Wednesday, July 6, 2011

A lightbulb goes off over the heads of lightbulb makers

Yesterday, the blogospheric zeitgeist was David Brooks. Today, to a large extent, it's... light bulbs. Farhad Manjoo made serious waves with his article about new LED bulbs coming from Switch Lighting, which offer all the benefits of incandescent bulbs (they're easily dimmed, they come on instantly, and they exude the soft, warm lighting that Americans prefer) and all the benefits of modern energy-saving bulbs as well (they, well, save energy, and over their long lifespan, cost much less).

This breakthrough has created a lot of excitement, because it has the potential to end the controversy over the phaseout of incandescents. I myself actually prefer the "cold, bright" light of energy-saving bulbs in many circumstances -- I find the mix of incandescent lighting and sunlight almost physically repellent -- so I wasn't aware that this controversy existed. Nonetheless, it appears to have been effectively resolved.

The best response came from personal all-time favorite blogger Felix Salmon, who reacted thusly:
I’m now officially not in the slightest bit worried about the fact that old-fashioned incandescents are going to be outlawed by 2014. Better, cheaper replacements are already here — just as you’d expect. Laws like this are a bit like laws governing fuel economy or NOx emissions: you set an ambitious target, the industry says it can’t be done, you stick to it, and then it turns out it’s eminently possible after all.
Right on, Felix. This is something that continually befuddles me, in fact. So many libertarian and conservative viewpoints are grounded in the assertion that markets are powerful drivers of change and innovation. And today, many -- maybe even most! -- progressives agree.

If anything, the problem, according to liberals, is that markets can be too good at what they do. Competition, rather than restricting itself narrowly into socially beneficial channels, can spill out and become wasteful or counterproductive. Competitive economic actors spend their money on rent-seeking activities, or maybe worse still, remaking the competitive landscape to tilt in their favor. For instance, imagine if manufacturers of old-fashioned incandescent bulbs had lobbied for heavy restrictions on LED bulbs. Or to use another timely example, do you really care who wins the ongoing patent war between Microsoft and Google? Either way, the same products remain on the market for you, for approximately the same prices. The billions of dollars of otherwise competitive resources these companies invest into gaining the upper hand basically help those companies and nobody else.

Contra Adam Smith, there's no magical force that drives economic actors exclusively towards the most socially beneficial outcome. Especially in the short term, it's vastly cheaper to lobby Congress for handouts, or sue for a competing product to be taken off the market, than to seek out greater efficiency or more innovation.

Like Felix says, it's a lesson we've learned time and again. The rational profit-seeking and competitive zeal that power the marketplace can be channeled into tremendous good and unexpected progress, but first, someone actually has to do the channeling. Otherwise, we might eventually reach the exact same place, but it'll take us three times as long and cost us twice as much.

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