Psychic cost
Encyclopedia
A psychic cost is a subset of social cost
s that specifically represent the costs of added stress or losses to quality of life
. In managerial economics
and marketing
, psychic costs "measure the stress of having to think about a transaction". In the 2000s, one of the important psychic costs are the "search cost
s" of hunting for content that interests us on the Internet.
to a waiter. There is no requirement for the client to give the tip, but if they do not, they may feel bad when they leave; to avoid this psychic cost, people are inclined to tip, even if the service was sub-standard. On the other hand, a psychic benefit occurs when one of the rewards of an action or choice are non-monetary.
Some jobs pay poorly, such as beach resorts, guitar stores, model train stores, and small colleges, but they always have applicants, because the jobs provide a substantial psychic benefit to the applicants. Seaside resorts such as Club Med
pay poorly, but young adults find the prospect of living in a tropical sea resort to be very attractive. Special interest stores such as guitar stores and model railroad stores usually have small margins, and they cannot afford good wages; however, for a guitar enthusiast or a model railroad hobbyist, working in these types of stores is very rewarding, because they are surrounded by other enthusiasts, and they are respected for their knowledge of these areas. Teaching in a small college does not pay well, but new PhD graduates still want to work at these institutions, because it is so pleasant to live in a small town and work in a park-like campus filled with young people and because there is so much competition for tenure-track positions at more prestigious schools.
Stores often introduce strategies to reduce customers' perceived psychic costs, because these can cause customers to delay or forgo purchases that they are considering. Customers have many areas of perceived psychic costs in regards to making purchases. They may be worried that there will be a sale after they buy the item, in which case they will pay a higher price. For mechanical items such as cars and appliances, customers may be worried about getting a mechanically-faulty "lemon
" or a product that does not suit their needs.
For technological items, customers may be concerned that the product may not be compatible with their computer or hardware. To reduce these perceived psychic costs, and encourage customers to make purchases, businesses have developed many strategies, including exchange policies, which allow customers to return the product and exchange it for a similar model within 30 days; return policies, which allow the return of the item with money back; service guarantees, which promise technical support
or in-home technician visits; and price guarantees, which promise to refund the difference should their store or a competitor drop the price within a certain period.
During the holiday period, some shoppers find gift-buying very stressful, because they are concerned that gift recipients will not like the gift, either because it is the wrong size, or because it is not suitable; to counter this psychic risk, stores offer "gift receipts" which allow a recipient to return the item and exchange it, and gift card
s, which the recipient can use for any item they want. For big-ticket items, such as cars, the purchaser may be worried about all of the upfront costs such as the downpayment and registration, along with the new finance payments; dealers have responded with promotions in which the buyer does not have to make the first one or two payments, which gives them "breathing room" and makes them feel more comfortable about buying a costly vehicle. Similar promotions are used by apartment building managers, who offer "first month free" deals for people who sign a one-year lease.
, the authors examined the impact of segregation
on the personalities of black Americans. An example of the psychic cost is that some white people still feel fear of blacks, which can make it hard for black people to get jobs or apartments in white-dominated neighbourhoods. As well, for business owners with mainly black clientele, some white clients may not come into their restaurant or theater because of perceptions that it may not be safe. In Michael Spence’s model, black students in a bi-racial university face psychic costs, such as the stigma of "acting white
" to convince the admissions committee that they will be a good student, or the threat of stereotyping. Research on discrimination against employees
has indicated that in businesses with white employees and black employees, the white employees may get better tips
Research on illegal immigration
indicates that illegal immigrants face psychic costs from the whole ordeal of being smuggled across a border, using false papers, lying to border officials, hiding from border patrols, and avoiding detection once they are living in their new country.
writer Steven Landsburg
argues that "psychic costs shouldn't count because they're too easy to exaggerate. Anyone can claim to have suffered $1 million worth of emotional distress, but we have no way of knowing which claims are simply fabricated." As well, he claims that a second problem with "... counting psychic harm is that once you start counting it, people train themselves to start feeling it." In Mark A. Runco and Ruth Richards' book Eminent Creativity, Everyday Creativity, and Health, they argue that creative people face psychic costs when they are thinking up new ideas, because the mental process drains them emotionally, and because there is a social stigma
associated with being different, and being an artist. In the article Putting a Price Tag on Friends, Relatives, and Neighbours, N Powdthavee argues that there are substantial psychic costs associated with being unemployed or separated from a marriage partner by divorce, because these situations reduce the social ties that keep us emotionally healthy.
Psychologist and former U.S. Army officer Colonel Grossman
argues that only a small fraction of soldiers kill during warfare, because the soldiers have an innate resistance to killing a fellow human being. He claims that soldiers during World War II
resisted by purposely firing above their target or not firing their rifles. When the military realized that soldiers faced such high psychic costs from killing people, they began developing strategies to encourage more soldiers to kill their targets. Nevertheless, after the Vietnam War
, one of the impacts of killing enemy soldiers was that US soldiers faced post-traumatic stress syndrome. Brigadier General S.L.A. Marshall concluded in his book, Men Against Fire, (1946, 1978), that "only 15 to 20 percent of the individual riflemen in World War II fired their weapons at an exposed enemy soldier". Over the centuries, armies have developed a range of "tactical and mechanical mechanisms to enable or force combatants to overcome their resistance to killing".
Research on tax evasion
shows that tax cheaters may face psychic costs from their deception, because they feel guilty about not paying their fair share for the services that they use. These psychic costs may also be from fear of shame if they are prosecuted for tax evasion and damage to their reputation; with these psychic costs, taxpayers may even pass up fairly low-risk opportunities to hide income from the taxman.
David Hemenway
of Harvard School of Public Health
claims that when some people in a community own guns, it "imposes psychic costs on most other members of the community". He claims that "eighty-five percent of non-gun-owners report they would feel less safe if more people in their community acquired guns; only 8% would feel more safe." This is purportedly because non gun-owners would worry about guns being used in the neighbourhood.
As the monetary costs of information and digital information fall (e.g., downloadable music recordings, magazine articles, etc.) towards zero, the main impediments to a transaction are becoming non-monetary factors such as search costs and psychic costs. Search costs are the time and effort costs of finding something. If a person has to search through a poorly-catalogued list of songs on the Internet, it may take hours to find the song that they want. Even if the song is free to download if you find it, you have to spend a lot of free time to find that song. As well, getting this "free" downloadable song may impose other psychic costs that make a person worry. The song file may have to reformatted to work with your media player and it may have to be screened for viruses
or spyware
.
Social cost
Social cost, in economics, is generally defined in opposition to "private cost". In economics, theorists model individual decision-making as measurement of costs and benefits...
s that specifically represent the costs of added stress or losses to quality of life
Quality of life
The term quality of life is used to evaluate the general well-being of individuals and societies. The term is used in a wide range of contexts, including the fields of international development, healthcare, and politics. Quality of life should not be confused with the concept of standard of...
. In managerial economics
Managerial economics
Managerial economics as defined by Edwin Mansfield is "concerned with application of economic concepts and economic analysis to the problems of formulating rational managerial decision." It is sometimes referred to as business economics and is a branch of economics that applies microeconomic...
and marketing
Marketing
Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
, psychic costs "measure the stress of having to think about a transaction". In the 2000s, one of the important psychic costs are the "search cost
Search cost
Search costs are one facet of transaction costs or switching costs. Rational consumers will continue to search for a better product or service until the marginal cost of searching exceeds the marginal benefit. Search theory is a branch of microeconomics that studies decisions of this type.The costs...
s" of hunting for content that interests us on the Internet.
Managerial economics
In managerial economics, economists examine the issue of psychic costs and benefits. An example of a psychic cost is the guilt that a restaurant-goer feels if they do not make a voluntary tipTip
A tip is an extra payment made to certain service sector workers in addition to the advertised price of the transaction. Such payments and their size are a matter of social custom. Tipping varies among cultures and by service industry...
to a waiter. There is no requirement for the client to give the tip, but if they do not, they may feel bad when they leave; to avoid this psychic cost, people are inclined to tip, even if the service was sub-standard. On the other hand, a psychic benefit occurs when one of the rewards of an action or choice are non-monetary.
Some jobs pay poorly, such as beach resorts, guitar stores, model train stores, and small colleges, but they always have applicants, because the jobs provide a substantial psychic benefit to the applicants. Seaside resorts such as Club Med
Club Med
Club Méditerranée , commonly known as Club Med, is a French corporation of vacation resorts found in many parts of the world, usually in exotic locations. It is considered the original all-inclusive resort.-Foundation:...
pay poorly, but young adults find the prospect of living in a tropical sea resort to be very attractive. Special interest stores such as guitar stores and model railroad stores usually have small margins, and they cannot afford good wages; however, for a guitar enthusiast or a model railroad hobbyist, working in these types of stores is very rewarding, because they are surrounded by other enthusiasts, and they are respected for their knowledge of these areas. Teaching in a small college does not pay well, but new PhD graduates still want to work at these institutions, because it is so pleasant to live in a small town and work in a park-like campus filled with young people and because there is so much competition for tenure-track positions at more prestigious schools.
Stores often introduce strategies to reduce customers' perceived psychic costs, because these can cause customers to delay or forgo purchases that they are considering. Customers have many areas of perceived psychic costs in regards to making purchases. They may be worried that there will be a sale after they buy the item, in which case they will pay a higher price. For mechanical items such as cars and appliances, customers may be worried about getting a mechanically-faulty "lemon
Lemon (automobile)
A lemon is a car, often new, that is found to be defective only after it has been bought. Any vehicle with numerous, severe issues can be termed a "lemon", and, by extension, any product with flaws too great or severe to serve its purpose can be described as a "lemon".-Origin:The use of the word...
" or a product that does not suit their needs.
For technological items, customers may be concerned that the product may not be compatible with their computer or hardware. To reduce these perceived psychic costs, and encourage customers to make purchases, businesses have developed many strategies, including exchange policies, which allow customers to return the product and exchange it for a similar model within 30 days; return policies, which allow the return of the item with money back; service guarantees, which promise technical support
Technical support
Technical support or tech support refers to a range of services by which enterprises provide assistance to users of technology products such as mobile phones, televisions, computers, software products or other electronic or mechanical goods...
or in-home technician visits; and price guarantees, which promise to refund the difference should their store or a competitor drop the price within a certain period.
During the holiday period, some shoppers find gift-buying very stressful, because they are concerned that gift recipients will not like the gift, either because it is the wrong size, or because it is not suitable; to counter this psychic risk, stores offer "gift receipts" which allow a recipient to return the item and exchange it, and gift card
Gift card
A gift card is a restricted monetary equivalent or scrip that is issued byretailers or banks to be used as an alternative to a non-monetary gift....
s, which the recipient can use for any item they want. For big-ticket items, such as cars, the purchaser may be worried about all of the upfront costs such as the downpayment and registration, along with the new finance payments; dealers have responded with promotions in which the buyer does not have to make the first one or two payments, which gives them "breathing room" and makes them feel more comfortable about buying a costly vehicle. Similar promotions are used by apartment building managers, who offer "first month free" deals for people who sign a one-year lease.
Minorities and immigrants
In The Psychic Cost of Segregation, a 1954 article by James W. Prothro and Charles U. Smith of Clark Atlanta UniversityClark Atlanta University
Clark Atlanta University is a private, historically black university in Atlanta, Georgia. It was formed in 1988 with the consolidation of Clark College and Atlanta University...
, the authors examined the impact of segregation
Racial segregation
Racial segregation is the separation of humans into racial groups in daily life. It may apply to activities such as eating in a restaurant, drinking from a water fountain, using a public toilet, attending school, going to the movies, or in the rental or purchase of a home...
on the personalities of black Americans. An example of the psychic cost is that some white people still feel fear of blacks, which can make it hard for black people to get jobs or apartments in white-dominated neighbourhoods. As well, for business owners with mainly black clientele, some white clients may not come into their restaurant or theater because of perceptions that it may not be safe. In Michael Spence’s model, black students in a bi-racial university face psychic costs, such as the stigma of "acting white
Acting white
In the United States, acting white is a pejorative term usually applied to African-Americans, which refers to a person's perceived betrayal of their culture by assuming the social expectations of white society. Success in education in particular can be seen as a form of selling out by being...
" to convince the admissions committee that they will be a good student, or the threat of stereotyping. Research on discrimination against employees
Employment discrimination
Employment discrimination is discrimination in hiring, promotion, job assignment, termination, and compensation. It includes various types of harassment....
has indicated that in businesses with white employees and black employees, the white employees may get better tips
Research on illegal immigration
Illegal immigration
Illegal immigration is the migration into a nation in violation of the immigration laws of that jurisdiction. Illegal immigration raises many political, economical and social issues and has become a source of major controversy in developed countries and the more successful developing countries.In...
indicates that illegal immigrants face psychic costs from the whole ordeal of being smuggled across a border, using false papers, lying to border officials, hiding from border patrols, and avoiding detection once they are living in their new country.
Other types
SlateSlate (magazine)
Slate is a US-based English language online current affairs and culture magazine created in 1996 by former New Republic editor Michael Kinsley, initially under the ownership of Microsoft as part of MSN. On 21 December 2004 it was purchased by the Washington Post Company...
writer Steven Landsburg
Steven Landsburg
Steven E. Landsburg is an American professor of economics at the University of Rochester in Rochester, New York. From 1989 to 1995, he taught at Colorado State University.-Education:...
argues that "psychic costs shouldn't count because they're too easy to exaggerate. Anyone can claim to have suffered $1 million worth of emotional distress, but we have no way of knowing which claims are simply fabricated." As well, he claims that a second problem with "... counting psychic harm is that once you start counting it, people train themselves to start feeling it." In Mark A. Runco and Ruth Richards' book Eminent Creativity, Everyday Creativity, and Health, they argue that creative people face psychic costs when they are thinking up new ideas, because the mental process drains them emotionally, and because there is a social stigma
Social stigma
Social stigma is the severe disapproval of or discontent with a person on the grounds of characteristics that distinguish them from other members of a society.Almost all stigma is based on a person differing from social or cultural norms...
associated with being different, and being an artist. In the article Putting a Price Tag on Friends, Relatives, and Neighbours, N Powdthavee argues that there are substantial psychic costs associated with being unemployed or separated from a marriage partner by divorce, because these situations reduce the social ties that keep us emotionally healthy.
Psychologist and former U.S. Army officer Colonel Grossman
Dave Grossman (author)
Lieutenant Colonel Dave Grossman is an author who has specialized in the study of the psychology of killing, which has been termed 'killology'.In February 1998 Grossman retired from the military as Professor of Military Science at Arkansas State University...
argues that only a small fraction of soldiers kill during warfare, because the soldiers have an innate resistance to killing a fellow human being. He claims that soldiers during World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
resisted by purposely firing above their target or not firing their rifles. When the military realized that soldiers faced such high psychic costs from killing people, they began developing strategies to encourage more soldiers to kill their targets. Nevertheless, after the Vietnam War
Vietnam War
The Vietnam War was a Cold War-era military conflict that occurred in Vietnam, Laos, and Cambodia from 1 November 1955 to the fall of Saigon on 30 April 1975. This war followed the First Indochina War and was fought between North Vietnam, supported by its communist allies, and the government of...
, one of the impacts of killing enemy soldiers was that US soldiers faced post-traumatic stress syndrome. Brigadier General S.L.A. Marshall concluded in his book, Men Against Fire, (1946, 1978), that "only 15 to 20 percent of the individual riflemen in World War II fired their weapons at an exposed enemy soldier". Over the centuries, armies have developed a range of "tactical and mechanical mechanisms to enable or force combatants to overcome their resistance to killing".
Research on tax evasion
Tax evasion
Tax evasion is the general term for efforts by individuals, corporations, trusts and other entities to evade taxes by illegal means. Tax evasion usually entails taxpayers deliberately misrepresenting or concealing the true state of their affairs to the tax authorities to reduce their tax liability,...
shows that tax cheaters may face psychic costs from their deception, because they feel guilty about not paying their fair share for the services that they use. These psychic costs may also be from fear of shame if they are prosecuted for tax evasion and damage to their reputation; with these psychic costs, taxpayers may even pass up fairly low-risk opportunities to hide income from the taxman.
David Hemenway
David Hemenway
David Hemenway is Professor of Health Policy at the Harvard School of Public Health. He has a B.A. and Ph.D. from Harvard University in economics. He is the director of the and the . He is also currently a James Marsh Visiting Professor-at-Large at the University of Vermont. Dr...
of Harvard School of Public Health
Harvard School of Public Health
The Harvard School of Public Health is one of the professional graduate schools of Harvard University, located in the Longwood Area of the Boston, Massachusetts neighborhood of Mission Hill, which is next to Harvard Medical School. HSPH is considered a significant school focusing on health in the...
claims that when some people in a community own guns, it "imposes psychic costs on most other members of the community". He claims that "eighty-five percent of non-gun-owners report they would feel less safe if more people in their community acquired guns; only 8% would feel more safe." This is purportedly because non gun-owners would worry about guns being used in the neighbourhood.
As the monetary costs of information and digital information fall (e.g., downloadable music recordings, magazine articles, etc.) towards zero, the main impediments to a transaction are becoming non-monetary factors such as search costs and psychic costs. Search costs are the time and effort costs of finding something. If a person has to search through a poorly-catalogued list of songs on the Internet, it may take hours to find the song that they want. Even if the song is free to download if you find it, you have to spend a lot of free time to find that song. As well, getting this "free" downloadable song may impose other psychic costs that make a person worry. The song file may have to reformatted to work with your media player and it may have to be screened for viruses
Computer virus
A computer virus is a computer program that can replicate itself and spread from one computer to another. The term "virus" is also commonly but erroneously used to refer to other types of malware, including but not limited to adware and spyware programs that do not have the reproductive ability...
or spyware
Spyware
Spyware is a type of malware that can be installed on computers, and which collects small pieces of information about users without their knowledge. The presence of spyware is typically hidden from the user, and can be difficult to detect. Typically, spyware is secretly installed on the user's...
.