The Separation Effect

One thing that's interesting about gasoline is that you buy it all at once, in bulk, and then use it gradually later. That separation between purchase and use is what makes it easy to ignore the cost of gasoline. Imagine if you had something like a taxi meter in your car that showed a running total!

The same thing happens with other kinds of goods too. Think of, say, a twelve-pack of soda. You probably don't think about the cost per can when you're drinking it (up to 50 cents a can). Maybe you don't even think too much about the cost when you pick the twelve-pack up off the shelf, you just see the grand total at the checkout stand. And, maybe sometimes you don't even pay attention to the grand total, you just put it all on a card. I do that fairly often. But, the deceptive simplicity of credit and debit cards is not what we're talking about here.

(It's true that with a credit card there's separation between when you use the card and when you have to hand over the actual money, but I think it's academic because using the card already feels like spending money.)

The same thing happens to a lesser extent even when the item isn't used gradually. For example, you're probably more aware of the cost of a plane ticket on the day you buy the ticket than on the day you fly.

People who want you to spend money will often create separation so that you're less aware of how much you're spending. That's why casinos use chips, why arcades use tokens, and why online games make you buy points and the like. It may not be the whole reason, but it's certainly part of the reason. It also may or may not be intentional. There doesn't need to be an evil genius behind the scenes saying “mwahahaha, let's create separation”; all that's needed is people who want you to spend money trying out different ideas and keeping the ones that work. (In other words, evolution doesn't require design.)

I'm not sure it's exactly the same thing, but there's definitely a connection here to how foreign currency feels like play money.

Here's one last example. Although I've complained about television at various times, for example in Anti-Consumerism and List of Principles, I do in fact have a television that I use to watch movies. I bought it for $500 around 14 years ago. The actual number is remarkably close to 750 weeks, so if I'd watched a movie a week for all that time (a reasonable estimate), the cost of the television would come out to 67 cents per movie. That's not much, but it's nontrivial when you consider that it only costs a few bucks to rent a movie.

That's a fun example of separation, but it's also an example of the same mistake I made in The Cost of Driving. To paraphrase, presenting a fixed cost as if it were a marginal cost is stupid and confusing.

(Is it really true that I don't watch TV shows? Nope, it's a lie. I've watched several on DVD on my own television, and I've watched several more in other places with friends and family.)