Lately, it has become common for critics of free markets to argue that they give us too many choices, and making all those decisions is too burdensome. Barry Schwartz's book The Paradox of Choice is the best-known defense of this argument. Tyler Cowen links to a good statement of it by Megan of the From the Archives blog:
This is the other thing I don't get about small government types. You protest so vociferously that government takes choices away from you. But a whole lot of choices are BORING. If I never once think about car bumper safety standards for 25mph crashes, I will never miss it. I do not want to carefully match my car safety standards to my most likely driving patterns and save two grand in the process. I would not enjoy that process. (Perhaps you would, and you would rather have the money.) I've never been a comparison shopper or a meticulous consumer. Maybe my model of the individual is too biased by my experience. But I don't want to figure out how much coliform bacteria I can tolerate on my spinach, given my health. I don't want to do that even if it saves me money. I don't want to figure out what goes into paint in nephews' toys. I don't even want to handle my health care.....
I can hear you already: "But you are FORCING me to take that deal too.". Yes. But right now our system FORCES me to comparison shop. Either way, someone gets FORCED to do something, and I don't see a justice interest on one side or the other....
There are several flaws in this argument. First, the market does not in fact "force" anyone to do "comparison shopping." If you genuinely don't care much about the price or quality of a particular product, you can simply choose at random from the options on sale. In that scenario, you can still benefit from the comparison shopping efforts of consumers who care more than you do, since most manufacturers will cater to the preferences of the better-informed consumers at least to some substantial degree.
Second, if you do care, but simply don't want to take the time and effort to choose intelligently, the market again provides solutions for the problem. You can 1) rely on the advice of better-informed friends and acquiantances, 2) use one of the many consumer publications (e.g. - Consumer Reports) that summarize product information in an easy to use format, or 3) pay an expert to make your decisions for you. Megan herself seems to approve of this third option:
People talk about being rational health care consumers, but they are maximizing some combination of health outcomes and money. I want to maximize my utility. My utility is optimized by going outside to play while someone who is interested in health care gets paid to balance my health care and money. I'll pay a little extra to cover that person. I come out well ahead in that deal.
Of course, if I interpret Megan correctly, she means that she would like to pay government regulators to impose decisions on everyone rather than to hire a private sector expert on her own initiative; otherwise, her argument would not be a criticism of "small government types." But a key advantage of the market over government is that you get to choose when you want to rely on experts, and which ones you want to hire. This gives the experts much stronger incentives to do what you really want, and also reserves to you the vital right to reject their advice at the end of the day - points I discussed in greater detail in my post on "Power to the Experts."
Finally, Megan's argument (and Schwartz's more sophisticated version) don't adequately consider the important fact that people differ from each other on what products and product attributes they care about. Choices that she and I would consider "BORING" or unimportant are intensely interesting and significant to others. In the market, people can choose for themselves which choices they want to study in detail, which ones they are willing to make more or less randomly, and which ones they prefer to delegate to an expert. With a mandatory government solution, we will at best get the menu of choices that the majority of voters consider appropriate - a result that will be deeply unsatisfactory to many who have minority preferences. At worst, the menu will be dictated by narrow interest groups that manage to capture the regulatory process and use it for their own benefit. Even "boring" choices that I have to make myself are preferable to that.
Related Posts (on one page):
- Waldfogel and Schwartz Reconciled:
- Do Markets Give Us Too Few Choices?
- Do Markets Give Us Too Many Choices?
Moreover her products used as examples are poor since they generally related to public safety (result from the annals of tort litigation for the most part) and not does this gizmo have 1GB or 2GB for example.
I'm sure they're may be some colorable argument for no choice (see e.g. your local telephone company's briefs to the FCC), but hard to defend in the face of reality.
Your laziness does not justify restricting my freedom.
Yours etc.
Coke, Classic Coke, Caffeine Free Coke, Coke with Vitamins, Vanilla Coke, Cherry Coke, Cherry Vanilla Coke, Diet Coke, Coke Zero, Diet Coke with Splenda, Caffeine Free Diet Coke, etc... And Pepsi has basically a mirror for all the same. For some things, a little less choice might be nice.
Why? If none of the variations interest you why would you want to cut down on the freedom of choice of others? Coke somehow profits from the multiple variations, otherwise it wouldn't produce them for long.
I like choice. It is like "free will". "I" can succeed or fail on my own rather than at the hands of someone else.
I remember years of Ma Bell, there was no choice, no service, no customer service, etc.
I think Megan, if she reaches maturity, will see the advantage of choice.
I think it's a natural reaction to be overcome in the face of too many choices, but you are right, the criticism does not bear out a more reasoned analysis.
I had a conversation with a friend of mine about surveillance , the 4th amendment and Elliot Spitzer.
My friend claims that Spitzer broke that amendment, that he subpenaed business documents without the court warrants etc, etc.
Can anybody help me out here?
Is that true?
Well, yes, it does; it forces you to take responsibility for your own choices, by failing to offer nothing but that most suited to your taste / needs / whatever.
When someone casts blame for a condition that still exists in the absence of any actor but themseleves... Is it so hard for them to see the illogic?
1. Never knew so many Volokh regulars were pro-choice. Go figure.
2. While Ilya manages to selectively quote a (somewhat) clueless proponent of the theory in order to assert superiority of the classic libertarian/free market/Clint Eastwood/U Chicago mindset, he overlooks very important things.
I think everyone can agree that *in theory* more choices is always better than fewer choices. I would also agree that if I was perfectly rational, had access to all information, and existed in a place of no transaction costs (pursuing Consumer Reports took no time), then that would be really friggin' awesome.
Of course, what many behavioral economists have shown recently is that in the real world, more choices is not always a good thing. Why? People are not perfectly (are even somewhat) rational. People do not have access to all information. Transaction costs (esp. in terms of time) are high.
Does this mean 'the gummint' should make all of our choices for us? No. Does it mean that if, as a social policy, we want to encourage saving, we should have a 'default' basket of 401Ks (that some could opt out of)? Sure. Can it inform a supermarket's jam purchaser (while letting a smaller, specialty chain cash in on the Boysenberry lovers)? Perhaps. Might it inform our health care debate? Most certainly.
Choice is good. 'Cept when it ain't. And attacking this post to make your point, Prof. Somin? That... was a choice. *grin*
25 different flavors of Coke, or 50 different styles of Nike, are not really choice, they are the illusion of choice, as they are all produced by the same company. The real choice is between Coke and Pepsi. So it really isn't as wide as it first appears--and there is probably less true "choice" in soft drinks, on a nationwide basis, than there was fifty years ago.
As for the complaints about the bad old days of Ma Bell, we are rapidly returning to those days. But this time around we won't have government oversight of the duopoly that will be the end result of the merger craze in telecommunications.
On the other hand, my mom wants someone else to make those choices for her. The only choice she wants to make is the color.
Luckily, she just went to www.dell.gov and the government made the boring choice for her.
What bothers me is that they do seem like choice, but unnecessary and undeserved choice since they seem like a waste of resources: design, marketing, manufacturing, etc., to give redundant options.
Basically, if you present people with the choice of "Barefoot or Shod", then only one shoe need be designed, built, etc. for the entire world. Or, you can present them with the choice of what functional type of shoe. Then, you only need to consume resources to design one global sandal, one steel-toed workboot for the whole world, one running shoe, etc. Currently, multiple companies make multiple models of multiple types of shoe (which are then sold in multiple stores).
And what I don't understand, since noone's ever tried to explain it to me, is why so many people take it for granted that consumer choice is important enough to justify the redundancy in the current world and make it preferable to the "Only one of each type" scenario. Do I really have a right to choose between products that do the same thing, instead of just a right to having that thing done?
1. Cheerwine, a local brand which tastes like a cross between Cherry Coke and Dr. Pepper. I didn't care for it, and won't be buying it again, though I did finish the 1/2 gallon bottle. Worth trying once.
2. Stewart's Key Lime soda, a favorite.
3. Jones Green Apple Soda, another favorite, still made with cane sugar. (The 6th-graders I taught last year called it "alien blood" -- very green and fizzy.)
4. Target brand imported Italian Blood Orange Soda, good over ice or in an orange float. The Lemon is even better, but apparently everyone else thinks so, too, since Target has trouble keeping it in stock and I haven't managed to get hold of any lately.
Of course, even within Coke and Pepsi, there is a great deal of real choice. As far as I'm concerned, Classic Coke is excellent, and (e.g.) Vanilla Coke is revolting.
Like most Americans, I save time and effort by thinking about things I care about (books, CDs, DVDs, liquor, most foods) and not bothering with things that make no difference. For (e.g.) toothpaste, mayonnaise, vinegar, sponges, dishwasher soap, and paper towels I buy whatever's on sale, or the house brand, whichever is cheaper. Thanks to the price-per-ounce labels on the shelves, it takes very little time to figure out which is cheapest. Doesn't everyone shop this way?
Of course, health insurance is another thing entirely, since the small print may make a huge difference in what exactly is covered, and how fully. But how often do we have to worry about which health insurance (or car, or house, or stock) to buy?
Or it could be a simple demonstration economies of scope.
Not sure if you're kidding. But, if you're not, you can move to North Korea where Their Great Leader will happily provide you one global shoe.
No redundancy, or wasteful competition or difficult choice.
If your whole life revolves around economic activism then you only care about if you are buying Coke or Pepsi.
But most people either want a cola or a cherry cola or a diet cola, etc. They DON'T CARE if one company makes them all or of 20 little union shops make them.
1. All choices.
2. No choices.
We'll call this the Vanilla Coke v. North Korea dichotomy. Unfortunately, this is a false dichotomy brought out by the poor framing of the issue in the original post.
Instead of arguing from ideology (Commies v. Friedman), let's agree that neither extreme is feasible. I don't believe that anyone would think that all decisions should be made for them. OTOH, empirical evidence has shown that we are spectacularly ill-equipped to make good choices in some situations, and that transaction costs (time and money) and information asymmetry mean that problems (yes, problems) of choice are particularly acute in some situations.
Having some regulation (a minimum safety requirement for food products) is generally considered to be a good thing, as most people don't have the time to research every single food purchase they make, and in today's distributed economy, cannot depend on community trust relationships. Complex financial transactions (retirement, health insurance) are also problematic when it comes to issues of choice, as empirical evidence has shown that most people are spectacularly ill-equipped to handle these issues.
In short, the issues and economics of choice are a little more complicated than the OP would let you believe, and there are solutions in between the nanny-state and a Darwinian free-for-all.
Perhaps there is a hostility here because Prof. Somin is against libertarian paternalism, but if that is the real target, this is a poor, um, choice.
You have traded one false dichotomy for another. We needn't choose between having to gather and analyze all information about these choices ourselves, and having government do it for us. As many have pointed out, there are plenty of good private solutions.
You can argue that government does a better job determining what insurance is best for you (or more likely, either regulating some minimum level of insurance or offering a one-size-fits-all insurance to everybody) than you can do using the private solutions, but you must first admit that there are private solutions other than you having to read all the fine print of a hundred insurance policies yourself.
Absolutely. Why just last night I went to a restaurant--I guess I should say I was forced to go to that specific restaurant because of its reputaton, convenience, and low prices--and observed the 20 entrees on the menu. "No choices," I thought to myself. I'm sitting here in this monopoly restaurant without any choices!
Life is so unfair...
There are transaction costs to choice. For those who think the transaction costs are too great, they can go to stores with fewer choices or simply default to a repeat product, regardless of the options available.
It is true that safety and other regulation can be an efficient alternative to choice in some circumstances. But that is a limited category where the number who would choose the unsafe product is very small and the transaction costs are high.
Vanilla Coke, for instance, was available in the US from 2002 to 2005, then was relaunched in 2007 as Coca-Cola with Vanilla. Coca-Cola with Lemon did not even last all of 2005, and Black Cherry Vanilla Coke came and went in 2007.
Two points-
First, you are arguing from belief and theory (which is fine). The issue is that studies with empirical data conducted by behavioral economists has shown that choice is not always a good thing. This has been shown in the several contexts, including the 'famous' ones you should be familiar with (jam, 401Ks, safety devices, health plans).
Second, assuming we use filters to collect this information about other services. What are the transaction costs of these services? The subscription to Consumer Reports? The time it takes to read or search the web information available? The amount of time you take to investigate the credibility of the metasource you use (does CR have a bias for Japanese cars, for example). Does the source have relevant information (has CR done a report on this particular consumer good)... if not, how much additional time will you spend perusing additional metasources and weighing their credibility and viewing that against your own, perfectly understood rational expectations? Assuming, of course, that they have all the information available (reliability of a new item, say).
Or do you just say, screw it, I'm getting the Cherry Coke?
When you have perfect information, are completely rational (self-knowing), and have no transaction costs, more choices are always a *good* thing... since you will make the right one, it doesn't matter.
But what research has shown is that in the real world, where real people make imperfect choices, more choices can be a bad thing. The question becomes this: how can we use this information to help guide us to more sensible policy decisions? There is a middle ground between North Korea and free market utopianism.
Having a floor does not mean you don't have choice -- you can have 25 types of Coke, but we should have the confidence that all of them are free of problems.
Catepillar 904 B wheel loader
It has 52 horsepower motor, a 22 gallon fuel tank, and a 2.75 ton bucket capacity.
Catepillar 994G wheel loader
It has a 1,577 horsepower engine, 1,013 gallon fuel tank, and a 38 ton bucket capacity.
Of course both of these products are manufactured by the same company so having these two products is just the illusion of choice. More illustrations of different products from the same company having no difference can be found here
Catepillar photos
And I'm sure those Nike golf shoes will work perfectly well on the basketball court.
Sure, there are transactions costs. However, if its important to the consumer then there is demand for that information, and it will exist. Yes, it won't be cost-free, however: is the government solution cost-free?
Lets look at steel toe boots. If a person is working in a shop on a cement floor all day they will probably want a boot with a wedge form, crepe sole because it is well padded and comfortable on cement.
If a persons work involves going up and down ladders they will want a boot sole that has a heel on it. The heel helps keep them from slipping through the ladder rund and injuring themselves.
A person working in a muddy environment is going to want soles with some sort of cleat on the bottom to help keep them from slipping.
Those are just a few reasons why one boot style is not going to work worldwide This expands to almost every product in existence.
Models like this make sense because mechanical engineers are the folks who understand boilers and therefore have the knowledge to setup safety standards.
However, in other parts of this website, we have people who argue against choice just as adamantly. Whether the issue is abortion or gay marriage or some other hot social topic, they don't seem to like choice very much, or would allow the market to function freely. Suddenly, government prohibitions are fine with them.
If you eliminate competition and have a centralized source that creates the universal work boot, there won't be any incentive to invent these subtypes that TJIT mentions-- there won't be innovation and creation of new anti-slip boots that are better for farming or factory work or construction. only cut throat competition drives the kinds of specialized products that we see in this excessively choice-ridden marketplace.
Don't people read Marx any more?
However, it is naive at best to not recognize those topics have social / ethical / bioethical elements that make them profoundly different then the topic of this post.
For example, when faced with a selection of bolts in Lowes, they all seem good enough. Except when you have a particular high stress and high temperature use in mind (attaching a wastegate flange to a turbine housing, 1700F operating temperature), at which point you realize all the selections in the store are substandard and differ only in the coatings they have.
Similarly, when you go into radio shack to buy a wire connector, you can find a million different types, it almost seems like anything would be good enough... Except when you are actually doing a project that has to operate in the real world- suddenly you realize that radio shack doesn't have anything meeting your requirements in wires, connectors or switching.
The market has choices because people demand them. If you have no particular demands to make of the marketplace, just buy a camry and shut up about the other choices. Those of us who want to drive a car with an engine we built ourselves like the marketplace the way it is. Many of us wish there was more choice. In fact, on the internet, there is almost unlimited choice if you know the right keywords and are willing to be patient finding a good price.
You need expertise in a particular field for the choices to become relevant. Uninformed dabblers are going to miss out on a lot of efficiency and utility at the margins in such a market, but this hardly dooms them. Less knowledgeable people can turn to the experts when making purchasing decisions. I, who am an expert in a number of automotive performance related fields, defer to other experts when I am confronted with too many choices in an unfamiliar field- stereo components, for example. This is the beauty of the internet- it allows consumers to have near-perfect information with a minimal expenditure of effort.
Oh really?
Beginning in the late 19th century, and throughout most of the 20th century, drug stores and soda fountains were flavoring colas with cherry, lemon, lime, chocolate and vanilla in response to consumer demand. Unfortunately, the bottlers haven't been able to successfully recreate those flavors in pre-bottled products, but they keep trying.
Do you really believe the companies are trying to foist these new efforts on us, or can you accept the fact that they're trying to meet consumer demand?
I drink diet coke with a squeeze of fresh lemon in it. If Coke could bottle a diet cola product that replicates the taste of fresh squeezed lemon, I would buy that instead of plain diet Coke. Unfortunately, the pre-bottled stuff tastes more like chemicals than lemons. I'm an example of unrequited consumer demand, but I appreciate the fact that they keep trying.
Oh, and I love the quip above about 50 varieties of Nikes. Any other marathon runners here? There is a reason for the dozens of varieties of distance running shoes alone--and that is because no two feet or running styles or body types are identical. Every shoe is built for a specific purpose. If you run 85 miles per week in the wrong shoes, your ankles, knees, hips, back and feet are likely to fail.
Choice is good. Choice is necessary. I would not live in a society with fewer choices.
Novice chess players see all legal moves: expert chess players see only excellent moves and never see bad ones.
When government has a reasonably workable model of reality, we are much better off, on many issues, to use the expertise the model provides to enable us to reduce our available choices by discarding unnecessary ones.
The reality is we're all somewhere between the novice and the expert, in a game whose rules are constantly changing. There may be an optimality point -- constantly changing -- where at any moment both fewer and more choices reduce utility. It may well hurt society to require ordinary people to have sophisticate expertise and wariness to avoid pitfalls such as losing their shirts on their houses and pensions. The cost of lots of ordinary people losing their shirts is quite high. A bit of risk aversion, and some limiting of choices, may well be optimal.
Do you the market on contract killing should be allowed to function freely? Do you object to government limiting people's choices? Why not leave such matters to the market, which presumably can be trusted to self-regulate so that only people who the market finds to have utility dead than alive would be recipients of its services. Doesn't the government's imposition of its own views of the value of human life represent an interferance with the market that results in net inefficiency?
Do you think the market on contract killing should be allowed to function freely? Do you object to government limiting people's choices? Why not leave such matters to the market, which presumably can be trusted to self-regulate so that only people who the market finds to have more utility dead than alive would be recipients of its services. Doesn't the government's imposition of its own views of the value of human life represent an interferance with the market that results in net inefficiency?
There's nothing inconsistent about being pro-consumer choice and being anti-abortion.
Just as there is nothing inconsistent about opposing 20 modes of infanticide and being pro-consumer choice.
Your choice ends where the life of an innocent 'person' (from the perspective of the anti-abortionist) begins. You might as well say that circumscribing a serial killer's choice of victims is inconsistent with being pro-choice at the supermarket.
Ah yes. Of course. Libertarians are always in favor of free market solutions, except when they are not. And the differences often turn on very arbitrary conditions.
I have no problem with the government outlawing contract killing or other such things. My point is that either you are in favor of free choice or your are not.
"However, it is naive at best to not recognize those topics have social / ethical / bioethical elements that make them profoundly different then the topic of this post."
Exactly my point. It is naive at best to think that having 25 different Cokes doesn't entail profound social, ethical, or bioethical elements, especially when our country represents only a tiny fraction of the planet, and yet we consume 25% of its energy.
Perhaps our vast freedom of choices limits choices in other parts of the world? Doesn't that have a social, ethical or bioethical element to it? Free choice doesn't mean the choice is free.
And yet, on something such as gay marriage, which is merely expanding a freedom, we have people who are totally against it, when they can't even articulate any reasons beyond religious beliefs, or a vague sense that 'it is wrong.' Of course, many people have said that there will be dire consequences, but either they can't articulate those consequences, or they have no basis for support of them. However, that doesn't stop them from trying!
So if people can argue that gay marriage is a bad choice for our society based on nothing more than a gut feeling that it is wrong, then others can say that 25 different types of Coke is wrong as well.
Of you can just agree that you are inconsistent in your beliefs. That, at least, is an honest statement and one I can accept.
True; that's where we are, in the middle ground. Also, why has no one mentioned the greatest benefit of choice: No choice equals one price; many choices equals many prices. Many prices means lower prices. Some people call it competition.
And, if big brother makes the choices who choses the big brother? And if I don't like the choice he's made then what do I do? Sorry, I'll take our present middle ground over Hillary's "common good"!
Maybe I framed the question in somewhat paradoxical terms to begin with - but is this really an efficient use of scarce resources?
Can someone point me to literature on the economics of wastage?
Take pesticides at Home Depot or Lowes. They have a giant section with hundreds of choices. All of them are watered down stuff, carefully selected and packaged for the consumer. To get the real stuff you have to go to a catalog where pest control experts get their supplies. It comes in boring brown containers.
Mutual funds, cars and pretty much every other commodity is packaged in an idiot friendly form and an expert form that is hidden at the boundaries of the market. There is nothing stopping the discerning expert consumer from managing his own investments, building his own car, brewing his own beer, sewing his own clothing or building his own house on land that he surveys himself.
Look at Schwartz and his story of buying a camry. It is actually kind of funny that he correctly observes that most of the choices are meaningless time wasters with minimal effect on one's enjoyment of the car. What he doesn't realize is that this is because all the really dangerous choices have been carefully hidden from his view. The choices are still out there, but you have to know to ask for them. And of course, most of them will void your warranty.
Choice theory mostly annoys me because it is such a practical area of exploration but so many of the people studying it are non-economic theory wonks who drive warrantied camrys and wear clothes from eddie bauer. They're mostly unaware of the marketplace and have little appreciation of how it would work anyway, yet they feel no shame making grand theories about how it works. Tenured blind men studying elephants, indeed.
Hilarious.
I must be in favor of 20 modes of torture if I want a choice of salads at the buffet.
Ever see those signs in supermarkets? Buy one, get one free? Save 2 dollars on this item? Buy 3, get one free? There is no waste, only supply and demand. When the item won't sell at any price, it ends up in the dumpster where dumpster divers and homeless can retrieve it and add value to it. If not, it ends up as landfill or fertilizer, which has a certain low value of its own.
The trouble arises when one part of society is asking the government to restrict choices, and another part is insisting that individuals be left to decide things on their own. When there is no consensus, how do you decide whether to let the government take over? There are some criteria we might use: ethical considerations, costs to the individual of getting it wrong, costs to society if the individual gets it wrong, extent to which a single solution for everyone is actually feasible, and so on, but it's rare to find a hotly contested issue where these things lead clearly to a decision in favor of more government. Usually there are good arguments on each side, or the issue wouldn't be hotly contested.
So the question becomes, if you can't get a consensus, is your presumption in favor of allowing government to step in over serious objections from some part of society, or is your presumtion in favor of leaving things in the private sector?
It would if it did. But it doesn't.
To avoid this "waste" as you call it, someone needs to set the level of production. My question would be, who sets the level; how is he chosen, what if he is wrong and we end up with shortages? The answer to your question above is that competition will reduce production to the most efficient level and waste is therefore reduced. It's really quite simple you see. No matter what you or I or the government do, the law of supply and demand will rule. It is immutable. Anything done to change one side or the other of the equation will effect the other. And remember, one persons "wasteage" is another's food bank.
The problem is quickly self correcting because the guy who produces more than can be sold at cost is going to eat the cost of the items that had to be thrown away or sold at below cost.
Most products aren't brought to market unless a safe margin of profit can be realized. A company that can't afford to have a failed product and significantly misjudges the market will go out of business.
This is the least wasteful way of organizing the economy. A government that misjudges the market (building rail service that no one wants lol amtrak) can just continue to extract money from the taxpayer for decades before anyone shuts them down.
If you choose to save money by buying cosmetics that are not "certified arsenic and lead free" under a program developed by a private entity such as Underwriter's Laboratory, it doesn't affect me much. Arguably there could be some increase in lead and arsenic in shared ground water from your cesspool from using such products, but I don't think that's the usual argument for such restrictions or on the "allowable" levels. An entity such as Underwriter's Labs would have an intense interest in monitoring the production of products certified under their program because their entire business is based on them being trusted and effective and loss of this trust and failure of their business could result from a single breach. As the recent history of products containing inappropriate levels lead, melamine, and some forms of glycol from China demonstrate, there's little accountability for the Federal government's failure to ensure product safety.
The safety of a nuclear plant is a different matter. Serious safety failures can impact (and even kill) thousands of people many miles from a plant -- even if that plant was planned and built after those people purchased their homes. Thus, it seems, regulation of nuclear plants may be something appropriate for a government agency as the impacted party may not be able to make an effective personal choice (except to leave the United States) if nuclear power plants are built widely throughout the U.S.
"If an abundance of options (over-production?) is marginally more profitable than under-production (even taking into account the cost of waste), then the firm will continue to generate waste and stock a variety of options."
I'm really implicitly asking if there's no situation whereby it is rational for the firm to overproduce. What if there is a situation in which it IS rational for the firm to overproduce? In other words, what if overproduction (of choices) is marginally more profitable even taking waste into account? Is this an efficient use of resources?
Is there a good economic explanation for this? Is it merely a seeming instance of allocative inefficiency or for real? Or is the question framed in an entirely wrong-headed fashion to begin with?
Well, there are certain parts of the economy (transportation is one, telecommunications, electrical grids, water systems) that have never been economical to operate on a purely competitive basis. To pick on the passenger rail system in this country, which is a tiny fraction of the government's overall transportation spending, as an example of how the government wastes money on "inefficient" projects is ridiculous. Has the FAA, the interstate highway system, or the inland waterways system ever made a profit. I don't hear you calling for that to be shut down? Although I am sure there are a bunch of crazy libertarians out there who would like to privatize them. Of course I doubt any of them would be willing to buy the interstates across Nebraska or the Dakotas.
Actually, the current system of transportation system funding is a fantastic example of what happens when a single payer controls resource allocation - $900M boondoggle bridges to nowhere, because a politically powerful politician can force the rest of us to pay for it. If transportation funding were de-centralized to the states, local communities would be forced to make a choice - is $900M in funding for the new interstate loop/spur worth the increased taxes or funding opportunity costs. Market pressures between states would reward correct choices and punish bad choices via voting and business relocations. More generally, devolving power to the state level would set up a powerful incentive for the most efficient level of taxation and regulation: too much and business leaves, to little, and, again, business leave. We're already seeing this in a limited manner via the move of heavy industry to the cheaper, less regulated, less taxed, and union-hostile Southeast.
And I'm not sure more choices mean more waste, they presumably involve less waste per individual product choice.
Highways can be operated for profit. Ever hear of a toll booth? Doing so reduces the number of unnecessary highway construction projects by ensuring that only highways that could pay for themselves would be constructed. Contrast this with our current system where a combination of pork spending and sovereign immunity ensures that we will build bridges to nowhere while high traffic bridges rust until they collapse and kill motorists. Private companies can't afford hundreds of billions to build useless bridges, nor can they afford to neglect maintenance for fear of lawsuits.
The inland waterways system never made a profit, but the people who used it before it was regulated certainly endured lower costs for that use. Add in all the real estate developers whose drainage ditches now count as "navigable waterways" and government regulation of the waterways is revealed to be a collosal timesink and money waster.
As for the FAA, pilots and airplane manufacturers already have ample incentive to not crash into one another or burst into flames in midair. Are you aware of how much automotive technology is in civil aviation these days? Despite this enormous overlap and the ease with which the market can supply highly reliable parts, the FAA routinely multiplies the cost of every part by several times due to the onerous inspection and certification program. Building an unregulated private craft would cost far less than building an FAA certified one and be just as safe. You aren't paying for safety, you are paying the salaries of bureaucrats.
Absolutely not. I think the government should enforce minimum quality assurance standards, perhaps via a licensing framework. Of course, to keep the market as free as possible, the framework shouldn't encourage regulatory capture, like the Bar.
Really? Where are all these examples of profitable highways. Tollroads are generally operated to supplement operation and maintenance costs, not generate profits. Granted there might be a few routes in the country that could turn a profit (along the eastern seaboard, Chicago to Detroit and Milwaukee and a few others) but that kind of leaves much of the rest of the country screwed.
As for the FAA, pilots and airplane manufacturers already have ample incentive to not crash into one another or burst into flames in midair.
The new air traffic control system has been in the news recently. I notice that the airlines are complaining about the government being slow in implementing it. What I haven't heard is that the airline industry being willing to pay for the upgrades themselves. That of course is not their responsibility, it is the responsibility of the government. And who pays for all the airports? Certainly not the airlines.
If private roads are such a great idea, why has road building been a government function since almost the dawn of civilization?
And to counter me you seem to envision responsibility for road building to be taken over by state and local governments (which it already is to a great extent). You apparently object to federal government involvement in it, not government involvement per se.
But these recent examples just prove how wrong you are. In these cases "the market" failed. Mattel and the other manufacturers supposedly had quality assurance programs in place to prevent the contamination and use of lead paint. The government inspection protocols caught the defects when the company standards failed. If not for the intervention of the supposedly incompetent and inept government regulators the products would have remained on the market.
You refer to the new air traffic control system being in the news recently, but you clearly haven't been reading what's being said. Contrary to what you state, airline passengers do indeed pay for the air traffic control system via ticket taxes. What the airlines are complaining about is free-riding via (1) general aviation, and (2) small, unprofitable airports with politically powerful representatives. (A leading example is Georgia, with a state goal of an instrument runway within 45 driving minutes of every point in the state). Guess where this free-riding comes from: political power combined with lack of choice (competition) for provision of the services.
With regard to government involvement, the debate here is about choice, not government involvement per se. Having whatever government involvement does take place happen at the state level will result in a (less than ideal) level of market-driven choice, 50 of them to be precise, and a reasonable ability to choose among them.
Since I'm pretty sure that contract killers don't give "free choice" to contract killees, there really is no "free choice" side on that one. If our goal were to get the cheapest, most efficient contract killers, then of course we should have free choice in contract killers. But since that isn't our goal, we shouldn't. Jam, on the other hand, tends not to jump out of an alley and shoot someone.
Now I am dreading the next trip Branes &Noble. Just think of the thusands of books on the shelves. And the local university library? Millions of choices? And god save us from the choices on the internet...
ahh...so then its only possible to profit from roads by restricting choice. you have to prevent people from walking.
I don't think its so much that they have to stop people from walking. I bet you even if you had a pedestrian path from NY to LA, people would still pay to fly and/or take a car, train or bus.
Ever sit down and think how much nicer things are these days? Not in big ways, like not dying of cancer and all. Just the little things. Take garbage bags. Theoretically I don't really need a choice with garbage bags - a thirty-gallon garbage bag is just like every other thirty-gallon garbage bag, and if they were the same as they were twenty years ago, nobody would be worse off.
But that's not true. Twenty years ago I had to go hunting for twist-ties, bundle up the end of the bag, and hope that I didn't rip it getting it out of the can if there was anything more pointy inside than a potato. Nowadays I have bags with drawstrings conveniently stored in the top of the bag, made out of material that won't rip if I'm filling them with shattered cinder blocks and surplus rusty knife blades. The bags are -better-!
All sorts of things are like that. My shoes are better. My soap is better. My anti-dandruff shampoo actually stops dandruff. And don't even get me started on technology-oriented products - I have more processing power in my pockets, between my music player and my cell phone, than a university would have access to in 1980.
For technology to be a spur to progress in the quality of goods, though, there has to be that competition - if you're the only government-sanctioned vendor of an item, the only innovation you're interested in is how to make them cheaper.
Well, I agree: our choices should end where the life an innocent person begins. That person can be unborn, or born, right? So if my choices result in the environmental degredation that affects another innocent person, then my choice ends, I'm sure you would agree.
I also agree that ethics should be considered on my ability to make choices.
Therefore, I'm sure you would all agree that the proper libertarian would support controls on, say, vehicles that pollute too much, on the grounds that the pollution affects people like me who have asthma.
Today, I can buy wood from around the world, but the cost is that many primeval forests are being cut down and not replaced properly, thereby degrading the environment for everyone. Therefore, you would of course support a limiting of choice of wood because it affects the lives of the innocent people.
And since gay marriage doesn't affect the lives of any other innocent person, the gov't has no right to restrict it, correct?
So you aren't familiar with the history of turnpikes in the US? Privately maintained roads used to be quite common:
But the vast majority of car trips are local ones. very few people drive all the way from NY to LA. your example only shows that relatively few long distance interstates might be able to make money. how do the many many local streets make a profit?
The idea that rational choice is bounded in humans and that its bounds have consequences is a serious intellectual idea. Examples of government action that limits choice include having a single currency (rather than having every bank issue its own bank-notes of varying quality), a single set of standards for weights and measurements, standard railroad guage, standard side of the road to drive on, standard telephone number system, standard time zones, standard internet communications protocol, standard TV channels, standard radio frequencies, etc.
These examples -- most of which we take for granted -- are all situations where government decided that having a single standard approach was greater net social benefit than giving everyone a choice.
One could argue that a few more things should be added to the list, or a few things now on it should be taken off. But to claim that these long-standing examples of government action that limits individual is a kind of communism or a threat to democracy seems a bit off the mark.
Straw man. No one is arguing that government should limit choice (except for those who want gov't to stop abortion and gay marriage, naturally). We are merely arguing whether all this choice is itself a waste.
For myself, I'm just arguing to make a few points that libertarians can be as full of hypocracy as liberals and conservatives, and just as biased in their thinking. From what I can see here, libertarians are in favor of very limited gov't, except when they don't like MY choices, and then they suddenly are all in favor of gov't intervention.
Furthermore, they don't care what costs are associated with unlimited choice, as though it were all free, and they always seem to forget the successes of gov't intervention in the economy.
This statement should get the award for most naive, hands down!
However, that drove up the overall costs of railroading, since at the end of one line, and the goods would have to be unloaded and placed on another line.
Finally, gov't stepped in and created a standard guage, which reduced the costs for all. So yes, sometimes, gov't intervention can be a good thing.
The same thing happened in the 1920s, when Herbert Hoover was a (I think) Sec'y for the Interior. He forced through many standards for industry, thereby allowing them to save costs and make our industry internationally competitive.
I totally agree and wondered if anyone would notice.
I think Mussolini wanted it refered to as "Corporatism"
As I watch our current political and economic evolution
I am impressed. The next few elections will bring the point home. I don't pretend to know what home will look like but I think we will have to make comfy good or bad.
If we highway funding was implemented by individual States there would be serious underinvestment in interstate highways. Perhaps you would prefer the transportation system of certain landlocked African states where half the cost of a grain shipment from Europe occurs in crossing a border checkpoint. The historical economic success of the US was predicated on an effective national market which included elimination of internal trade barriers, uniform and effective commercial law, and investment in interstate infrastructure. If the cost of industrialization and trillions of dollars of additional production generated by a more modern economy, then I think "waste" of a few billion on an interstate highway system is well worth it.
This has been studied, and talked about. It is an example of collective decision making that benefits all, not unlike the near universal agreement that ownership of a thing is exclusionary. That's not the question - the question is how far down the chain of such decisions is it useful for a government to go? (It should be noted that governments didn't just suddenly decide which side of the road horses, wagons and those on foot should stick to - it codified it out of convention.)
There's a big difference between saying that established practice (say, driving on the correct side in whatever country you're in, or not shooting at bird on your neighbor's roof, or other things likely to lead to negative outcomes) should be enforced, and saying that people should accept the fact that an array of options for even trivial things may be put before them. Such is life. Heck, some people even enjoy navigating the transaction costs of discovering which particular things they prefer - among other names given to those processes are "cooking" and "wine tasting".
However, that exception ranges far from the original claims about consumer choice. I would say the response is a straw man, except that the occasional nods to anarchism on this site preclude that.
It is undeniable that being given choices forces you to make one. You can't both argue that the market allows one to make a choice but doesn't force one to make a choice. Now of course the market doesn't force you to make the choice without aid but it still forces you to make some choice.
I mean suppose it was the case that people were endmically irrational so that every time they bought a car they would never bring themselves to pay an extra $100 for safety no matter how good it was for them yet were capable of seeing this in the abstract and voting for safety standards. Clearly in such a situation government imposed regulation would be the way to go.
Ultimately the point of this comment is merely that whether or not people are better off without regulation is a genuine empirical matter. We can easily create possible sorts of irrationality and preferences that make it the case that government regulation is better for situation X and we can create possible sorts of behavior (e.g. perfect rationality) which makes government regulation bad in a certain area. What doesn't make any sense is to sit back in our armchair and assume that government regulation must be good/bad without looking at the evidence for that particular case.
This is why I keep saying there is no such thing as being a libertarian. Sure one can be a person who often believes that government regulation is less efficent but there isn't an in principle view one can take that allows one to short circuit the debate in any particular situation.
In fact if people are so irrational as to regularly prefer government regulation when it is more harmful than helpful it just highlights the fact that in some circumstances we might need to regulate to constrain their irrationality, e.g., their proclivities to enter into limiting contracts that serve the role of regulation.
In short if you want to claim that area X should be deregulated you have to provide an argument that in area X people tend to be better off without regulation and you can't circumvent this by being a libertarian or anything else. You really need to get out the evidence and data in each and every case.
Moreover, I think it is plausible that such a utility function exists.
For instance why is it that most people refuse to try heroin or crack? The risk of using them once is extremely small but they fear that they will be irrational in the future so instead of allowing themselves to make a decision each and every time they create a blanket rule 'no heroin'.
It's entirely possible that many people are deeply irrational and are aware of this. They know that each and every time they had to choose between buying say safe spinach at the supermarket and risky spinach they would buy the risky to save money even though it is irrational. The research of people like Kahnerman and Tversky has made this possibility pretty reasonable so I don't think you can just dismiss the argument that people would be better off with fewer choices so easily.
And you certainly can't dismiss the point that libertarianism really would force the original poster to make choices though whether that matters is another discussion.
Naive? Slow, perhaps, but demonstrable. In recent decades: automobile production has moved from the Great Lakes states to the Southeast, for the reasons noted above (cheaper cost of living, lower taxes, and hostility to unions). Likewise, the largest depot for commercial aircraft maintenance is now ex-Brookley AFB, Mobile, Alabama, for the same reasons. Electricity production: you don't see blackouts and power shortages in parts of the country that don't go apeshit over the thought of new powerplant in their backyard; instead, you see massive investment in new generation everywhere except the East and West coasts. Population is shifting to match; Atlanta and Houston don't have inner city slums ala Detroit. I can think of other examples, even in the public sector, but I guess your brilliant ipse dixit put me in my place.
I believe that this over simplifies the argument which has been going on in this thread. The argument that "too much choice" is in fact a waste presumes the solution is government control over production. How could it be otherwise? Hence, my argument. As for Libertarianism, I don't follow the esoteric arguments pro or con. I'm not an absolutist or an ideologue. Some government control over limited activities is necessary. I prefer well regulated monopolies over government control where natural monopolies exist, but most of all I believe in free enterprise. Again, the belief in free enterprise is what drives my thinking about controlling choices. What little waste there exists is quickly squeezed out by the free markets. That's the beauty of free enterprise. You can't remove the economic realities of the market from the argument about waste.
I disagree. use of a standardized weights and measure precludes me from buying gasoline by the liter or by the hogshead. it effectively precludes consumer choice. who knows maybe the cosmetic industry would benefit from increased competition if they could use whatever measurements they wanted or the tourism industry might benefit by using another countries standards for weights and measurements.
this then becomes a problem when you make the argument that all choice is good. you can't exclude certain choices and they are "different" or somehow special and you can't admit that society is better off with this choice made for us. once you do you change your argument from "all choice is good" to "all choices that i think are good are good" which effectively neuters the argument, especially if you say that not having a certain choice "provides extremely valuable network benefits". it means you can't argue in abstract theory anymore, but that you have to argue using empirical evidence which is much less clear and much less in favor for unlimited consumer choice.
For purposes of simplification, suppose there are 5 basic options in health insurance (HMO, PPO, etc.) If the consumer is offered his choice of the five, he can evaluate and choose. Now suppose that there are twenty slight variants on each of the 5 options. Or a hundred slighter variants on each of the 5 options. At some point, the cost of the additional analyis exceeds the potential increased utility, especially in the presence of uncertainty.
Further, if the number of choices is too large for analysis, he no longer has confidence that he made the right decision. How can anyone have confidence, a prioi, that he bought the mutual fund?
Yes, naive. Your comment that market forces would bear pressure upon the voting public is naive at best. people vote for or against candidates for a variety of reasons, and choosing the 'best' candidate is often the least considered option.
I live in WAshington, and our fair city voted Marion Barry back in as Mayor after he was convicted of smoking crack, AND he ran the city into the ground.
So to think that the voting public votes its economic interests is, well, naive beyond belief.
As for market forces, industry moved out of the north and to the south for a variety of reasons, one of which was lower taxes, but also lower workforce costs, and the absence of unions and worker safety and environmental regulations. It was a race to the bottom, in some respects. Now that those same industries are moving to Mexico and China, the people in the south are screaming "unfair!" Which, of course, pure hypocracy. If you live by the sword, you shouldn't complain when others live by the sword, and that forces you to die.
And that doesn't even take into account that many companies played one state after another for tax benefits, dangling the prospects of jobs. This benefited no one except the corporations. And often, once those tax benefits ended, they moved to another state that promised more benefits.
I never made that argument. By the way, standard time zones were instituted by the railroads; not the government. I would argue that they did it because the government failed to act, but maybe not.
You are forgetting the other benefits of additional options in the health care industry-- sompetition drives down the costs, the price of insurance falls, there is more innovation, new medicines are created, etc. In addition, you are assuming that the consumer will have to wade through all of these new options without any additional resources. But those resources would certainly be offered to him, since there would be demand for them.
D.C. serves as the exact case of what happens when choice isn't available. The seat of government, as a practical matter, can't move. No choice. So despite bad policies (such as the reelection of Mr. Barry), D.C. retains tax revenue and population - lawyers, lobbyists, and defense contractors don't have a choice. While I'm no fan of the tax benefits used to lure industries to a state, that is a choice made by the people of that state; obviously, they saw a benefit to their state via jobs and income. What you call a "race to the bottom" is actually finding a natural "price point," if you will, i.e. what is the appropriate level of pay and regulation. Massachusetts is trying a different tack with state-funded health care; maybe that WILL attract industry - maybe benefits are a successful strategy in the market. I would also point out that the South wasn't always hostile to unions: that was a change in attitude resulting from the implosion of the steel industry in the 1970s - people were punished for a bad choice, and changed their behavior accordingly. I haven't seen too much industry fleeing the South in recent years; Toyota in Tennessee, Mercedes in Alabama, and Honda in Mississippi are all relatively recent investors; Mississippi seems more than happy to be the location of a new nuclear reactor. When industry does offshore, the cause is more often than not nationally set policies rather than local - excessive environmental protections, employment regulations, wages, etc. That is yet another example of choice - except the competitor who captures the industry isn't another state, it's another country. Maybe West Virginia likes its coal mines, thank you very much, and doesn't want to lose them to South Africa. Those of us living in D.C. shouldn't make that decision for West Virginians.
But I am willing to be persuaded that it was a brilliant statement if Randy R can provide me some of the bioethical elements of having different flavors of carbonated sugar water.
Randy R also says I assume you were not kiddingwhen you asked that question so I will give you the answers no and no.
How do you think Zimbabwe went from being the bread basket of Africa to facing famine? I'll clue you in it was not US action it was bad governance.
That is the root cause of most deprivation in the world, not the amount of resources the US consumes.
Furthermore, European and US ag subsidies have done far more damage to Africa and other third world countries then US resource consumption ever has.
Another example of bad governance, not consumer choice or US resource consumption, causing harm to third world countries.
Not only do I think that this is the only positive-sum solution to this dellemma, but I think such a setup would be quite stable and would work very well. Malaysia is kind of an example. Malaysia has parallel legal systems. One for muslims and one for everyone else and it seems that it has worked out quite well for them.
I think more fruitful direction of conversation for Megan and Schwartz would be about how to create such a system.
However, free choice is vastly more economical then the cost and unintended consequences of limiting choice via anything but voluntary, individual action.
I disagree that this is a general principle. Certainly, there are people with irrationality (e.g., minors, mentally ill) or p