What Cheap Stuff Really Costs Us

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At the dawn of the 21st century, America is, if nothing else, the land of the bargain. Big-box stores like Wal-Mart dominate the retail landscape, peddling middling goods at rock-bottom prices. Higher-end stores put their merchandise on sale like clockwork; if you wait a little longer, you can get it even cheaper at a factory outlet. Afterward, you can fill up on all-you-can-eat shrimp at Red Lobster for $15 — truly, the American Dream.

But Boston University professor Ellen Ruppel Shell argues that the allure of low prices is leading us astray: in their bid to drive down costs, big-box stores have kept the salaries and benefits for their employees to a bare minimum; fashion retailers have prioritized price over style and quality, often using their outlet stores to hawk a completely different line of merchandise. Finally, what kind of bottomless plate of scampi do you really think 15 bucks can buy? In her new book, Cheap: The High Cost of Discount Culture, Shell argues that our never-ending pursuit of cheap has blighted our landscape, depressed working wages and (yes) contributed to the global financial meltdown. Shell talked to TIME about the problem with bargain goods, how to stop yourself from buying something you don't need and why Ikea is the least sustainable company on the planet.

So what's wrong with cheap, in a nutshell?
Well, in a nutshell, it comes back to bite us in the ass. It's short-term gratification and long-term pain. Now, I'm a rabid bargain hunter. Ask my kids. When I come back from the store and I have four boxes of cereal, they know that cereal is on sale. I'm what behavioral psychologists call "deal prone." And yet I noticed this wasn't really saving me any money — in fact, it was costing me money. I went and looked at the data and found that since the 1970s, we are spending less for clothes, food and appliances and substantially less for owning and maintaining a car. But at the same time, our spending has increased, controlling for inflation, by over $4,500. And a good deal of that has to do with price.

You talk in the book about a drug study in which they administered painkillers, and when they told patients the drugs had been bought at discount, they were actually less effective. That's kind of terrifying.
The response to a discount is profound in the human brain. What is less profound is the response to actually owning that object once you get the discount. We strive to get that deal, but we tend to devalue the object after we purchase it. For many things, the biggest charge we get is that transaction itself. Retailers and marketers strive to make us think we are scoring good deals. They make you think that you're special because you've been able to score this deal. But you need to think, really: Why are you so smart that you're not paying the so-called full price? And in fact you need to look carefully, because many times you are.

That was another thing you discuss in the book: unrealistically high reference prices. They'll put this price tag on an item that's ridiculous for what its actually worth to make you think you've gotten a good deal when it's marked down.
No one ever pays full price for a mattress. There's actually been a lot of litigation around mattress prices because they set those reference prices very high to make you think that you're getting a good deal. In fact, often a department store will put one mattress on so-called "sale" and raise the prices of the other mattresses so it makes it seem that that mattress is cheap. The only mattress they really expect to sell is that mattress on sale.

You also say that factory outlets may not really be a bargain at all, that you're not really buying a Banana Republic shirt at a cheaper price — you're just getting something else.
That's absolutely right, and for me that raises really interesting philosophical issues: When is a brand really a brand? What does it mean to be a Coach bag? What does it mean to be North Face parka? These companies manufacture things specifically for their outlet stores, and they rely on their brand to carry that signal of value. So you have to think about that: If you like this object, whatever it is, if it seems to suit you or fit your needs and appears to be good quality or good value for price, then go ahead and buy it. But don't buy it because you're motivated by the brand and think your getting a good deal.

You argue in your book that the so-called "age of cheap" is unsustainable.
Right. It's a short-term fix. I talk about Ikea being the least sustainable company on the planet. That's a quote, I didn't say that. But the reason is that they rely on consumers to carry huge costs for the company.

In their defense, they seem like very nice people.
They are. The Ikea people I met in Sweden are the nicest people you can imagine, but they were also like a cult. Their allegiance to Ikea was just beyond belief, to the point where they weren't really thinking about what their day-to-day activities meant. They design to price: they set the price first and then do what they need to do to keep the price where it is. So whether it's a 50-cent coffee mug or a $100 table, they do what they need to do to keep the price at that point. So if that means buying wood from eastern Russia, with its questionable timbering practices, hauling it over the border to China, with its questionable labor practices, to produce furniture for American consumer, that's what they'll do.

You write about how working on the book has changed the way you shop. Are you spending less now that you're not focused on buying stuff just because it's on sale?
I absolutely am. It's incredible. I bought mulch, just last week, from my local hardware store. It's more expensive than going to Home Depot, where I used to get it, but the guy there could direct me to exactly the type of mulch I wanted, he carried it to my car, it's much closer, and I got exactly what I wanted in the right amount. So the satisfaction I got was not in the price, which was higher than I normally pay, but from the stuff. That's a switch.

It seems like if this cycle is going to be broken, it's going to require changing people's behavior on a really large scale.
The first thing I suggest is, when you see something and you're motivated by price — and we all are — you walk away. Take a walk around the store and think about it. Freud said there are two parts of our thinking system. The primary process is the impulsive, playful, I've-gotta-have-it-now side. The second is the more thoughtful, contemplative side. Get that secondary process going. Think about why you want this object — this particular MP3 player, this particular screwdriver. Is this really going to do the job for you? And you know, if people start thinking that way, I think it can have big impact.