Why Consumer Appliances Break

September 27th, 2014   Submitted by Youliy Ninov

WashingMachineFor many years I have heard complaints that the life of consumer goods, in particular appliances such as washing machines, and refrigerators, is getting shorter and shorter. A typical complaint goes that a refrigerator bought 30 years ago likely still functions, but a modern refrigerator lasts at most 6-7 years before breaking down. Typically, the market is blamed for this (i.e. manufacturers create faulty products so that when they break down they get new orders). That means that they intentionally work against the interests of the consumer. While the observations of consumers correspond with reality, their explanation of this phenomenon is wrong. I want to stress that the producers of consumer appliances are unjustly blamed.

To make the problem clearer, let me explain what exactly makes a certain market tick (i.e. what makes manufacturers produce the particular goods we buy in stores, and not others). A common misconception, which has somehow become the conventional wisdom, is that the market should produce what is “best” for us. That suggests that consumer goods should constantly get more durable, and of higher quality, and that they should affect us positively.

The problem with this perspective is that it does not correspond with reality. As an example, the market economy produces cigarettes, which have been known for many years to be deleterious to our health. There are many such examples: alcohol, drugs, etc. And newer drugs often have a stronger effect, which often means that they harm us more.

A typical market economy also produces many low quality goods, which are in demand. Have you ever bought something that broke after the first use? To claim that the market always produces “the best and the most useful” contradicts common sense and reality. In reality the market produces whatever consumers are willing to pay for, and it tries to do this as efficiently as possible. Here one should ask the questions, “What exactly do consumers want?” and “What do they pay for?”  These two questions are of utmost importance, because these are the questions that producers ask themselves before they decide whether or not to produce a particular good.

The most straightforward way for a producer to determine what people want is to conduct a survey. However, the problem with surveys is that they often do not reflect the real needs of people. For example, many years ago car-manufacturers realized that when they ask people what kind of car they want, people say they want inexpensive, fuel efficient cars that are easy to maintain. However, when consumers are given a real choice between cars right in front of them the results are significantly different. It turns out that people actually choose cars based on the outside appearance, cars that are sporty, and have a long profile. Manufacturers found that there is a big difference between what people claim to want and what they will actually buy. People often delude themselves about what they actually prefer.

In sex-related surveys it has been shown that participants often consciously lie. As an example, typical surveys show that heterosexual men have more sexual partners on average than heterosexual women. That is impossible, but that’s what surveys show because people consciously lie.

As another example, people often enter a shop and buy something that is on display, even though they did not intend to buy it beforehand. How could they accurately respond to a survey if they did not know what they would buy in advance? The decision to buy is often impulsive.

It is ultimately impossible to determine exactly what consumers want from surveys. What is left is for producers to see what consumers will pay for, and then guess what else they would buy if it existed. To achieve this producers try to understand how consumers evaluate goods (i.e. what value one assigns to particular qualities). They base that determination on previous buying habits.

So, how exactly do consumers decide to buy something? Assume for instance that you want to buy a washing machine. A washing machine has many parameters: price, functionality, color, load size, durability, etc. When consumers go into a store they have to evaluate all these qualities, and more, to choose the washing machine that best satisfies their needs. That task is not always easy, but what typically happens is consumers prioritize and outward appearance over durability. That is to say consumers are more likely to buy a cheap, good-looking washing machine than one with a 10-year life expectancy. The consequence of this is that manufacturers who pay attention to what people actually buy, and not what people say, will try to produce a washing machine that is cheap and attractive, but not necessarily long lasting.

Taking that into consideration, it’s obvious why consumer appliances have such a short life. In reality consumers get what they are willing to pay for, not what they say they want. When somebody buys a microwave, and it breaks down after two years, they honestly didn’t expect that to happen, but they actually got exactly what they paid for.
Is it the manufacturer’s fault that consumers delude themselves about their priorities? How can producers guess what people really want when people’s buying habits and their stated intentions are different?

In conclusion, what consumers think they want and what they’ll actually pay for are two often very different things. It’s foolish to complain when consumer appliances reflect our buying habits and not our expectations. When people search for scapegoats they should take a good look in the mirror. My advice is, when you make an important purchase do your due diligence. It is hard, but it is always worth the time.

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25 Responses to “Why Consumer Appliances Break”

  1. Davi BarkerNo Gravatar says:

    I love this piece. It’s a refreshing change from the typical political screeds, and a solid answer to the pandemic of economic illiteracy.

    It also perfectly describes my experience with ShinyBadges.com. I used to only offer the black and yellow flag pin, but I got dozens of emails from left anarchists saying they wanted their own black and red flag pin. Persuaded by this informal survey I had them made, and since the set up charge is expensive I had all the other colors made at the same time. Turns out very few communists will actually pay for what they say they want. I should have guessed. But further, the second most popular color is actually black and green flags, and to take the primitivists at their word, they shouldn’t be shopping online, shouldn’t be using paypal or bitcoin, and most importantly shouldn’t be interested in a factory manufactured trinket that serves no utility in their utopia. But I’m a market anarchist. I don’t care what they say. I care what they’ll pay for.

    • STLICTXNo Gravatar says:

      Actually, in the very long-term your pins would be a rational choice for anarcho-primitivists if they ever get what they want. In a post-collapse primitivist world, stuff like that couldn’t be made again most likely, but they also might conceivably last for a very long time and their appeal and rarity would only increase. It might not be as useful as other pre-collapse artifacts like really good knives but I can see some primmies wanting it as a “if we get what we want, we will have something to remind our children of where we came from and why we fought” kind of thing.
      Plus, all green anarchists use the same flag, you might be getting some more technology-friendly green anarchists, including green market anarchists who think we need better, rather than necessarily less, technology.

    • HReardenNo Gravatar says:

      So unlike Howard Roark you were willing to give people exactly what they wanted rather than only produce what you liked?

    • redtonyNo Gravatar says:

      i love your tongue in cheek critique of naturalists, funny funny stuf you cheeky free marketeer

  2. Erv HillNo Gravatar says:

    Nice article but you overlooked government intervention as well.
    1) Government control of currency: In 1970, one could purchase a 21 cu. ft side-by-side refrigerator for $700 (FRN), that is the equivalent of $4200 today. An internet search reveals that the high end (not counting the Sub-Zero line) of the consumer refrigerator market has a 30 cu. ft refrigerator for $3800 that has a 10 yr warranty on the compressor. I ascribe the ~10% reduction in real cost and 50% increase in capacity to manufacturing efficiency and technology advances (i.e., real market driven improvement).
    2) Government control of materials: In the early 1990’s governments worldwide “outlawed” CFC’s and HCFC’s. This forced the refrigerator industry into large scale research for safe and effective replacements. Add to that the energy efficiency requirements and the industry was between the proverbial rock and hard place. If a refrigerator will last even 10 years, then the return on investment for research is daunting. The industry found places to mitigate the decade long ROI and subsequently sacrificed durability.

    • Youliy NinovNo Gravatar says:

      “The industry found places to mitigate the decade long ROI and subsequently sacrificed durability.”

      You are right, I didn’t consider the above, but it doesn’t change the overall picture, namely, that consumers are not willing to pay for a long-lasting refrigerator. Producers have surely sacrificed what consumers value the least.

      • macsnafuNo Gravatar says:

        Your basic argument is quite sound, but Sam Spade is correct in pointing out how government intervention affects consumer choices is valid, too. People may not be willing to pay for a long-lasting refrigerator, but they would be willing to pay for a longer-lasting refrigerator if government intervention hadn’t driven the price up. Producers have sacrificed what consumers value least because that’s the easiest place to cut costs. Producers have no choice but to comply with government regulations and deal with the costs as well as they can. Barriers to entry prevent competition and allow companies to charge more or be less efficient than otherwise. And we all suffer from central bank-created monetary inflation, which leads to higher prices and an eroding of our savings and income.

  3. RichardNo Gravatar says:

    The best example of this in the disconnect between “made in America” and “made in China”. Just about everyone says they want companies in general and Wal-Mart in particular to stock the shelves with products that are made in America but when it comes right down to it they want to save money and will purchase made in China products.

    Back in the late 80’s when Wal-Mart was still doing the Buy American thing a friend of mine was managing a Warl-Mart at the time and he showed me a perfect example. His store was selling two sets of tools that were exactly the same except that one was a cheaper made in China set and the other one was a little higher quality made in America set and was a around $1.50 more expensive.

    As you can guess the cheaper made in China set outsold the made in America set by over 20-1. He ended up having to put them on sale and barely breaking even on them just to free up the shelf space.

    People say they want made in America products but they are not willing to pay the little extra to make it worthwhile for the stores to stock them so the stores stock the cheap made in China products which people will actually buy. Then they complain that there are too many made in China products.

  4. VanmindNo Gravatar says:

    Great stuff, Mr. Ninov, thanks.

    • VanmindNo Gravatar says:

      This avatar was a bit hasty, forgot to add something.

      A big mistake that many aspiring entrepreneurs make is to start with a presumption that they need to offer the Rolls Royce of whatever product they’re going to start producing/selling. This article says pretty much the same thing, stressing the mistaken consumer presumption that each manufacturer should only ever try to offer them the Rolls Royce of a particular good or service — you know, so consumers themselves can remain as lazy as possible and not perform due diligence as the author recommends.

      Ultimately, only consumers matter, because consumers are the only reason anything ever gets produced (correction: anything that isn’t a work of art). Consumption, though, is no “engine” of an economy, because consumption by definition always comes after production.

      Still, even while “at work” producing stuff to sell to others (including manual labor for a wage-paying employer-consumer), everyone spends the majority of their time consuming other stuff that has already been produced (paper, office furniture, factory equipment, computers, etc.). Producers (including wage laborers) respond to unsold merchandise by revising their supply schedules, which means that consumers control production in a time-lag kind of way as opposed to the NWO’s canard about consumption being an “engine” of economic activity. Setting aside the effects of socialist regulation, it was the way-long-ago consumer rejection of already-produced products that inspired production adjustments which led to today’s subsequent marketplace.

      Bottom line: consumers might hint at a potential demand for something, but until a producer believes that producing and selling the thing apparently in demand will improve their own tomorrow, all those demanding shouts will fall on deaf marketears.

  5. Sam SpadeNo Gravatar says:

    Government intervention into what should be a free and open marketplace is at the root of all the arguments. We’ve lived with this albatross for so long it has become the antithetical invisible hand. The argument that consumers may not be willing to pay more for a better product has certain validity, but only marginally so. Consumers are the ultimate victim of the invisible hand of incessant state strangulation — and corporate personhood, and mercantilism. Psychopaths who become politicians and regulators know that.

    Even the export/import “buy local” phenomenon is government created, largely illusionary, and a part of the gigantic divide-and-conquer maneuver. Keep the unwashed masses arguing and wailing and gnashing teeth over whether Wally-World should go back to selling “American Made” rather than Chinese stuff, and nobody will consider asking the questions that strike at the root of the dilemma.

    In a 100% free and open market the disparity between a foreign product and a U.S. product wouldn’t amount to much when you consider everything — overall costs, transportation, etc. Consumer reporting services would compete with each other for the most effective and best value of reporting, and shoppers would be capable of assessing value and durability vs price.

    Sam

  6. Fritz KneseNo Gravatar says:

    Another reason for piss poor quality is foreign goods, particularly those from Red China today. Since the corporations building things for the US market in other countries are using what amounts to slave labor they will usually be able to undercut domestic production. Then most manufacturing moves out of the US to be able to compete. So when lousy quality starts to show, there is no one left in the US making decent quality goods. One answer is to make the US a totally free market inside our borders with nothing imported at all that we can produce here. You can’t have free enterprise if one party is using de facto slave labor.

  7. Sam SpadeNo Gravatar says:

    “…No government anywhere,
    at any time,
    has ever brought net benefit
    to any society,
    and there is no desirable function
    that any government performs
    that could not be performed better,
    or less expensively,
    by free people
    operating on a voluntary basis
    for profit or for charity…”

    ~Jim Davies

    http://www.takelifeback.com/tdaw/

    My cyber friend, Jim, made the above comment in one of his essays of several years ago. I’ve kept it at the top of my “quotations” file, and post it often. I believe this thought underlies the entire quandary Mr. Ninov has brought to fore with this essay.

    It’s the marketplace and the marketplace alone that determines what consumers will buy. But you and I are subtly led to believe the fault lies with the consumer, not mercantilism. Psychopaths grouped and hiding under the skirts of that lifeless abstraction of violent action (“the state“) simply limit the choices of buyers. And that’s all they do.

    Producers don’t always guess accurately. That’s why some are successful, many fail. The successful have a “feel” for the markets and the trends. They do the research, and invest accordingly.

    There is a market, for instance, for Rolls Royce automobiles. Not so much in my neighborhood, but if I had the money and wanted the luxury car badly enough I could find a seller of them.

    The likes of Henry Ford understood this. They also knew how to grease the wheels of “state” in order to restrain trade and further limit the choices of potential buyers.

    The enormity of the truth is incredible. Sam

    • Fritz KneseNo Gravatar says:

      I love the quote!
      I recently had a letter to the editor published in Playboy where I try to promote the concept that the free market has the potential to cure most of the ills of the world if it can actually be free of government intervention and can get a relatively level playing field by forcing the oligarchs into restitution of their stolen wealth. I find that many libertarians do not understand that today’s corporate tyranny is not the same as the free market. IL seriously doubt that in a truly free market one could ever become ultra rich, but lots more people would be comfortable on a hell of a lot less time spent working.

  8. aNo Gravatar says:

    Sometimes manufacturers go out of their way to make their products less durable.
    This is most notable in inkjet printers market, where manufacturers put special microchips in ink cartridges to prevent them from being used after a certain threshold even though the cartridge may still contain usable ink or could be refilled.

    If consumers care about durability of his purchases they has to spend a lot of time educating themselves. Information on life expectancy of goods is not easy to get, especially for the new stuff.

    • Youliy NinovNo Gravatar says:

      “Sometimes manufacturers go out of their way to make their products less durable.”

      Quite possible. The question is why? I see two options (with regard to ink cartridges):
      1. There is a market-based reason for this. For instance that the quality goes down significantly when the cartridge is almost empty and consumers resent it.
      2. They do it because they can. For instance if the particular company is a monopolist in the sector (happens often when there are laws regulating the sector) and wants to increase its profit.

      So, do you know why the company does the above? Unless there is an statement from them one can not know. Jumping to conclusions is bad.

      “Information on life expectancy of goods is not easy to get, especially for the new stuff.”

      One does not need it. Just make sure that the guarantee is long when you buy the particular good. This however means that the price will be higher.

      • Fritz KneseNo Gravatar says:

        It is called “planned obsolescence”. Car manufacturers have been engineering it into their products since long before any of us were born. It is one problem with having a “sorta free” market vs. a true free market. A real free market would not have all the laws protecting corporations so that competitive forces could actually work. You would have some companies building to last forcing bigger companies to follow suit as many people opted for quality. The point is that without government hoops to jump through a decent profit can be made with both quality and reasonable price.

        • Youliy NinovNo Gravatar says:

          It is my general impression that car manufactures continuously make car guaranties longer. So, I disagree.

          “You would have some companies building to last forcing bigger companies to follow suit as many people opted for quality.”

          This will happen only if people opt for quality. Experience however shows that the most opt for low price.

        • Sam SpadeNo Gravatar says:

          Fritz:

          “…It is one problem with having a “sorta free” market vs. a true free market. A real free market would not have all the laws protecting corporations so that competitive forces could actually work…”

          Totally agreed. None of us has ever experienced true freedom. Therefore, it’s difficult to imagine a marketplace that will be totally motivated by human action.

          There seems to be a natural tendency to depend upon the beast who enslaves you. Sam

    • macsnafuNo Gravatar says:

      Some inkjet printers are so cheap that it costs less to buy a new printer than to buy new ink cartridges for the current printer. That’s pretty darned obsolescent, I’d say!

  9. Fritz KneseNo Gravatar says:

    Sam, I think you have a good handle on it. The old adage, “We grow to love our chains” seems appropriate. Hope to read your stuff elsewhere. Check out Wendy McElroy’s blog if you do not already. Her weekly Daily Bell articles are very good.

  10. Jimmald JonesNo Gravatar says:

    Isn’t this a problem of insufficient information for consumers? If I had reliable data telling me that the cheap washer really will probably die after a year, but the expensive one will last 15 years, I would choose the expensive one. But too often it’s a guess – who knows? (I do check Amazon reviews, etc. for this, but there’s always guesswork.) It’s also a matter of time preference – people think “who cares about next year? I’ll worry about that when it happens”.
    Here’s another market issue that concerns me: mortgage lending. It seems to me the practice of providing mortgages inevitably leads to real estate price inflation, which is bad for everyone except lenders. Time-preference bias leads most people to accept a very bad deal. Even those who know better end up trapped because soon nobody can afford to pay the inflated prices in cash. Yes, there’s government involvement making it worse, but I wonder if that’s the only problem. Any thoughts?

    • Youliy NinovNo Gravatar says:

      “Isn’t this a problem of insufficient information for consumers?”

      Information can never be sufficient. In general a consumer can not be expected to understand a product well. Production is and becomes more and more complicated. One is expected to do the following: Ask for a guarantee always and choose the longest-term one despite having to pay more for the particular stuff. Do not choose something just because it is cheap.

      “It seems to me the practice of providing mortgages inevitably leads to real estate price inflation, which is bad for everyone except lenders.”

      Not inevitably. If the money in circulation was constant prices would not rise (may fluctuate however). In the long run they would constantly fall.
      So, if you need somebody/something to blame, blame the the contemporary monetary system of choice – fractional reserve.