Thursday, July 14, 2011

The Free market

From my news feeds a US story appeared regarding a bill to repeal the energy efficient light-bulb standards brought in by George W Bush; it had the majority but not enough of one to be passed. But why try to repeal it in the first place -

“The government shouldn’t be taking these kinds of freedoms away from us. ... The market should decide,” Kozak said. “But the politicians tend to ram these things down our throats.”
Ah yes the market should decide that invisible hand that rewards those in public favour and punishes those out of it. Except as all but the most rabid fans know it doesn't work like that.

When proponents discuss 'the market' they invariably mean the competition between manufacturers and the clamour of the public for products. In terms of competition this is obvious - a manufacturer wants the public to purchase their goods over that of another as such they will offer more features, better quality, cheaper pricing and all this is to the benefit of the buying public.

The flaw lies in the desire of the public for the new. Consider all the advertising that goes into telling us something is new, that it's better none of that would be necessary if there was an underlying desire in the public to always buy the latest thing. We have to be told we want this - the old has to be castigated; the new lauded.

Of course if a product is demonstrably better then we would desire it, but that comes with a price tag attached - for me is the gain worth the cost?

It's this latter that lies at the heart of government laws such as this - sometimes there are benefits that are better for the public as a whole rather than for the individual. Now there are occasions when the public as a whole demands change regarding a collective gain, but such instances are rare and generally come about due to great publicity and pressure from the media or via some 'celebrity' via the media.

Despite drawing up graphs to maximise profit with the most customers when the market interacts with the public it only really understands gain for the individual. Oh sure it may make a gesture about how environmentally friendly it is or some such, but that's only for those rare occasions I've already mentioned. For the most part if it can't produce an individual benefit it's simply not going to happen.

Given the choice between a light-bulb for 75p or an energy saving one at £2.63 which would the majority buy? Even given that the latter will supposed last 10 times as long and therefore save the buyer £4.87 over the long term how many would stop to work that out?

As the public, as a collection of individuals, aren't that good at long-term planning it is the function of government to perform that task. On occasion it needs to be accepted that while the government may not know what's best for me, sometimes it does know what's best for us.


Orphi said...

I much better argument is that the new energy-saving bulbs just aren't ready for the marketplace yet. (Argue amongst yourselves about whether legislation will improve that situation or not…)

FlipC said...

They're never going to be ready for the market until they drop to easily comparable prices to the current ones.

That won't happen until the industry has evolved, which won't happen if they don't make any. Which they won't because the market's not ready for them yet :-)