The Law of Inflated Expectations
By Bryan Caplan
Do you want to know the clearest sign that someone is a bad driver? If they think everyone else is a bad driver. Why do these people imagine that everyone else is a bad driver? Because they have unreasonably high expectations about the kind of treatment other people owe them. The clash between their inflated expectations and reality is the cause of their bitterness.
When people scoff at the power of reputation to constrain business behavior, they’re basically making the same mistake. If you think that paying the standard market rate entitles you to top-of-the-line quality, businesses will constantly disappoint you. I call this the Law of Inflated Expectations: The main cause of cynicism about business is consumer narcissism.
A more reasonable stance: When you offer a business mediocre compensation, you should expect and be satisfied by mediocre quality. If you hire a random contractor out of the phone book, don’t expect him to be anything special. If you buy a one-year health insurance policy, then get chronically ill, don’t expect the insurer to eagerly renew his policy for the original low price. He’s not throwing you under the bus; he’s giving you what you paid for.
In other words, “You buy cheap, you get cheap,” and “Reputation matters a lot” are perfectly compatible. Every firm wants a reputation for more-or-less keeping its promises. Only a few firms seriously try to make people say they’re “the best.” Why would anyone expect more?