‘Tastes and preferences’ is the phrase economists use to refer to everything we want in life. These preferences can be little things, like what toppings we like on our pizza, or bigger things, like what kind of work we like doing or how we like to spend our free time. Most economic theories don’t actually pay much attention to where people’s tastes or preferences come from. Instead, economists generally start by accepting that people want what they want, and then studying how people get what they want.
But where do our preferences come from? A lot it is just inherent in who we are, but there’s also a lot that comes from other people. The way we were raised, the people we spend time with, and even the types of shows we watch or book we read can shape our preferences in sometimes unexpected ways.
Whether or not we like to admit it, sometimes we make our economic choices based solely on the image we want to create. Economists call this conspicuous consumption. A fast car, an expensive purse, even a $6 coffee might be 100% functional, but they can also be a way of showing the world that we’ve made it. Our tendency to want the ‘best’ or ‘most expensive’ can sometimes allow companies to push prices pretty high. For some extreme luxury goods economists actually think higher prices can make things more desirable.
Sometimes our economic choices are directly influenced by what people around us are doing. Economists call this information cascade; when everyone is doing something, it often makes sense go with the flow. This can help explain why certain fads, like Pet Rocks or Pokémon cards, become popular in some areas and not others. It’s not that people in one city inherently enjoy Pokémon more than people in another: rather these trends can be seen as being passed from one friend to another within an area.
Why are our interests so easily affected by other people? Sometimes it’s because we trust other people’s decisions. If a restaurant is packed, we assume it must be good or everyone else wouldn’t have gone in. Or perhaps we’ve just been persuaded to make a certain choice by an advertising campaign. We’re pretty impressionable sometimes, and someone in a position of power can be very persuasive, especially if we don’t already have strong feelings about a subject.
This isn’t to say we’re not capable of thinking for ourselves. But it’s important to recognize that we’re not just individuals on our own mini desert islands—we listen to, imitate, and influence each other all the time, and often without even realizing it.