This spiral was catalyzed by a gift he received—a very fancy dressing gown—which was so nice that it made his other possessions seem quite not-nice in comparison.
Thus, he began to replace his other things, one by one, so they would seem to be more of a kind with his snazzy, higher-end gown. As a consequence of that shift toward heightened possession-elegance, he ran out of money and accrued debt.
The term "Diderot Effect" was coined in 1988 by an anthropologist who writes about culture and consumption named Grant McCracken to refer to two concepts relevant to consumption patterns in capitalistic societies.
The first is that consumers within such societies tend to accumulate possessions they feel represent or define them in some meaningful way. So while some of our things are acquired for pure utility, many of them are acquired because they resonate with us in some way or project a certain self-conception outward, toward others.
The theory here, then, is that our assemblage of possessions become a sort of interconnected cloud of meaning, all the pieces interwoven with all the other pieces, serving as dots of color that add up to an image of who we are or who we're trying to portray ourselves to be.
The second concept is that bringing something new into this interwoven, pointillist portrait of a person can throw the whole thing off-kilter. And that can, in turn, make the person in question feel weird about who they are and the impression of themselves they're projecting both inward and outward, resulting in a strong desire to bring that jumble of possessions back into complementary order.
This, as a consequence, can result in a spiral of consumption, because it often seems to make more sense to upgrade everything than to downgrade that higher-end, better version of something that has been acquired.
Yes, it may be easier on your bank account to just get rid of the nice, new dressing gown than to replace your chair, writing desk, artwork, and so on with more expensive versions of the same (as Diderot did), but a sense of loss aversion can dissuade us from even considering such a downgrade.
Of course, the simplest solution may be to just enjoy the robe for what it is while continuing to enjoy your existing possessions for what they are, as well.
This is an effect worth naming, however, because that's often easier said than done.
The comparisons we make between old and new can change our stance toward something in an eyeblink, rendering a perfectly serviceable chair no longer suitable for who we now perceive ourselves to be, in our fine new dressing gown.
This is part of why people often upgrade their whole dining room all at once, rather than in pieces. It's also why someone who acquires a new smartphone or pair of shoes will tend to acquire supplementary and complementary gear at the same time.
These behaviors are thought to be sparked or stoked by the status-consciousness most of us feel, to some degree at least, as a result of all the marketing messages we're exposed to every day.
There's a chance some version of this effect would play out even for someone who's never seen an advertisement or compared their garments to those of another person, but marketing messages meant to convince us we need whatever they're selling seem to amp up our status-consciousness and dissatisfaction with what we already have.
In other words, these messages want us to not feel okay with what we have so we'll feel an urge to go out and get what they're selling. And that not-okay-ness can then ripple outward from one possession to the cloud of other possessions connected to it: we won't just replace our jeans, we'll get a new wardrobe, and we won't just replace a chair, we'll refurnish the whole room.
There's a hint of the hedonic treadmill in this concept, as well, which basically says our levels of happiness eventually reset to a baseline equilibrium no matter what we're going through or the circumstances of our lifestyle.
So someone who wins a billion dollars will experience a variety of changes to their life, but will, after a period of flux, return to some kind of happiness baseline, as will someone who goes through a traumatic experience.
We seem to reach a similar balance with our possessions: even if something triggers a flurry of new acquisitions we'll return to a default balance in relatively short order; we'll have different things, but we'll feel basically the same as we did before, despite having fancier stuff—though the debt we accrued in the process may negatively impact other aspects of our lives.
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