “goods” we consume or activities we voluntarily engage in have a positively sloping total utility curve, but eventually utility “caps out” and no longer continues to increase or grow once we surpass a threshold.
In our example above, Jane is full from eating cherries, and her total utility stops growing after a certain point.
This is represented by a downward sloping marginal utility curve. The plot below is the corresponding marginal utility curve for the total utility curve from before.
Remember, MARGINAL utility is the CHANGE in utility as we move one unit to the right on the X-axis (“servings of cherries.”) A positive marginal utility denotes an increase in total utility, while a negative marginal utility indicates a decrease in total utility.
At 0 servings, Jane’s marginal utility is 4, as her total utility increases from 0 to 4 after just consuming 1 serving. At 1 serving (already consumed), Jane’s marginal utility is 3, as her total utility increases from 4 to 7 after another serving, and so forth.
If Jane is “rational,” or wishes to maximize utility, we will expect her to stop before marginal utility reaches negative territory.
You don’t need to concern yourself with the specific numbers too much. Just understand that for most activities we voluntarily engage in, or products we voluntarily consume…
- The TOTAL utility curve is upward sloping and continues to increase up until a certain point.
- The MARGINAL utility curve is downward sloping – the next unit we consume creates less utility than the previous unit we already consumed.
- Generally speaking, people will not consume beyond the point where marginal utility equals zero.
Abnormal Utility Curves
Our assumption for “normal” utility curves is that each additional unit consumed (or activity engaged in) generates less utility compared to the previous unit consumed (or activity engaged in). If you think about it, this is obvious for most of the things we do:
- We stop eating at a certain point because our bodies can only handle so much food. We don’t eat until we’re extremely bloated.
- We stop exercising when we become too tired or have “had enough.” We don’t continue exercising until we collapse from exhaustion.
- We stop watching TV when we get bored or there are more urgent and important tasks. We don’t sit there for hours without end and shirk our responsibilities due to the consequences.
Note that these activities all have inherent or intrinsic stop mechanisms.
Unfortunately, many of these “stop mechanisms” do not apply for people with addictions. Indeed, the relentless desire to fill a psychological void is likely to override our brains’ natural signals to STOP.
What might a utility curve look like for an individual with a substance or behavioral addiction?
And the corresponding marginal utility curve…
As you can see, the marginal utility continues to stay the same, and the total utility continues to increase. (Remember, someone with an addiction does not have the same utility curves as “normal” people)
Astute observers will note that the graphs above are incomplete; that is, if we were to stretch the graph along the X-axis, we would eventually discover a hard limit for consumption.
To put it more bluntly…
- You can only gamble away so much of your money (and credit) before you have nothing left to gamble.
- You can only drink so much liquor before you start experiencing alcohol poisoning and stop out of necessity (or risk death).
Obviously, from a practical standpoint, this is extremely undesirable, and hence why medical intervention is necessary.
In a previous blog post, we discussed five relevant factors explaining why people might use the Internet as an “outlet” for their fantasies. While most people who game or use social media won’t become addicts, just as most people who drink alcohol don’t become alcoholics, the threat is not a trivial one. Overuse and excessive consumption may indicate more severe underlying problems.
The second economic concept is that of “preference.” Preference is, as the name implies, the relative utility one receives from consuming a good or engaging in some activity compared to consuming another good or engaging in another activity. Higher utility translates into higher preference.
For example, I like watermelon more than cherries, and cherries more than apples. My preference is watermelon > cherries > apples. To understand how this is applicable to Internet addiction, let us examine the following example below:
Suppose “Bob” is a 14 year old. His “preference” among daily activities on a scale from 1 to 9 might look something like this:
Very high preference (9) – Playing Fortnite (a highly popular online game)
High preference (7) – Skateboarding with friends
Neutral (5) – Reading a fiction novel
Low preference (3) – Doing homework
As you may notice, an individual’s preference has very little to do with what “must” or “should” be done. This goes for adults as well, as most are unlikely to rank “getting up at 7 AM and commuting 1 hour to work” as “highly preferred.” But I digress…
Bob’s normal psychological state would, likely with the help of parents, regulate his high preference activities. He wouldn’t play Fortnite until 3 AM in his bedroom. We can safely conclude that Bob’s “normal” psychological state is around a (5), perhaps a (6) if he were in an upbeat mood.
Problems compound when someone becomes more and more “accustomed” to high preference activities. Instead of playing for 60 minutes a day (which is perfectly fine), they start to play 90 minutes. After a month, they’re up to 120 minutes daily, and three months later, they’re spending 180 minutes.
If “Bob” becomes addicted, his “preferences” will shift into this:
High preference (7) – Playing Fortnite
Neutral (5) – Skateboarding with friends
Low preference (3) – Reading a fiction novel
Very low preference (1) – Doing homework
As hinted earlier, preference is relative, and it WILL change depending on the person’s age, experiences, social status, physical health, etc.
The exact process involves a neurotransmitter called “dopamine.” Dopamine is generated in high amounts when the user engages in a pleasurable activity. The flood of dopamine prompts the brain to shut off some of its dopamine receptors. The user will need to engage in even higher levels of the activity (in this case, spend even more time gaming) to experience the same level of pleasure as before.
Previously “fun” activities (skateboarding with friends) will seem neutral, and previously neutral activities (reading a fiction novel) will become unenjoyable.
What do you might suppose will happen among the extremely unenjoyable (very low preference) activities? After a while, “Bob” might skip doing homework or cheat on tests in order to shift precious time from studying to playing online.
Behavioral economics is truly a fascinating field, and I’ve only scratched two of many surfaces.
For parents, the course of action is quite clear, and you must consider the following:
- When your children use digital media, does their behavior resemble the standard utility curve or the abnormal one? That is, do they eventually get tired/bored of using it, or does social media and gaming entice them so much that they won’t stop without external intervention?
- We strongly advise parents to strictly regulate Internet time, while at the same time encouraging more socialization offline.
- Remember, preference is RELATIVE, not ABSOLUTE!