Our weekly explainer on economics using lessons from popular culture. In Installment 40, Chandler and Joey discover the economics of free porn.
In an episode of Friends, ‘The One With The Free Porn’, Chandler and Joey find porn that is not part of their cable subscription while flipping through TV channels. After learning that this once happened to their building superintendent, only for him to lose the channel once he switched off the TV, they resolve to keep it switched on at all costs.
Eventually, the guys get sick of the constant erotic streaming and turn the TV off, knowing fully well the consequences: no more free porn.
While they were not be aware of it, what was at play was Gossen’s First Law:
The magnitude of a given pleasure decreases continuously if we continue to satisfy this pleasure without interruption until satiety is ultimately reached.
Alfred Marshal later restated this law in the following words:
The additional benefit which a person derives from an increase of his stock of a thing diminishes with every increase in the stock that already has.
This is better known as the Law of Diminishing Marginal Utility (DMU), which explains the behaviour of consumers and a basic tendency of human nature. It states that with continuous consumption of any good, the utility obtained from every successive unit goes on diminishing. First one reaches the point of maximum possible satisfaction, also called as level of satiety, and upon further consumption, the utility derived actually becomes negative and causes discomfort.
Marginal utility refers to the additional utility derived from consuming one more unit of a good/service. In other words, the satisfaction obtained at the margin or the total utility derived divided by the number of units consumed.
Understanding the Law of DMU is crucial for determining consumer behaviour. It can be summed up with the adage, “too much of a good thing.” While it may seem counterintuitive, we simply don’t have as wide a bandwidth for pleasure as we like to think we do. This law also helps to explain the moment when more of what used to make you happy no longer does; like how even the most decadent food-eating competitions inevitably end in misery (“here come the meat sweats!”) or as in the case of Chandler and Joey, even porn.
There are some exceptions to this law such as rare collections (coins, stamps, art etc), intoxicants (there does come a point after which there are only lows), jewellery, intellectual curiosity, and the latest entrant to this group, social media. Old school economic concepts will take some time to catch up to the unabated dopamine rush provided by social media platforms.
Such is the notoriety of jewellery as an exception to this law, American political satirist PJ O’Rourke once exclaimed, “With an additional eight ounces of water, all we get is a trip to the bathroom in the middle of the night. With an additional eight ounces of gold, we get the upfront payment to lease a Lexus. Marginal utility explains why gold, vital to the life of no one except hip-hop performers and fiancés, is so high-priced.”
Another glaring exception to this law is money. As a person collects money, their greed to accumulate more increases. However, it is to be noted here that its not money directly that is being consumed as one good but the different goods that can be purchased using it, throwing all uniformity out of the window. Moreover, the marginal utility of money declines with increase in wealth, but never falls to zero. For example, a person who earns Rs 50,000 per month would attach less importance to Rs 500, but to a person who makes Rs 10,000 per month, the value of Rs 500 would be very high. Modern taxation is based on this tenet so as to tax the rich progressively higher.
The Law of DMU also appears to evade fans (or should I say fanatics) of this TV show, since no amount of reruns seems to make them stop and switch to something new.
