What happened to the idea that capital economies drive innovation? And that these economies are driven primarily by consumer choice?
In 2012, go to your local hardware store to buy a standard incandescent light bulb. You won’t find a single one. The rule of law (passed by congress and signed by Bush in 2007) will dictate you buy one of those new-fangled spiral fluorescents. What’s wrong with that, you ask? Among other things:
- Less consumer choice (my #1 beef)
- The light is poorer in quality - as an amateur photographer, I hate the tone they give to people
- They don’t work with dimmers
- They contain mercury, and they can break – I have a daughter. The less of that stuff in my home, the better
That’s just the tip of the iceberg…
The intention of this law is energy conservation. In my opinion, it will backfire. In the long run, the good capitalists that make our light bulbs will have less capital pressure to innovate. Allow me to explain.
Which of the following options do you think would benefit consumers, and for that matter, the planet?
- The government tells you that there is not a choice. You have to buy a more expensive, poorer quality product
- You and the rest of the market place decide which light bulb manufacturers produce
By the latter, I mean allowing consumers to vote with their wallets. The buying public is ecologically conscious - there is a pot of gold at the end of the rainbow for the company that creates a better product for less (not an inferior one that costs more). With government intervention, there is no incentive to create green value. In fact, the manufacturers now have another “green” reason NOT to innovate!
This kind of green governance generally serves to stifle innovation and progress. It’s done with the best of intentions, and it feels good. In the long run, we all suffer.
If you’re not buying (or following) my argument, consider the Compact disc. Introduced to the public in the early 1980’s, it did not supplant the analog cassette until the early 1990’s. Why? Because it was not a practical alternative. CDs were double the cost of cassettes, and CD players were prohibitively expensive. Now how long do you think it would have taken for the cost of manufacturing CDs and their players to come down if Reagan signed a law banning analog cassettes in say, 1985? More than a decade, that’s for sure!
The government is assuming you’re too stupid to drive green commerce. They think that they can do a better job. If not for the government, you’d be using “bad for the planet light bulbs” through 2050. Since you’re incapable of exerting capital pressure on the manufacturers to create a better product, they come to our rescue.
So tell your friends - capitalism and environmentalism are not necessarily antagonists. Remember that consumers drive consumption, and the capitalists will make what we tell them to make!
8 comments:
Fred,
Have you even looked at the law that was passed? If you had, you should know that it doesn't ban specific technologies, and it doesn't come into full effect until 2014. The law simply requires new bulbs to produce the same amount of light with less energy.
GE has already announced a more efficient incandescent bulb that should be available by 2010 that will meet these new standards, so there is no need to worry about consumer choice suddenly disappearing in 2012. In fact, a variety of new technologies are being developed that should be coming to market in the next 5 years including LED and halogen bulbs, so you can actually expect consumer choices to increase over the next few years, not decrease.
If you are concerned about the tone of the light you might want to look into some of the newer CFLs with lower Kelvin ratings (CFLs with a 2700 Kelvin rating are supposed to produce light that is indistinguishable from that of current incandescent bulbs).
There is also a selection of CFLs that can be dimmed (Check out some examples here: http://www.1000bulbs.com/Dimmable-Compact-Fluorescent-Bulbs/ )
I understand your concern about the mercury, but old thermometers contain 125 times more mercury than the average CFL. For more information about the mercury in CFLs, including instructions for clean up in case of accidental breakage, check out this article: http://www.energystar.gov/ia/partners/promotions/change_light/downloads/Fact_Sheet_Mercury.pdf
The law that was passed late last year will benefit both consumers and the planet by encouraging companies to develop more efficient technologies. Your assertion that it will somehow limit innovation is simply preposterous. Innovators will simply have to focus their efforts on producing bulbs that fit the guidelines of the new law (as stated before, the law only requires that new bulbs be more efficient, and puts no limits on specific technologies). The law also specifies 3 awards for more efficient bulbs that are worth a combined $20 million to the businesses that develop and implement the new efficient products. Innovation will not be stymied as you suggest, but focused into producing more efficient bulbs.
Before the law was passed, people were already voting with their wallets and adopting CFLs in a big way despite their shortcomings (~290 million CFLs were sold in the US last year). This was due to the overall savings that they were promised due to the longer life and reduced energy usage of the new bulbs – not because they were perceived to be green.
I agree with your point that capitalism and environmentalism are not necessarily antagonists, but often times the environment is neglected in favor of larger profit margins. 60 Minutes just did a piece on electronic “recycling” that shows one of the horrible consequences of under-regulation of businesses. Check it out here: http://www.cbsnews.com/video/watch/?id=4586903n
I think that after watching that piece, we can agree that the government has a responsibility to not only incentivize behavior that can help the environment, but also to enact regulations that protect the environment and our fellow human beings from exploitation.
I encourage anyone reading this to check out Public Law No: 110-140 (Originally H.R.6) here: http://thomas.loc.gov/bss/d110/d110laws.html
Sam. Thank you for your drive down education lane. It's refreshing to debate with someone that's not just running off at the mouth based solely on emotion.
As a matter of fact, I did look a the law that was passed. My argument still stands: by the government passing the law, there is LESS CAPITAL PRESSURE on the manufacturers to create and produce a more efficient product. Things would move faster without the law. That is there is, government intervention and capital pressure are inversely proportional. This is an incontrovertible fact. (for my math geek friends, there exists a proportionality constant that equates this relationship, and its value varies based on several factors including what industry we're talking about, the relative reach of the intervention, and other factors... I should not do this... there is an old math saying that 'for every equation you place in a book/blog, you halve your sales/readership'... oh well, it's in me :)
You agreed with my assertion that capitalism and environmentalism are not necessarily antagonists. Thank you for agreeing with my point - You're half way to reason and logic :)
Of course, I am not foolish enough to think that there is not a roll to be played by The Man. Of course there is. But the less, the better!
Fred,
I'm glad to hear that you looked at the law before voicing your disapproval of it. Did you miss the part that said only 100 watt bulbs will be affected in 2012, and bulbs below that wattage will not be affected until 2014, or were you intentionally attempting to mislead your readers when you said, "In 2012, go to your local hardware store to buy a standard incandescent light bulb. You won’t find a single one."?
I'd love to see some evidence of capital pressure reducing innovation. Could you link me to an article or case study? It seems very counterintuitive to me that requiring companies to produce energy efficient products would slow down their progress in bringing energy efficient products to market.
I hope that you would agree that oftentimes capitalism and environmentalism find themselves at odds with one another. Capitalism is all about maximizing profits, and all too often the environment gets neglected in favor of larger margins. The less the government decides to regulate, the more we see examples like the one in the video. Please watch it if you haven't yet. It's well worth the 15 minutes.
I bet you are also upset by fuel mileage standards such as CAFE. Did you know that the National Academy of Sciences found that without the "evil government intervention" (the Corporate Average Fuel Efficiency regulation), national fuel consumption would have been 14% higher in 2002. Sounds like government intervention really backfired there, didn't it?
(Source: http://books.nap.edu/openbook.php?record_id=10172&page=111 )
No matter what prism you try to look at this law through, or which way you try to spin it, facts are still facts. This particular law does not stifle innovation or limit consumer choice. It merely requires light bulb manufacturers to create more energy efficient products that will save billions of dollars per year in energy costs and reduce all kinds of harmful emissions from coal power plants (including sulfur dioxide and nitrogen oxides which contribute to acid rain and even mercury which you voiced concern about in your original post).
No Sam, I was not intending to mislead anyone. I read about the law almost a year ago. I forgot the detail about a phased reduction of our freedom :) Sorry everyone. 2014, not 2012.
Sam, I'd love to cite evidence on my theory on capital pressure and innovation. Unfortunately It'll have to wait. My daughter wants to play. I promise to get back to you on this one!
On your capitalism/environmentalism statement - you've already agreed with me that they are not always at odds. I will also agree that we need regulations in many cases - we just don't need bad ones! By the way, capitalism it not "all" about maximizing profits. That is an obvious goal of going into business, but capitalism is also about creating jobs and promoting the general welfare - making products that we need and want. Our lives are longer and better under capitalism.
And now for my checkmate move:
You've cited CAFE standards as evidence that the light bulb law is a good thing for all. You've done a good job at stating your case. I commend your efforts. Now let's get a dose of how things really work:)
Who do you think was behind the light bulb law? Kind hearted law makers? Green Peace lobbyists? Neither. It was the light bulb guys. The very guys that lost the capital pressure to innovate!
read this
This Examiner article hits the nail on the head (google is a wonderful thing). Parts of the article read as though I wrote it myself:) I had no idea who was behind this bill! The old saying is right again - "follow the money"!
My "Readers Digest" version of the article: manufacturers lobby congress - they (the manufacturers) write a law - hand the law to congress - money is made - American jobs are lost - zero sum gain for the environment - your freedom is dimmed (so are your bulbs) - innovation is stifled.
Whose got next?
Checkmate Fred? You've got to be kidding me.
It looks like in response to me refuting all of your arguments, the best you can do is cite an article with the same factual inaccuracies as your flawed original post.
First of all, the article doesn't cite any sources to back up its bold claim that the light bulb companies "basically wrote the new light bulb law." So as far as we know, they completely fabricated that claim.
Even if the bulb manufacturers wrote the law, that doesn't necessarily mean that it is bad for the environment or the average American consumer. I've already made a strong case that consumer choice will increase over the next 5 years due to the development of new technologies, and I haven't seen you attempt to address that. Our freedom isn't being reduced!
Zero sum gain for the environment? How did you arrive at that conclusion? If every light bulb in America was changed to a CFL, over $18 Billion would be saved on energy costs per year, and the equivalent electricity of 80 coal power plants would be saved, so you’d need to produce evidence of a comparable negative environmental impact from the law to substantiate your claim.
CAFE is an example of a government regulation that helped consumers and the environment with very few negative side effects by imposing efficiency standards on manufacturers. I think 10 years from now the new light bulb standards will be viewed the same way.
I eagerly await your evidence that government intervention reduces innovation.
My argument stands that innovation was taking place before the law was passed, and the new regulation will only speed up the adoption of the new, more efficient technology without significantly limiting consumer choice. You're going to need more than a biased article with no citations, factual errors, and weak arguments to convince me and the rest of your readers to the contrary.
Sam, if you can't see this, I don't know what more to tell you.
Even if GE, Sylvania, et al did not have a hand in writing the law, how do you not see the pecuniary benefits of this law to their bottom line? How is it that you do not see that without the law, they would have to produce a more energy efficient AND cheaper bulb, not just a more efficient one?
Come on man... the need to innovate is gone! They will make more money by (relatively) standing still!
Could it be that the normally vilified CEOs are for once actually behaving in the interest of something other than their wallets? Is this the beginning of corporate altruism? Ahh, yes! GE wants to save the planet! Even for less money, Sylvania will forge ahead - acting in a manner as though the law were never passed! YEAH, RIGHT!
Why do you continue to ignore all of the points that I make? Are you conceding their correctness?
CAFE worked and this law will work as well. How do the companies lose the incentive to innovate? The law does not change the fact that they are all competitors in a capitalist economy.
How are they standing still? They have to change from producing regular incandescent bulbs to more efficient bulbs. That doesn’t sound like standing still to me.
Consumers will still want to buy the cheapest and most effective/ efficient bulbs, and they will purchase them from the manufacturer that delivers the best product. The law does nothing to change that. There are already a dozen different manufacturers that produce CFLs, and they will continue to compete against each other to make the cheapest, most appealing product to consumers.
This competition, combined with the new energy efficient incandescent bulbs that GE is developing, halogen bulbs already being produced by a variety of manufacturers, and LED bulbs that are currently in development ensure that consumers will continue to have a wide variety of lighting options to select from, and bulb manufacturers will continue to feel competitive pressure from one another to produce inexpensive, efficient lighting solutions.
Show me proof beyond a reasonable doubt that the light bulb manufacturers wrote the law and then your argument that the CEOs are evil and only look out for their company’s bottom line becomes pertinent. Right now we have no evidence that that is the case, so the intentions of the CEOs are irrelevant.
I’m still waiting for some evidence of government intervention reducing innovation.
Sam, sorry for dodging (or appearing to dodge) your questions. I am not conceding anything.
For clarity, allow me to call out and then answer your last round of questions in order.
your question: CAFE worked and this law will work as well. How do the companies lose the incentive to innovate?
my answer: In this case, light bulb manufacturers (companies) lose their incentive to innovate because a competing technology (i.e. the incandescent light bulb) is no longer a factor. Allow me to explain through an example.
Imagine you're the owner of Acme Plastics, Inc. You make plastic bags. Grocery stores buy millions of bags from you every year. Your customers (the grocery stores) tell you that their customers (end of the line consumers) are asking for biodegradable bags. You need to innovate, or go out of business (this incentive is what I called 'capital pressure'). You do the necessary R&D, spend millions of dollars over several years, and introduce a biodegradable, earth-friendly plastic bag. Congratulations. Focus groups love the product - it's as effective at carrying groceries and better for the environment. Sales of your new bag are okay, but not as brisk as you'd like. Why? The bags are 6 times more expensive than the previous model.
As any good capitalist, you seek a solution to the problem that will allow you to stay in business – back to the drawing board! You reengage the scientists hired to create the biodegradable bag. Now, the mission is to reduce manufacturing costs in order to allow you to sell the bags at a lower price point. This is capital pressure… a need to innovate DRIVEN BY MARKET CONDITIONS. 7 years pass. Millions of dollars in R&D later, you have managed to reduce manufacturing costs to a point where the new bags are marginally more expensive than the older ones. Grocery stores buy your better bags at a higher rate – sales surpass the older bags! Champagne flows as your stock price soars! Congratulations once again!
Continuing with our fictitious example, let’s back up 7 years. Instead of trying to reduce the manufacturing costs, you lobby congress to ban the older bags. After all, they’re bad for the environment, right? Baby seals and cute polar bears eat them and die. Landfills are choking under the weight of the evil plastic bags. Congress agrees, and essentially bans the bags, effective January 1, 2016. Yippee!
With this government intervention, you have SIGNIFICANTLY LESS incentive to spend millions of dollars in R&D on reducing the manufacturing costs. In fact, any savings manage you create through R&D, you can keep as increased profit – the competing technology will be ban, so no need to pass the savings on to your customers (the grocery stores) . What a sweet deal for you!
Which of the above scenarios would result in a proliferation in biodegradable shopping bags? Both. Which of the above helps the environment? Both. Which of the above costs the consumer more? The latter.
Recall that the point of this thought experiment was to demonstrate that competing technologies provide more incentive to innovate.
I will grant you, capital pressure to innovate still exists - it comes from competition. But competition was there to begin with, so I don’t believe you can say that the amount of capital pressure is the same, with or without a competing technology.
My views on innovation and regulation were mine. I came up with this theory from putting 2 and 2 together. You challenged it on its face because I did not have proof (a citation or credible source). I thought it was clear enough to see, but I guess not. So I’ve done the diligent task and found a source. It appears that I’m not the only one that thinks regulation can negatively impact innovation.
Seeing What’s Next – Using Theories of Change to Predict Industry Change, by Clayton Christensen, Scott Anthony, and Erik Roth. In this book, you’ll find a relatively clear argument for a relationship between motivation (what I called capital pressure) and innovation.
"Market contexts that are deficient in motivation or restrict ability are stifling to innovation."
Or in my words, a loss or reduction in capital pressure removes incentive to innovate.
My conclusion: A free market saturated with intelligent consumers will do a better job at protecting the environment than the government.
your next question: How are they standing still? They have to change from producing regular incandescent bulbs to more efficient bulbs. That doesn’t sound like standing still to me.
my answer: I meant relatively standing still. The need to innovate is reduced, not totally removed. The degree to which the industry moves slower is related to how much choice there is. At one extreme, you have no competing technologies and no competitors. At the other, many competitors and a rapidly evolving set of competing products. In the former case, one can afford to stand still – baron, do as you wish! In the latter, one must change or perish.
Your challenge: Show me proof beyond a reasonable doubt that… the CEOs are evil and only look out for their company’s bottom line becomes pertinent.
My response: Wow. This is a great case of sarcasm being taken literally. Let’s assume that a CEO is only looking out for the bottom line. Does that make him (or her) evil? I don’t think so. In fact, give me the stock symbol so I can buy a few shares! And I agree that the intentions of the CEOs is irrelevant, but for a different reason. It’s irrelevant, because the end result is the same – less choice and higher cost for the consumer.
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