Malls: Defying the principles of Economics?

By Vaishnavi Rathore (Edited by Dikshita Pemaraju, Assistant editor at The Indian Economist)

I traced my fingers over the warm and cozy woolen scarf. Rs. 900. “But how does that matter, it’s from Accessorize!” I try to rationalize with myself, and I succeed. I was at Promenade Mall, Vasant Kunj, New Delhi, which I had come to not with a specific desire to buy anything, but due to lack of something new to do during the vacations. On my way out I look at the malls, a string of four malls, adjacent to each other. And at the end of the row, I see a new mall coming up.

As I look at it, I think about the basic principle of demand and supply that Economics teachers have been hammering into our brains since we knew of demand and supply – A demand is met by equal supply to reach equilibrium. But the basic demand, the demand of roti-kapda-makaan has more or less been supplied by the four malls! After all, a single mall has over a hundred showrooms, with Indian and foreign brands ranging from Lifestyle, Westside, Shopper’s Stop, Inc. 5, and even supermarkets, occasionally  to Prada, Gucci and Louis Vuitton for our friends with expensive tastes. Feeling hungry at a mall? What do you feel like eating? Pizza? Pasta? Perhaps something south Indian? No problem! The food court will take care of it all. So what is it that the new upcoming mall, at the end of a lane of four malls, have that has not already been supplied by the older malls? And if it does not have anything new, does it mean that the malls are defying the carved-in-stone principle of economics?

Turns out, they are not. And that is because of another principle of economics, which has not always been in the limelight – induced demand. This principle, if to be explained in an uncomplicated manner, simply means that more of the good is consumed, as and when more of the good is supplied. This principle has very interestingly, also been used by economists in the USA to debate against the increasing combustion emitted from vehicles. Surveys have been conducted which showed that within 5 years after the building of a Freeway in California, 95% of the new road capacity filled up with traffic which would not have existed had the freeway not been built. Similarly, think about the Metro lines in Delhi. The more its supply increased, the more was the increase in demand for it, since the cost of the tickets went down. The increase in the commuters did not mean that people did not travel every day from North to South Delhi, or East-West, they did back then too, but since it has become more convenient, and with new lines coming up, the consumption of it has gone up. On my metro ride to college every day, I notice at least five people who are noticeably new commuters, even after its inauguration in 2002.

Coming back to malls, this principle seems to fit perfectly with the increasing consumerism arising from malls. We go to malls, as a respite from heat, (free A.C in the summers, what more could one ask for) and enjoy the backdrop of good peppy music, spend time with close ones, eat a snack or a meal, watch a movie maybe and shop. While some people come to malls to purchase what they actually require, there are others who come to pass time, “window shop”, and have no particular item to buy in their mind, but end up going home with at least something new. It’s like a character from the popular TV show Big Bang Theory, Penny, says, “Sometimes I buy things not because I like it, but so that no one else can have it!” That seems to be the state of mind of most of the people who end up shopping in malls.

 Of course, one’s economic status also plays an important role, but even people from the lower middle class families do not go empty handed-they buy things which they did not really need, just because it is in front of them. Hence the principle here used is not that the malls are supplying in equal quantity what is being demanded by consumers, but that the consumption of the things presented in the malls increases since its supply has increased. It is like when you go to the supermarket to buy milk, and then while you are carting around the lanes, you spot the new flavor of flavored yoghurt, colorful cheap plastic cups which claim to be made of unbreakable plastic, and boom! You come home with a car full of stuff which you could have easily lived without.

At the end, if I were to take a stand for or against the building of new malls and increasing consumerism, I would weigh it precariously. I could be an environmentalist, and advocate for the deforestation, and the effect in turn over the wildlife population or the number of families that have to be displaced from a particular region to start the construction of malls. Or, I could be a social activist, and shun the building of malls and argue for the case of using that space for NGOs, orphanages, old age homes and so on. But I would be untruthful, if I say I didn’t like malls. For one, they provide employment to a number of people. Apart from the stores in the malls and the people dependent on it, we have security guards, sweepers in and out of malls, people who open the doors for you, valets, parking assistants, ladies in front of the trial rooms to make sure you don’t take more than three items, people who clear your plates at the food courts etc. But what could be an alternative to these demand inducing malls, would be that if they were not just another profit making institution. How about putting some amount of profit aside for social responsibility? Wouldn’t it be nice if some of the profit went to orphanages, NGOs and planting new trees? Or maybe to a dog shelter, or education for children and adults both. Because what we must remember is that these malls will continue to be demand inducing. People will go to malls to buy things they do not need. People will eat out. I will still buy that scarf from Accessorize. And there still will be profit rolling in, but I would be satisfied when a part of this profit goes to people who actually need it, and we understand the concept of social responsibility. And trust me, once we see the effects of our induced demand for products in malls in tandem with improving someone’s life, there definitely would be induced demand for social responsibility – when there is a supply of happier, content and satisfied people, there will be an increase in the demand for continuing the same.

 Currently a second year student of political science and economics at St. Stephen’s College, Delhi University. A compulsive traveler, she has been exposed and sensitized to the diverse cultures of the country. She has freelanced as a writer with Artfairie and Montage, and displays her funny side as a content author with Indian Memes on Facebook. Loves dogs, photography and icecream. She can be reached at vaishnavirathore@yahoo.co.in