A wide-roaming train of thought

How cheaper calls from abroad illustrate two important economic principles

Rejoice! The EU is scrapping roaming charges, and you’ll be able to ring your mum from anywhere in the 28 member states without needing to take out a second mortgage!

Reading this on Twitter, and following the reaction, reminded me of two of my favourite psychological and economic principles.

Firstly, loss aversion. It seems we humans are wired to be disproportionately displeased by small losses compared to our appreciation of small gains. How much have roaming charges cost you in the last year? Really? Even if you spent an hour on the blower whilst abroad at 50p per minute, it’d still only be £30, which is probably less than you lost due to booking your plane a few days later than planned, eating out at the slightly posher restaurant with a sea view, or bringing home a few notes of unspent currency. And seriously, if you need to be on the phone that long, can’t you find some wifi in your hotel or a café and use Skype or something?

That said, I’ve certainly lost far less than £30 to roaming charges this year and yet, like Mr Knowles, I do find myself disproportionately grumpy about that. And since we’re all so grumpy about it, it’s a good thing that the EU will be nixing these punitive charges, isn’t it? Not so fast…

But the debate over whether exiling roaming charges will be redistributive, whilst mildly interesting, totally misses the second point: there really isn’t any need for every individual policy to be redistributive. Individual policies should be rational, and it’s the system as a whole which needs to be fair.

It might well be a good thing to get rid of roaming charges because a) the mobile companies are clearly ripping off their customers, and b) it’s probably decreasing net happiness, because us foolish, loss-averse souls are failing to make calls and send e-mails which might increase our overall contentment if only we weren’t so grumpy about being ripped off.

And, as a redistributive measure, roaming charges are terrible. Firstly, as we’ve said, they’re a tiny, irrelevant amount of money for most people, especially to the actually-rich. Secondly, use of a mobile abroad is not a good indicator of excess wealth: the rich do holiday more often than the poor, but do they use their phones more often exactly in proportion to their extra assets? It would be pretty surprising if this roundabout proxy turned out to be a more reliable indicator of richness than, say, income or, y’know, actual wealth.

So, if you want greater equality, feel free celebrate the demise of roaming charges (whilst recognising that the degree of your satisfaction is probably slightly irrational). Just make sure you also ask for a fairer taxation system with, say, higher income tax, a property tax, or your favourite alternative. Don’t waste your breath decrying tiny, incremental changes which, on balance, probably make the world a slightly more rational place.

Comments

  1. Lovely stuff, glad you’re blogging again old man. Not sure that I’m on board with the use of government price controls without a very compelling reason to do so though – if there were demonstrated oligarchic price collusion that would be one thing, but the fact that consumers don’t much like paying higher prices doesn’t seem sufficient to me to warrant legislative intervention…

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