Free market efficiency and planned obsolescence

[Mittlyle]

Free market is advocated as efficient system as resources are allocated by the 'invisible hand' of the markets. I, however find the efficiency claims quite unfounded as direct consequence of maximizing profits is phenomenon know as planned obsolescence. That is, products are made inferior than need be just to be able to resell updated version as soon as possible. Also resources are recycled only when its profitable comparing to new materials, meaning its very rarely going to happen voluntarily. These two factors make free market extremele wasteful when considering resources. My claim is that by limited central control you could have hands down more efficient outcomes than in pure laissez-faire. By effieciency I'm speaking about use of commodities of real economy. I'm not impressed by abstract numbers representing speculation.

(Oh, btw, I'm really advocate of free market provided there is sufficient regulation for enviromental matters.)

[1714776421]

1714776421

[1714776421]

1714776421

[1714776421]

1714776421

[1714776421]

1714776421

[1714776421]

1714776421

[1714776421]

1714776421

[AyeYo]

There is only a miniscule minority of economic schools of thought that believe that a completely unregulated market is perfectly efficient.  The rest (and any that are taken seriously) recognize the need for a moderate level of intervention in markets to address exactly the type of issues you've identified. 

What's good for profit and what is long-term sustainable are often worlds apart.

[NghtRppr]

First of all, it's always fallacious to compare our current system of fascism (privately owned business with public regulations) with a truly free market (privately owned business without public regulations). So don't think that our current system is any reflection of an actual free market unless you have taken into consideration all the ways in which the government is interfering.

As far as planned obsolescence goes, if it costs $1 to make a product X that will last 1 year, yet Company A makes it so that it only lasts 6 months then Company B has an incentive to make a version of product X that will last 7 months. Also, Company C has an incentive to make a version of product X that will last 8 months, and so on. The length of time that a version of product X will last at a cost of $1 will tend to approach 1 year. Free market competition tends to prevent wastefulness.

As far as pollution goes, as long as people value pristine land, clean air and fresh water, there will be a cost associated with spoiling them. Businesses that can avoid these costs will increase their profits, expand and eventually drive the less profitable polluters out of business. The only reason why we have such a problem with pollution is because governments prevent private property owners from suing for damages from pollution. Also, we a have a tragedy of the commons on rivers and other public land. If you dump garbage on my privately owned land or burn coal fires that pollute my air (assuming I was there first) and I can sue you, you will stop or be sued into bankruptcy. Right now, there's no way to stop some company from polluting the air on my land because the government gives them a free pass.

[em3rgentOrdr]

First of all, it's always fallacious to compare our current system of fascism (privately owned business with public regulations) with a truly free market (privately owned business without public regulations). So don't think that our current system is any reflection of an actual free market unless you have taken into consideration all the ways in which the government is interfering.

As far as planned obsolescence goes, if it costs $1 to make a product X that will last 1 year, yet Company A makes it so that it only lasts 6 months then Company B has an incentive to make a version of product X that will last 7 months. Also, Company C has an incentive to make a version of product X that will last 8 months, and so on. The length of time that a version of product X will last at a cost of $1 will tend to approach 1 year. Free market competition tends to prevent wastefulness.

As far as pollution goes, as long as people value pristine land, clean air and fresh water, there will be a cost associated with spoiling them. Businesses that can avoid these costs will increase their profits, expand and eventually drive the less profitable polluters out of business. The only reason why we have such a problem with pollution is because governments prevent private property owners from suing for damages from pollution. Also, we a have a tragedy of the commons on rivers and other public land. If you dump garbage on my privately owned land or burn coal fires that pollute my air (assuming I was there first) and I can sue you, you will stop or be sued into bankruptcy. Right now, there's no way to stop some company from polluting the air on my land because the government gives them a free pass.

+1.

Free market is advocated as efficient system as resources are allocated by the 'invisible hand' of the markets. I, however find the efficiency claims quite unfounded as direct consequence of maximizing profits is phenomenon know as planned obsolescence. That is, products are made inferior than need be just to be able to resell updated version as soon as possible.

Aha.  Have you considered the possibility that possibly planned obsolesce for some products is indeed the most effective use of resources?  For instance, cars should be assumed to have some accident after several years, so it is actually a waste of resources to design the engine and machinery to last forever.  Computer parts are most likely to become obsolete after ~5 years, so it is a waste of resources to over engineer the reliability at the expense of lower performance and higher cost.  Now, mind you, if you do want a piece of equipment to last forever, then you will have to pay.  Most of the computer logic that NASA sends out into space is designed with triple modular redundancy such that if one copy of a module fails, there are two other copies.

Anyway, just look at all the old stuff you can buy on ebay...some of it is really good.  I have purchased a lot of great but really old saxophones for really cheap off ebay from people who had them sitting in their basement for years.  I fixed them up, and they play just fine.  Sounds like an efficient allocation of resources to me.  But then you also have these crappy student models that are designed to break after 4 or so years, because it turns out most students don't end up playing their instrument for life.

Also resources are recycled only when its profitable comparing to new materials, meaning its very rarely going to happen voluntarily. These two factors make free market extremele wasteful when considering resources. My claim is that by limited central control you could have hands down more efficient outcomes than in pure laissez-faire. By effieciency I'm speaking about use of commodities of real economy. I'm not impressed by abstract numbers representing speculation.

Have you considered that maybe because silica and aluminum are so plentiful, it may actually not be worth the resources and labor (depending on the economics of a particular situation) to recycle in some cases?

[AyeYo]

First of all, it's always fallacious to compare our current system of fascism (privately owned business with public regulations) with a truly free market (privately owned business without public regulations). So don't think that our current system is any reflection of an actual free market unless you have taken into consideration all the ways in which the government is interfering.

As far as planned obsolescence goes, if it costs $1 to make a product X that will last 1 year, yet Company A makes it so that it only lasts 6 months then Company B has an incentive to make a version of product X that will last 7 months. Also, Company C has an incentive to make a version of product X that will last 8 months, and so on. The length of time that a version of product X will last at a cost of $1 will tend to approach 1 year. Free market competition tends to prevent wastefulness.

Back in reality land, Company's A, B, and C have the MOST incentive to all get together and mutually agree to make product X only last six months AND charge an outrageous price for it.

As far as pollution goes, as long as people value pristine land, clean air and fresh water, there will be a cost associated with spoiling them. Businesses that can avoid these costs will increase their profits, expand and eventually drive the less profitable polluters out of business. The only reason why we have such a problem with pollution is because governments prevent private property owners from suing for damages from pollution. Also, we a have a tragedy of the commons on rivers and other public land. If you dump garbage on my privately owned land or burn coal fires that pollute my air (assuming I was there first) and I can sue you, you will stop or be sued into bankruptcy. Right now, there's no way to stop some company from polluting the air on my land because the government gives them a free pass.

100% untrue, as usual....

http://www.wsws.org/articles/2010/nov2010/mass-n22.shtml

You can current sue companies for pollution all you want, provided you can actually prove they are the polluter.



The fact of the matter is the "costs" of pollution are typically far lower than amount of money saved by not worrying about being environmentally friendly - which is, obviously, why businesses pollute in the first place.  So, no, these costs do not drive polluting companies out of business.


I also find it hilarious that you once again manage to pin even this issue on government.  You think government gives a free pass to pollute... I guess that's why big business and the free marketeers are up in arms over every environmental regulation that comes along.    Pollution would be at its maximum without government involement.  Government is currently the only thing controlling it, because law suits don't do a damn thing.

[FreeMoney]

Will people prefer your product that breaks fast or mine that lasts longer?

[AyeYo]

Will people prefer your product that breaks fast or mine that lasts longer?

Why make yours last longer when we can get together and both make them break quickly to increase our profits?

[Anonymous]

Will people prefer your product that breaks fast or mine that lasts longer?

Why make yours last longer when we can get together and both make them break quickly to increase our profits?

Then an individual like me comes along who likes to build great things, not just make money. I build a product that's cheaper and lasts longer.

Both are in for trouble.

[NghtRppr]

Back in reality land, Company's A, B, and C have the MOST incentive to all get together and mutually agree to make product X only last six months AND charge an outrageous price for it.

You're talking about cartels. The same profit motive that causes them to form also causes them to fail. If Companies A, B and C all agree to charge the same high prices, each company has an incentive to charge lower prices to gain more market share. Even though they are charging less, the volume is greater and total revenue can increase. But let's say that A, B and C resist the urge to cheat and the cartel remains strong. There is still a higher profitability in that market which encourages Company D to enter the market and undercut the others.

You can current sue companies for pollution all you want, provided you can actually prove they are the polluter.

No, you can't. You can only win a lawsuit against companies for pollution if they are breaking government regulations. You can't win a lawsuit outright for pollution if they are following regulations. That was my point. As long as the government says they can pollute, they can pollute.

Why make yours last longer when we can get together and both make them break quickly to increase our profits?

Because I can increase my profits faster by undercutting you and gaining market share as well as goodwill for my brand which goes a long way towards profitability. People pay hire prices for brands they associate with quality.

[AyeYo]

Will people prefer your product that breaks fast or mine that lasts longer?

Why make yours last longer when we can get together and both make them break quickly to increase our profits?

Then an individual like me comes along who likes to build great things, not just make money. I build a product that's cheaper and lasts longer.

Both are in for trouble.

Not at all.  There are many options available.  

First off, better and cheaper isn't always possible.  Look at a field like microprocessors.  Intel is already on the bleeding edge.  Joe Atlas Idiot isn't going to come along and magically design and build a better microprocessor and sell it for less money.  So it sounds get in theory, but it doesn't work like that in practice.

Where are you going to get the bankroll to attempt to take on a large oligopoly of companies?

Even if you could, do you know what happens when you make something that lasts forever and sell it for cheap?  You go out of business.  New customers are in finite supply.  Returning customers are in infinite supply.

Finally, if all else fails and your impossible idea actually works, the oligopoly will just have you killed and/or your business terrorized.  It happens all the time in the real world.  In Liberland with no government powerful enough to enforce laws and execute retribution, the powerful companies of the world can do whatever they please.

[NghtRppr]

Even if you could, do you know what happens when you make something that lasts forever and sell it for cheap?

You focus on adding improvements. Your argument would only apply assuming we have reached the apex of technology, which we haven't.

In Liberland with no government powerful enough to enforce laws and execute retribution, the powerful companies of the world can do whatever they please.

Let's concentrate on one of your fallacies at a time please.

[AyeYo]

Back in reality land, Company's A, B, and C have the MOST incentive to all get together and mutually agree to make product X only last six months AND charge an outrageous price for it.

You're talking about cartels. The same profit motive that causes them to form also causes them to fail. If Companies A, B and C all agree to charge the same high prices, each company has an incentive to charge lower prices to gain more market share. Even though they are charging less, the volume is greater and total revenue can increase. But let's say that A, B and C resist the urge to cheat and the cartel remains strong. There is still a higher profitability in that market which encourages Company D to enter the market and undercut the others.

That's assuming Company D can even enter the market.  http://en.wikipedia.org/wiki/Barriers_to_entry

That's assuming Company A, B, or C doesn't buy Company D in it's infancy.  http://en.wikipedia.org/wiki/Buyout

That's assuming it's even possible to undercut the other guys. http://en.wikipedia.org/wiki/Economies_of_scale

So you know what they say about assuming.  Having a start-up company just magically appear into an established industry and take away market share from an oligopoly of companies that have MASSIVE economics of scale advantages, more experience, pervasive marketing, etc.... yea it's just not going to happen.

You can current sue companies for pollution all you want, provided you can actually prove they are the polluter.

No, you can't. You can only win a lawsuit against companies for pollution if they are breaking government regulations. You can't win a lawsuit outright for pollution if they are following regulations. That was my point. As long as the government says they can pollute, they can pollute.

And in magically Liberland with no regulations at all, I'm going to sue you for smoking a cigaratte in your own yard seven blocks from my hosue because one microscopic bit of tar landed on my front yard and I have DNA evidence that proves it was from you.

So yea... no standards, no effective legal system.  Good luck with that.

We can currently pressure the government for stricter pollution standards.  You can't do that in Liberland.  All you can do is hope the privately owned courts aren't owned by the same company that's polluting your neighborhood.

Why make yours last longer when we can get together and both make them break quickly to increase our profits?

Because I can increase my profits faster by undercutting you and gaining market share as well as goodwill for my brand which goes a long way towards profitability. People pay hire prices for brands they associate with quality.

See response above.  It's very easy to say, but in reality land you've got a shark filled, ocean sized obsticale course to get through to actually accomplish those things.

[AyeYo]

Even if you could, do you know what happens when you make something that lasts forever and sell it for cheap?

You focus on adding improvements. Your argument would only apply assuming we have reached the apex of technology, which we haven't.

Ah to be so naive...

If only you could understand the difference between the ease of saying something and the ease of doing something.

[Anonymous]

Even if you could, do you know what happens when you make something that lasts forever and sell it for cheap?

You focus on adding improvements. Your argument would only apply assuming we have reached the apex of technology, which we haven't.

Ah to be so naive...

If only you could understand the difference between the ease of saying something and the ease of doing something.

I think you need to look at products such as Team Fortress 2. Companies actually do that sort of thing. Not every company is in it for the money.

[NghtRppr]

Having a start-up company just magically appear into an established industry and take away market share from an oligopoly of companies that have MASSIVE economics of scale advantages, more experience, pervasive marketing, etc.... yea it's just not going to happen.

Cartels lose the advantage of having an economy of scale by charging higher prices if they are high enough. I can enter the market at a smaller scale, pay higher costs yet still make a profit. I can also advertise exactly what I'm doing and show how the cartels are charging more than myself. People resent being gouged like that and word of mouth would quickly increase my market size. You've got a lot of "if's" that can be overcome and don't even apply to all cases.

And in magically Liberland with no regulations at all, I'm going to sue you for smoking a cigaratte in your own yard seven blocks from my hosue because one microscopic bit of tar landed on my front yard and I have DNA evidence that proves it was from you.

You have to show damages.

So yea... no standards, no effective legal system.  Good luck with that.

There will be courts.

All you can do is hope the privately owned courts aren't owned by the same company that's polluting your neighborhood.

There are many reasons why people wouldn't deal with courts that are biased without having some impartial party to settle disputes. Really though, describing a libertarian legal system isn't something I can do in a few sentences. It deserves a thread of its own.

[AyeYo]

Even if you could, do you know what happens when you make something that lasts forever and sell it for cheap?

You focus on adding improvements. Your argument would only apply assuming we have reached the apex of technology, which we haven't.

Ah to be so naive...

If only you could understand the difference between the ease of saying something and the ease of doing something.

I think you need to look at products such as Team Fortress 2. Companies actually do that sort of thing. Not every company is in it for the money.

Ah, but if they aren't all in it for the money (greed, rational egoism, et.al.) then the free market myth just got blown wide open, because it depends on everyone being it for self-interest and maximized profit.

[AyeYo]

Having a start-up company just magically appear into an established industry and take away market share from an oligopoly of companies that have MASSIVE economics of scale advantages, more experience, pervasive marketing, etc.... yea it's just not going to happen.

Cartels lose the advantage of having an economy of scale by charging higher prices if they are high enough. I can enter the market at a smaller scale, pay higher costs yet still make a profit. I can also advertise exactly what I'm doing and show how the cartels are charging more than myself. People resent being gouged like that and word of mouth would quickly increase my market size. You've got a lot of "if's" that can be overcome and don't even apply to all cases.

Dude... no... just... no.  Economics of scale has NOTHING to do with the prices being charged.  It has to do with procurement of supplies, logisitcs, etc.   It's based on purchasing power and thus size.  You REALLY need to hit up a school and get a simple footing in econ 101.


I guess this is why we see start-up oil companies blowing the Seven Sisters out of the water.  

And in magically Liberland with no regulations at all, I'm going to sue you for smoking a cigaratte in your own yard seven blocks from my hosue because one microscopic bit of tar landed on my front yard and I have DNA evidence that proves it was from you.

You have to show damages.

Says who?  Does the non-existent government put that law in writing?  I'll take you to the private court that my friend's company owns and sue the ever living shit out of you.  What's stopping me from doing it?

So yea... no standards, no effective legal system.  Good luck with that.

There will be courts.

Courts interpert laws and standards.  They do not make laws and standards.

All you can do is hope the privately owned courts aren't owned by the same company that's polluting your neighborhood.

There are many reasons why people wouldn't deal with courts that are biased without having some impartial party to settle disputes. Really though, describing a libertarian legal system isn't something I can do in a few sentences. It deserves a thread of its own.

Not deal with them?  What are you just going to not show up because you think they're biased?  Fine.  I'll pay the private police force (that my other friend happens to own, perks of being a rich guy - hell, maybe I'll send my own police force) to come arrest you for not appearing for your summons at my other friend's biased court.  What's stopping me from doing it?

[billyjoeallen]

Even if you could, do you know what happens when you make something that lasts forever and sell it for cheap?

You focus on adding improvements. Your argument would only apply assuming we have reached the apex of technology, which we haven't.

Ah to be so naive...

If only you could understand the difference between the ease of saying something and the ease of doing something.

I think you need to look at products such as Team Fortress 2. Companies actually do that sort of thing. Not every company is in it for the money.

Ah, but if they aren't all in it for the money (greed, rational egoism, et.al.) then the free market myth just got blown wide open, because it depends on everyone being it for self-interest and maximized profit.

Everything? EVERYTHING? really? It's easy to construct your straw man when you use absolutes like that. That might win you points with the peanut gallery, but if you actually believe that, well that's just sad.

"Fat, drunk and stupid is no way to go through life, Son" ~Animal House

[AyeYo]

Even if you could, do you know what happens when you make something that lasts forever and sell it for cheap?

You focus on adding improvements. Your argument would only apply assuming we have reached the apex of technology, which we haven't.

Ah to be so naive...

If only you could understand the difference between the ease of saying something and the ease of doing something.

I think you need to look at products such as Team Fortress 2. Companies actually do that sort of thing. Not every company is in it for the money.

Ah, but if they aren't all in it for the money (greed, rational egoism, et.al.) then the free market myth just got blown wide open, because it depends on everyone being it for self-interest and maximized profit.

Everything? EVERYTHING? really? It's easy to construct your straw man when you use absolutes like that. That might win you points with the peanut gallery, but if you actually believe that, well that's just sad.

"Fat, drunk and stupid is no way to go through life, Son" ~Animal House

The word "everything" doesn't even appear anywhere in my post.  Check yourself before you wreck yourself.

[em3rgentOrdr]

I can't wait for this whole aregument to become irrellvant once the open-source 3D printers and CRC routers mature and become commonplace...

"Son, back in the old days before a little kid like you could own a 3D printer, we were all held hostage by evil corporations that deliberately designed their products and toys to fail after a certain amount of time."