Russ Roberts

Postmortem on Cochrane on Education and MOOCs

EconTalk Extra
by Russ Roberts
Continuing Conversation...Coch... Bryan Caplan on College, Signa...

Here's my postmortem on the Cochrane episode.

Great teaching is more than passing on information. For that you can read a book or watch a video. A great teacher provokes and takes you on a journey of understanding. That requires grappling with the material and making it your own. Usually that means applying your knowledge to a problem you haven't see before. At least that's often the case in economics. I think Doug Lemov said it in his EconTalk episode--you haven't taught it until they've learned it and learning is more than just hearing the facts or the answer to a problem.

As John Sallay points out in the comments, one-on-one teaching/learning may not be the ideal. I, too, learned much of what I would call the economic way of thinking not from my professors but from my fellow students, arguing for an idea, defending an idea, challenging someone else's idea. A good teacher can create that experience in the classroom in a variety of ways. One of them is by helping students understand why wrong answers are wrong, getting students to defend their ideas and so on.

On to lightbulbs. Why do they last longer than they used to?

When I started teaching in the 1980s, students were more prone to believe in the idea of what was called planned obsolescence--the idea that companies designed their products to wear out quickly so that they could sell more of each item. You would hear it about lightbulbs, women's stocking, and cars. For example, people would say that manufacturers of stocking know how to make stockings that don't run--that get holes in them--but they don't sell them because they couldn't sell as many pairs. The planned obsolescence argument is enshrined in at least two movies--The Man in the White Suit and Tucker--movies about employees who are harassed or ignored by their employers because they make a product that lasts "too long" or is simply too good a product and will thereby reduce sales.

The planned obsolescence argument is flawed for two reasons. The first is that even a monopolist can potentially make more profit selling products that last longer as long as people prefer longer-lasting products. The planned obsolescence argument ignores the price you can charge for a longer-lasting product. If you could make a lightbulb that never wore out or stockings that never ran, you could charge a higher price for two reasons--there's more value because it lasts longer and you save the customer the hassle of getting up on the ladder or finding the bulbs or shopping more often for bulbs. So you can charge not just double for a lightbulb that lasts twice as long but more than double because of the added convenience. So it comes down to the cost of innovating (and manufacturing). Time preference and interest rates can also play a role in the decision. But the basic argument that companies want shorter-lasting products in order to sell more is simply wrong because it ignores the price they can charge.

That's a monopolist. Under competition--meaning more than one firm trying to survive and thrive satisfying some want of customers--firms look for ways to get ahead. There are many ways--lower prices, better product, better service providing the product or selling it. Firms generally compete on all of these dimensions. If you foolishly try to sell more product by making it less durable, your competitors will eat your lunch. So the one word answer is competition. Competition encourages innovation. And if you stand still in an innovative competitive world you'll disappear. Explaining that fully does take a few paragraphs. And in the real world of lightbulbs, there is more going on--regulations, for example as some of you mentioned.

I think most consumers have noticed that in the very competitive landscape of the economy of the last few decades, products are better in lots of dimensions and one those dimensions is durability. And it's not just lightbulbs. Cars last longer and break down less often. So it's harder to believe in the myth of planned obsolescence.

Bonus question--if all the above is right, why don't women's stockings last longer? There are indeed ways to make stockings that don't run or rarely do. Grapple with the question, but if you want a hint, you can find it on p. 131 of my book, The Price of Everything where I talk about Corfam--a material for shoes Dupont developed that made shoes looked freshly shined and as good as the day you bought them. You don't have to buy my book--just use Google books and search for Corfam. Understanding what Corfam has to to with lightbulbs and women's stockings should help you know whether I've not just taught you something but whether you've learned it...

Another bonus question. I wrote above:

The first is that even a monopolist could make potentially make more profit selling products that lasted longer as long as people prefer longer-lasting products.

Don't consumers always prefer a longer-lived product to a shorter one? Not necessarily. Can you think of some examples?

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COMMENTS (7 to date)
Patrick R. Sullivan writes:

If consumers always preferred long lasting products, there would be no such thing as a fashion industry.

Russell writes:
Bonus question--if all the above is right, why don't women's stockings last longer?

Probably because in order to make them last longer they had to change the look or feel of them.

Don't consumers always prefer a longer-lived product to a shorter one? Not necessarily. Can you think of some examples?

Most people seem to prefer fresh fruits & vegetables to longer-lasting canned versions.

I think women probably feel similarly about fresh vs. fake (long-lasting) flowers (e.g., roses).

Ryan H writes:

Harbor Freight Tools.

Sometimes their stuff breaks after just one use...but sometimes you only need it once in a lifetime and you can't justify paying 10x+ for the higher quality tool.

Ryan H writes:

Harbor Freight Tools.

Sometimes their stuff breaks after just one use...but sometimes you only need it once in a lifetime and you can't justify paying 10x+ for the higher quality tool.

Jacob A. Geller writes:

People might prefer shorter-lived stuff to longer-lived stuff when the cost of maintaining the longer-lived stuff exceeds the cost of replacing the shorter-lived stuff.

Paper plates vs. porcelain plates are one example -- some people prefer having to replace paper plates than to washing the same plate after every use.

This point is subtly different from the point that some shorter-lived stuff is simply cheaper than longer-lived stuff -- that is, the cost-of-maintenance vs. cost-of-replacement question is different from the cost-of-purchase-in-the-first-place question.

anonman writes:

I think a lot of it has to do with our culture and advertising. Every person can spend all day doing cost/benefit analyses and plan their finances better, but type of person is rare. Not everyone plans for things based on maximizing their personal benefit, which is why I think a lot of economic modeling is wrong.
On a more personal note, and based on microeconomics, one reason I would be more likely to buy inferior products is simply that I can buy more.....but I pay for it in the long run - this is probably based more on culture and also the fact that America has too many choices in the marketplace. But not all outcomes lead to people simply buying more. In the Youtube video, "The Paradox of Choice," people can actually be less likely to buy much of anything, since the choices are too great. That's why some stores limit choice to begin with.
Realistically though, the major propellant which leads people to buy better products is probably most often branding. But brand names, in my own experience, are NOT inferior. So, if you take a look at who's making the most money in the market - the companies with brand-name recognition - they actually tend to have great products.
But long-lasting products are not ALWAYS a concern for some of these companies. You could say that some products are not at ALL long-lasting, like energy drinks. The paradox here is this: although I like Red Bull, when I buy it, I tend to treat it more like something to be savored, and even though it costs way more for less, I treat it less like something that I can affordably choose to guzzle.
In any other decision in the market, I may make far different choices, but I can confidently say that I take my own risk and am fine when buying something cheap if it breaks. The market is pretty good at pricing quality, it turns out, so pay attention.

Thomas A. Coss writes:

I've always found the notion of Planned Obsolescence challenge, not that we couldn't design Obsolescence, but rather could successfully plan it? The speed with which technology improves makes the notion somewhat moot.

Today we have successful secondary and tertiary markets (many foreign) for products which continue to work great, but not as great as the newer ones. Isn't today's recycling more like re-marketing? The same applies to education. I'm confident that somewhere on this planet, even what little I know is valuable and new. Glorious.

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