The Masking Sensation

The fundamental economic problem refers to the assumption that we have unlimited wants but finite resources (scarcity); thus, economic decisions must be made regarding the allocation of resources to determine which ones should/can be satisfied. In other words, demand invariably outweighs supply.

While wants are unlimited, resources are finite; thus, demand outweighs supply.

Traditionally in ‘economics’, the homo economicus (rational economic man) is assumed to rank their preferences, making choices that will maximise utility. Since consumers cannot meet all demands, it implicates a need to prioritise one’s needs over wants. Quite simply, SURVIVAL > LUXURY. While this certainly holds true, these choices are made according to consumers’ perception of what are ‘needs’. Hence, enter a new sensation (quite literally).

While the internal influences on the homo economicus are still as per traditional economics, sensationalism prompts a rethink. In recent years, sensationalist media coverage has introduced a revolutionary dynamic to consumer behaviour, a trend especially manifested in the recent coronavirus outbreak. Through technology, the world is becoming increasingly interconnected and as such, accessible information is in abundance. Theoretically, this should enable consumers to make informed and rational choices that maximise their utility; yet, this does not account for the accuracy of such information.

Sensationalism refers to a journalism tactic aimed at misleading people by presenting information in a biased and exaggerated manner, effectively manipulating the truth. In fact, a study by the Health Feedback and the Credibility Coalition in 2018 discovered that less than half of the 100 most shared health articles on social media ‘help readers become better informed’ (see below) and in the midst of the COVID-19 outbreak, its consequences could not be more telling.

‘Today, the only thing reliable about the media – both American and international – is how unreliable they are. Even on vital issues like the coronavirus, they succumb to sensationalism and conspiracy theory.’ – Dr. Alex Berezov, PhD

In such times of crisis, the media still seeks to capitalise on the widespread interest surrounding the issue by instilling fear within the public. Despite the lack of evidence supporting the prevention of COVID-19 with surgical masks, demand for surgical masks is nonetheless increasing exponentially as the public falsely deem them vital for survival. As previously mentioned, consumers rank their preferences, prioritising goods and services essential for survival above all, and the ‘masked truth’ meant that masks have skyrocketed up the homo economicus wish list.

The false conception that masks are ‘needs’ has had severe economic impacts. For instance in Hong Kong, the prices of N95 masks had risen from HK$35 per mask on Jan 26 to HK$50 per mask in the space of 48 hours. This roughly represents an inflation rate of 29% daily, a stark contrast from the Reserve Bank of Australia’s target of 2-3% per annum. To put in perspective, they will reach the same levels of inflation in 3 days as normal inflation rates will in 20 years! This is coming at a time (Jan 28) when there were only 8 reported cases of the coronavirus in Hong Kong...

Overall, sensationalist media coverage has revolutionised the way consumers behave as the distorted truth prevents them from making informed decisions. This has had severe ramifications during recent times as surging demand amid the COVID-19 has created a severe shortage for surgical masks. Ultimately, consumers no longer rank preferences according to what will maximise utility, but rather what’s portrayed to maximise utility.

The truth has been sensationally masked.

Hong Sheng QUAH

- Founder & Chief Editor of Economics Discovery