Steve Jobs and John Kenneth Galbraith on the Dependence Effect
By Randall Holcombe • Monday October 10, 2011 1:23 PM PDT • 2 Comments
John Kenneth Galbraith coined the term “dependence effect” in his 1958 book, The Affluent Society. Galbraith argues against satisfying a person’s demands for goods that are “...contrived for him. And above all, they must not be contrived by the process of production by which they are satisfied. ... One cannot defend production as satisfying wants if that production creates the wants.”
In a 1998 interview in Business Week, Steve Jobs said “A lot of times, people don’t know what they want until you show it to them.” As Jobs saw it, producing goods like the iPhone and iPad created consumer demand for them, through the very process Galbraith criticized. The demand for those products were “contrived” by Apple’s producing them. Nobody would want an iPad if Apple hadn’t made them.
It is easy to fall toward Jobs’s side on this, because of all the great products Jobs created at Apple that we didn’t know we wanted until he showed us. Friedrich Hayek took issue with Galbraith’s dependence effect in 1961, arguing that “to say that a desire is not important because it is not innate is to say that the whole cultural achievement of man is not important.” So, I’m not the first to find fault with Galbraith’s dependence effect. Hayek did that 50 years ago. But this does seem like a good time to bring up Jobs’s comment, less than a week after his passing. His observation is a small example of what was behind his entrepreneurial genius.