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Feb 4, 2009

Selling Burned-Out Lightbulbs

A Market For Burned Out Lightbulbs
02/02/09 - MarginalRevolution by Tyler Cowen

The movie "Jurassic Park" (1993) and its sequels were about the modern re-creation of dinosaurs, under the watchful control of careful scientists. The theme is announced by the mathematician who is an expert in Chaos Theory. He thinks correctly that the dinosaurs are very dangerous, because "Life finds a way". Living things are going to find a way to achieve their desires, if it is remotely possible.

The "free market" is the name we use for thousands or millions of people thinking, experimenting, exploring, and linking their actions through exchanges of goods and information. They have more information and problem solving power than a supercomputer. The patterns and solutions that they discover are intricate and amazing. Life finds a way.

We should want to encourage and use this ability whenever possible, instead of imposing uniform plans and control from high above.

The following quote about the operation of the Soviet economy shows the power and humor of the market.

[edited] It is hard to imagine any market for burned-out light bulbs. But this market was entirely reasonable in the mismanaged Soviet economy. Light bulbs were rarely available to individual consumers for a new lamp at home. But, they were distributed for use in state-run offices and factories.

If someone needed a new bulb, he would buy a burned-out bulb for a small fee, use it to replace a functioning bulb at work, and take the good bulb home. The maintenance person at the office would replace the burned-out bulb and sell it.

A friend of mine who lived in Russia told me that there was another factor. Some lightbulbs were available in stores. But, a dislike of state-run business supported the bad bulb market. Many people so disliked their employers that they stole what they could, going out of their way to do it.

Nobody knows how to make a pencil
The lowly pencil is the result of 100 years of discovery and development. The knowledge about its manufacture and ingredients is dispersed around the world.

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