Cleaning Up Detergent
As a self-professed libertarian, I generally loathe the idea of the government poking its nose around in private business. I’m sane about it, so I do think government is still necessary and should perform certain functions for the public benefit, such as regulating natural monopolies, for instance by enforcing net neutrality. But for the most part, I think it should generally butt out.
There are a few weird instances though where I think the government can benefit everyone involved with laws that might otherwise seem outlandish. One example that comes to mind is detergent.
For decades, laundry and dish washing detergent manufacturers have competed mainly by increasing bottle sizes, often even diluting their product with cheap filler to do so. Consumers have better things to do with their time than research the merits of Tide vs. Cheer, and though they may have a brand preference due to whichever one sponsoring their favorite Neckcar racer, it’s tenuous at best. So if they see two bottles for about the same price, and one is larger, that’s going to be the winner. They don’t even notice that the bottle that’s twice as large also requires you to use twice as much in every load.
So the manufacturers were trapped in a sort of mutually assured destruction that prevented them from concentrating their product. They could easily have done so, but that would have meant losing serious sales. Packaging and shipping (both of which rose almost proportionately to bottle size) were such a high percentage of the cost that doing so would have meant higher markup for them and lower prices for consumers simultaneously.
Retailers lost as well. Larger bottles required more stocking and took up more shelf space, which is as vital to them as servers are to Amazon. Consumers had to make more room for the bottles at home, and paid more for less. And we all lost due to the increased fossil fuels burned in shipping and plastics manufacturing.
If it weren’t for the rise of Wal-Mart (who now sells 25% of the nation’s detergents) and the environmental movement, this stalemate, which persisted for decades, might never have been broken. As of this month, they’ve officially mandated that they will only carry concentrated varieties, and they’re clearly the only retailer in history that could ever have gotten away with that.
(Interestingly, for all the hippie anti-big-business Wal-Mart haters constantly complaining about the stranglehold that Wal-Mart has on our retail industry, a lot of good things like that come of it. Because the interests of consumers, the environment and retailers are so often aligned and nearly always diametrically opposed to those of manufacturers, they, in a lot of unexpected ways that mom and pop grocers never could, have made life better even for the people that don’t shop there.)
So the market did solve the problem, but decades after it first came to light. And it makes one wonder, couldn’t the government have simply forced this many years ago? A law that all detergents had to be concentrated would have been opposed by nobody except perhaps the shipping industry, who is the only loser in all of this, and even they might not mind much. Manufacturers are giddy right now at the higher profit margins that Wal-Mart has dropped into their laps. Retailers and consumers are almost as happy as they are. Environmentalist bloggers are even singing Wal-Mart’s praises.
Perhaps in certain situations, government can, to the benefit of all parties, enforce certain standards in areas typically left to the market to decide. It’s touchy, because the power to do so can be a slippery slope, but there has to be some way to allow it in certain situations where game theory prevents progress if and only if the vast majority of all interested parties agree to it.
May 28, 2008 at 11:48 am
I don't even know what to say. To claim the label libertarian while espousing the philosophy of using the government hammer to solve perceived problems in an industry of which you have a layman's cursory knowledge is absurd at best.
Aside from pragmatic view – the evidence of the greater problems created whenever government gets involved, how about the issue of right and wrong? How is it anyone else's business how the detergent manfacturers, retailers and customers interact voluntarily? Central planning is immoral even if the fantasy of efficiency were achievable.
Even given the failure of government intervention at everything it touches, DETERGENT must be different.
May 28, 2008 at 12:00 pm
Well, I don't think it's wrong for the government to intervene to break stalemates when all parties involved would be in favor of it. Cases like that are so rare that I can't even think of another off the top of my head, but surely they exist. And it's not fair to say that government intervention always exacerbates problems. I'd agree that it often does (i.e. the war on drugs) but that's clearly not universal.
We all lose due to the old detergent model. The increased shipping (if a package is 5x bigger, you need 5x the number of trucks to deliver the same amount) causes more road traffic, resulting in deaths on the road. It has a serious environmental impact due to burning that much oil, and increases demand for gasoline, costing us all more at the pump. It's a lose/lose situation for everyone but the oil companies.
And generally I don't support the “gang up on Big Oil” liberal mentality, but from a civil liberties angle, environmental destruction and decreased road safety impede the public's right to life. Global warming and air pollution are serious threats to us all that the market is clearly not going to solve on its own. I see laws protecting our health and livelihood from the market's short term focus as no different than laws outlawing killing or robbery.
But, like I said, I'm not an anarchist. I don't think that government messes up everything. Just most things.
May 28, 2008 at 12:16 pm
Good points, but the issue is the flawed premise that all parties are agreeable. If all parties agree (and not just the vocal ones), the action will already happen, as it did here. If that is not the case, forcing the issue just implies a claim to knowledge about the situation that is never really concentrated in one person or entity.
Another issue is the deep rooted idea that the government is some sort of benevolent parent, allowing us children to goof around, but if something is serious, can always step in with the right answer. There is no evidence that government will resolve major issues. In fact, most people now acknowledge that government is (at least mostly) incompetent. It is far more likely that we would have negative environmental impact ALONG WITH government interference, which only exacerbates the problem. In addition to pollution, we now have a new class of power to be sold by public officials.
May 28, 2008 at 12:18 pm
I don't know why this post got me going. I suppose I read your posts and find them insightful, so I was compelled to write a response, even though there are zillions of wrongheaded articles on zillions of other sites. I appreciate your measured response.
May 28, 2008 at 12:22 pm
Well, I don't even think all parties need to agree, just the ones being regulated. The detergent manufacturers clearly would have agreed and welcomed a law regulating them. They're happy that Wal-Mart stepped up and did, it means more profit for them.
Is it wrong to allow the government to regulate people who desire to be regulated? Sometimes the dictates of game theory prevent people from doing things they'd like to, and I see no other way out for them.
May 28, 2008 at 12:52 pm
It isn't wrong for people that have a common interest to form an entity for the purposes of regulation. In this case, Walmart served that purpose. If someone wanted to do business differently, they don't have to do business with Walmart. Homeowners' associations do the same thing as do voluntary web standards.
Actually, corporations generally serve that purpose. A large group of people work to common ends voluntarily. I work at a corp that sets policies for me – some I don't like that much. I can always leave, but often the good outweighs the bad and there are efficiencies. The difference is that government does not have an “opt-out”. Rules are set unilaterally. That is closer to a mob family that declares an area under their control. Perhaps there are benefits (protection against other criminals?), but most would say that is undesirable.
I would say that regulating those that want to be regulated is fine, but it cannot encompass new actors entering the market (or not even born yet, for example). The Walmart solution achieves that moral goal. Government does not.
Example:
Toilet manfacturers are regulated to only provide low flush toilets. I am not regulated in theory, but I am an interested party because I can't buy a working toilet at the old toilet price. Government has unilaterally given me a choice of an inferior product or higher costs. If a manufacturer did that, I could buy from another or even start my own business.
As far a game theory creating a less than ideal outcome, that is based on assumptions about what are the best ends. Different actors are not in agreement about that. Smaller, fuel efficient cars might save energy (in theory), but safety is defintely affected. Current culture has elevated fuel efficiency above safety, but that does not necessarily represent my priorities or yours. Activating the trump card of government assumes that there is a right answer that is clear and can be achieved by force. There are almost always unseen effects from any action and the market's job is often to choose the best path, in spite of what any single observer can see or realize.
There is also an endless supply of people professing to know this right answer, whether from religious text, environmental activism, fear or desire for power or control. Even assuming you are right about detergent, don't assume that others have your same “common sense”. Any government powerful enough to do what you want is also powerful enough to everything else. Throughout history, I would imagine you agreeing that the damage caused by powerful governments outweighs the inefficincies of temproarily shipping large detergent bottles. This is how is starts.