What Cost Variety?

In 1930 Keynes famously predicted that by 2030 we’d be four to eight times more productive, and we’d use those gains to work far fewer hours. Though we could get by on less, we might work fifteen hours a week just to feel useful.

It is clear now that this won’t happen. But it is interesting to wonder what sort of lifestyle we could manage if we worked three to ten times fewer hours on average. And it occurs to me that we could probably work far less, and still have just as much stuff, of just as high a quality, if only we’d sacrifice product variety.

Imagine that we made just as many cars, houses, clothes, meals, furniture, etc., each one just as big with just as high quality materials and craftsmanship. But instead of the making these in the stupefying variety that we do today, imagine that we made only a few standard variations, and didn’t update those variations as often. A few standard cars, standard clothes, standard meals, etc. Enough variety to handle different climates, body sizes, and food allergies, but not remotely enough to let each person look unique. (An exception might be made for variety in music, books, movies, etc., since these are such a tiny fraction of total costs.)

I’d guess that this alternative could plausibly cost three to ten times or more less than what we pay now. Let me explain.

First, most products have fixed costs of production. That is, not only does it cost more to make more items, it costs to be ready to make that kind of item. For example, in addition to costing more to give you another gallon of gas, it costs to make a gas station and have it ready to sell you gas. With product variety, there is usually an added fixed cost for each new product variation.

Second, industry has worked hard to enable “mass customization,” i.e., product variety, by lowering fixed costs at the expense of increased per-item costs. Without product variety, industry would instead work hard to reduce per-item costs, at the expense of higher fixed costs.

Third, there is a lot of learning during most production processes, learning that makes it cheaper to make more items, even when the scale of the production process doesn’t change. A typical estimate is that costs fall in half when ten times as many items are made. So with a thousand times less product variety, costs would be eight times lower.

Fourth, there are lots of ways to save on costs when you produce at larger scales. For example, for most chemical processing, like making gas from oil, the cost of a production plant goes roughly as the surface area of its devices, while the amount processed goes roughly as the volume of the devices. Since volumes grow faster than surface areas, the per-volume cost goes down. There are also lots of ways to save on costs when you distribute and store more standardized items.

Even with a lot of bad management, the early communist revolution in Russia was still able to make impressive gains in output by using these scale economies. They didn’t have much variety, but they did make a lot of cars, etc.

What fraction of us would prefer to live in a world where they work only 10% as many hours, have just as much high quality stuff, but lose most of our product variety. If many of us would rather switch to this alternate world, then we may suffer from a coordination failure, of failing to switch together to more standard products.

I suspect that status competition is the problem here. We see those who don’t use distinctive products as lower status, either because they can’t afford them, or don’t have enough taste to pick ones well matched to them. Consider the distain expressed in the famous Pete Seeger Malvina Reynolds song Little Boxes for houses that look the same, and people who act similar. Consider the horror two women might feel to arrive at a party wearing the same dress. Or how folks at a restaurant are reluctant to order an item chosen by someone else at their table.

It isn’t like we are each born with detailed preferences for varied products, so I must own a tall white leather couch while you must own a short red cotton one. Instead we each try to construct a product-use-identity that is the right distance from other identities around us, and that well matches our few distinctive features. The more different others around us are from each other, the more different we must also be to not seem low status.

But it isn’t clear we are any happier, or that our lives have more meaning. This seems to just be part of the human status treadmill. A treadmill we don’t seem able or even much inclined to coordinate to avoid. Welcome to the human condition.

Added 20Feb: See a nice quote from Murray’s Coming Apart on increasing variety.

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