Economic Theorem Explains Why We Love Adorable Cat Videos

The Alchian-Allen Theorem states that when a fixed cost is added to substitute goods, the more expensive one becomes relatively less expensive, and so people are likely to increase consumption of the higher quality good. What does this have to do with the internet? Everything.

Economist James Oswald explains:

The harder it is to gain access to cultural elements, the higher the quality of those elements will be consumed. On the flip side, if it is easy to access culture, people will prefer to consume shorter lower quality pieces of culture. In the middle ages, people had to travel long distances to view concerts, which were performed by live musicians. Thus, the fixed costs of consumption were very high. If you bothered to pay a huge amount of money and time, you might as well view a long complex opera or symphony. On the flip side, when fixed costs are as low as a Google search, people prefer short YouTube videos of cats doing cute things. Don’t think that this means that the quality of culture has gone down.

It makes sense that we set the bar low for free stuff online, but if we travel to an event — or pay for tickets to a show — we expect to get a lot. In a way, TV reflects this as well. Reality shows are popular mindless entertainment that you don’t have to get emotionally invested in — and can watch from the comfort of your own couch. And (most) films seen in a theater have better writing, casting, wardrobe and effects. Honestly, this theory should give us hope for mankind. Because in a society where Rebecca Black videos and fights in McDonald’s go viral, you might think we’ve been so dumbed-down that we’re doomed. But we’re not. Right?

The Alchian-Allen Theorem [Azmytheconomics]
Why We Love YouTube Videos [Andrew Sullivan]