Why canceling Netflix can save you a bundle…of difficulty.
The thrill of a good deal is powerful. My dad loves them so much that he often buys three older B-movies for $15 dollars out of the bargain bin, but would never purchase a new release or popular classic at full price. Flea markets were a regular childhood family weekend outing. As an adult I always haggle to get maximum discounts from my insurance and cell phone companies.
Obviously cheaper isn’t always better, and that is not my point in this post. If everything were all about the marginal cost, then I’d take my wife to McDonald’s for our anniversary for the amazing deal we’d get on calories per dollar. But for those familiar with economic analysis, the marginal benefit is equally important as the marginal cost. Without knowing marginal benefit, you wouldn’t know when to stop eating Big Macs. Even if the additional cost of another burger is low, the marginal benefit may actually decrease, become negative, or for some it might have been zero from Burger 1. Equilibrium, one of the holy grails of economics, is the point at which the marginal benefit equals the marginal cost.
Netflix is a service that provides, I think, a great value, especially on the margins. A two-disc-at-a-time package costs less than two movie theatre tickets. And for that cost, you could get as many as 4 movies per week through the mail and—the real kicker—unlimited streaming movies.
Their library has everything from big blockbusters to cable TV shows to quirky documentaries. Just this month Netflix added a bunch of new indie filmmakers to their streaming library.
For every new movie you watch each month, you drive the marginal cost down even further. This is much better than one of those examples describing diminishing marginal returns (or benefits) where your 10th donut is much less satisfying than the first two. If you watch 5 movies in a month, and pay $3 per movie – that’s cheaper than Blockbuster or AMC and is a little less gross than eating a dozen donuts.
So by all accounts, Netflix is an amazing deal—again especially when you think about marginal cost and marginal benefit.
The problem however, that my wife and I discovered about 7 months into our Netflix subscription is that the amazing value made it difficult to make better decisions. When you are faced with the choice of watching one more streaming movie on Netflix or reading a book or exercising, the movie on Netflix easily wins by most handy cost calculations. It requires less effort and it doesn’t require any more expenditure (you prepay your Netflix account each month) and in fact the total value for your money increases with each movie you watch.
Now of course, we didn’t always automatically choose Netflix, but it certainly made making a more costly choice more difficult. While this example may be trivial, learning to make difficult choices is critical to living virtuously.
From Aristotle to St. James (see my earlier post), it is often said that developing virtue requires practice. You practice virtue by choosing well over a repeated series of decisions. This can take the form of choosing to be patient or grumpy with your spouse after an exhausting day at the office or starting your exercise routine instead of lazing about one more night.
To help us make better decisions, like keeping up chores, spiritual exercises, and getting to bed earlier, my wife and I decided to cancel our Netflix subscription.
Now some readers may be thinking, “Well it is too bad you didn’t have the discipline to only watch stuff more rarely. “ And I would agree with them.
Nonetheless, I know my wife and I are not alone in needing the environmental help to make better decisions. Moreover, as two people who profess to love economics and its methods of analysis, I was astonished to find myself relishing the idea of having to pay more for movies. But ultimately it makes sense, the price of Netflix wasn’t capturing the other costs and so moving to more expensive options made decision-making easier (think: subsidies lead to overconsumption because you don’t have to pay for the full cost).
Now when we want to watch a movie on the cheap, we have to drive to a Redbox. Just that small amount of additional effort is enough to make movie watching less enticing.
Food advocates make this point about cheap food all the time. Now I’m not in favor of using government coercion to force people to rethink unhelpful good deals. But I think it’s worth pausing to evaluate what voluntary factors in our lives might be making it harder to make good decisions. As weak and fickle as human beings tend to be, we need all the help we can get to cultivate lives of virtue.
Adam D’Luzansky lives in Charlottesville, Virginia.