I have just
been reading Animal Spirits. Subtitled: How Human Psychology drives the economy
and why it matters for global capitalism. It's a surprisingly readable
book - and coauthored by George Akerlof, a man who won the Nobel Prize for
economics in 2001 for a 1970 paper entitled "The Market for Lemons: Quality Uncertainty
and the Market Mechanism".
Akerlof's Lemons paper should be interesting to marketing folk on two counts.
For one thing, the article spawned a discipline known as information
economics - along with useful concepts such as signalling,
this field has created an area of study invaluable to anyone who wants to
present the economic case for building brands.
The second
interesting thing about the Nobel-prize-winning paper is that, before it was
finally published, it was repeatedly rejected by academic journals on the
grounds that its subject-matter was too trivial to be worth printing. Which
suggests that, just as advertising does, high-level academia has that category
of work which somehow straddles the line between infantilism and genius. I
suppose Compare the Meerkat, Shake 'n' Vac and (greatest of all) www.rainhamsheds.co.uk would all
be examples of this kind of work. A magical type of work which, incidentally,
the planning function in advertising, with its tedious reliance on logic, tends
to destroy. But I digress.
Reading the book above, I came across this interesting paragraph, in
which the authors ask why, if we are all so driven by rationality, personal rates of saving
in China are nearly 20% of GDP while in the US they are near zero.
"The Governments of both the United States and China have wanted to promote
personal saving for many decades. Since the early 1950s the US has promoted
saving with special tax incentives, such as individual retirement accounts,
401(k) and 403(b) plans and savings bond campaigns.
"In communist China,
where there was no income tax, efforts to spur saving took the form of
propaganda campaigns.... A 1953 paper shows a group of happy, smiling workers
turning in cash for government bonds at the People's Bank of China. A 1990
poster shows a smiling Lei Feng...writing the word 'save' on a money box. In
the 1990s big red banners were hung in the streets: 'Saving is Glorious'. These
campaigns, which made saving everyone's patriotic duty, set the stage for
today's high savings rates."
This raises a few questions. First of all,
why - other for psychological reasons - do the Chinese save more than even
fairly wealthy Americans? If logic were the driver, would it not be the other
way round? After all, perhaps more than 50% of Americans have more material
possessions than they can possibly need, while many of the frugal Chinese are
living in meagre circumstances. This is a massive behavioural difference - it drives the entire world economy - and yet it is not merely affected by "animal spirits", it is exclusively driven by them.
A second question. Why is it considered ethically acceptable for the
government to use tax-payers' money to create tax breaks for savers, whereas it
would be considered wasteful for the government to spend a fraction of this
money advertising the virtues of saving? Especially when the Chinese approach
seems to be many times more effective at changing behaviour.
But another, more important question: what is
behind this staggering behavioural difference, and is there anything you can do
to change it? To make Americans and Brits save even adequately.
It may be that there is nothing we can do. That the whole Chinese behaviour is
rooted in Confucianism and hence is impossible to replicate without a few
thousand years of cultural indoctrination.
Or it may be a very different reason: one theory I have even seen advanced is
that, because the Chinese are indiscreet about money (you can
routinely ask someone their salary without seeming rude) they don't need to buy expensive goods in
order to convey their wealth to other people: you don't need to buy a BMW when
you can just go around like Harry Enfield's Brummie character telling people
how rich you are. Or is it perhaps a question of choice architecture - that Westerners are faced with so many competing investment opportunities they just
can't be bothered to choose between them? Or is it simply that their dictators
are more trustworthy than our bankers?
Whatever your answer, the difference is psychologically driven, and could
submit to marketing-led approaches?
There may even be a very simple stimulus required to change things.... Tesco letting you save at the
checkout? Social networks making your savings visible?
The fact is that indidual savings levels are amazingly arbitrary. And marketing
is good at influencing the arbitrary.
You're a marketer. What's your answer?
