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Planning for ObsolescenceNot everything should last forever.

By Steven E. Landsburg
Posted Thursday, Oct. 14, 1999, at 3:30 AM ET
Illustration by Robert Neubecker

When I wrote my first textbook, the publisher wanted to combat the second-semester used book market by sewing a $100 bill into the binding of every 100th book. Every student would tear his book apart to see if he'd won. Printing with disappearing ink that lasts exactly one semester would also discourage the used book market. But instead of running lotteries or using disappearing ink, most publishers make used textbooks obsolete by periodically releasing revised editions. Did I mention that the fifth edition of my textbook is forthcoming next year?

The naive answer to why publishers might want to discourage the used book market is that they prefer to get paid every time a student buys a book. But by that logic, you should never sell your house when you can rent it: Why get paid only once when you could get paid every month? The logic is wrong because the sale price is likely to be far higher than the monthly rent. And the logic is still wrong when applied to textbooks, because the sale price for a book that can be resold is likely to be far higher than the price of a book designed to lose its value.

If a student is willing to pay, say, $30 for a textbook, that same student will be willing to pay $60 for the use of a textbook that can be resold for $30 at the end of the semester. (For the sake of simplicity, let's ignore the fact that the $30 delivered a few months from now is worth a little less than $30 delivered immediately.) And for a book that can be resold twice, the second owner's willingness to pay $60 means that the first owner is willing to pay $90.

Now, if you're a publisher, is it more attractive to collect $30 apiece for three books printed with disappearing ink or to collect $90 for one book that's designed to last? As long as it's cheaper to produce one book than three, the publisher should opt for permanence.

That's why economists are generally skeptical about allegations of "planned obsolescence." Every few years, someone claims that General Electric knows how to make a light bulb last 1,000 years but suppresses the technology to keep us coming back for more light bulbs. Likewise, Ann Landers is forever publishing columns about how pantyhose are intentionally designed to run so women will need a new pair every two weeks.

But a woman who buys a $2 pair of pantyhose every two weeks has demonstrated her willingness to spend $52 a year on pantyhose. If Hanes could make a pair that's guaranteed to last a year, she'd buy it for $52. That would be a better proposition for Hanes than having to make 26 pairs to collect the same revenue. So the Ann Landers theory makes no sense.

Illustration by Robert Neubecker

Does that mean there's no such thing as planned obsolescence? No, it means that planned obsolescence occurs only under special conditions. Mistrust, for example, is a special condition. If a publisher says, "Buy this book for $90, and you'll be able to resell it next year for $60," a student might well respond, "How do I know you won't bring out a new edition next year and undercut my resale market?" Unless the publisher can quell such doubts, students won't pay premium prices for books with lasting value, so publishers won't provide them.

(Students, of course, are in some sense a captive market, forced to buy the books their professors assign. But there must, nevertheless, be some upper limit on their willingness to pay; otherwise, textbooks would sell for an infinite price. And whatever the upper limit is, it will always be higher for a book that can be resold than for a book that can't.)

In most instances of planned obsolescence, customers have demanded it, and firms have provided it as a service. Maybe you'd rather not spend $52 on a pair of pantyhose that might get lost at the laundry. Or maybe you don't have $52 in your pocket right now. By letting you buy 26 shoddy pairs at $2 apiece, the manufacturer provides you with the equivalent of either insurance (against the prospect of losing your entire year's supply of hose at once) or a loan (by allowing you to spread out your payments over an entire year).

What brings all this to mind is the recent controversy over Monsanto Co.'s development of infertile seeds--seeds that yield crops that don't reproduce so that farmers have to buy new seeds each year. From the farmer's point of view, the opportunity to buy infertile seeds can be a great boon. Instead of paying $100 for seed that should last 10 years, you pay $10 for new seed each year, which insures you against the possibility of a disastrous and expensive crop loss.

(Are you worried that Monsanto would charge just as much for the infertile seeds as the fertile ones? Don't be. Surely farmers are willing to pay much more for fertile seeds than for infertile, and you can be sure that Monsanto fully exploits that willingness.)

Many high-yield hybrid seeds are infertile, though not by design. Like mules, they're naturally infertile. Taking its lead from the software industry, Monsanto had planned to convert this bug into a feature. But in the face of considerable public pressure, Monsanto has agreed to stop developing infertile seeds.

Much of the opposition had nothing to do with planned obsolescence and everything to do with concern that the Monsanto's infertility gene might "leap" from its seeds to fertile seeds in adjoining farms and eventually render those fertile strains infertile. Such hypothesized contamination is a legitimate concern and quite plausibly a sufficient reason to applaud Monsanto's decision. But an unfortunate side effect is the lost opportunity to provide some socially desirable planned obsolescence.

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Steven E. Landsburg is the author, most recently, of More Sex Is Safer Sex: The Unconventional Wisdom of Economics. You can e-mail him at .
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The Fraymaster adds:


This reader thinks pantyhose could never sell for $50:

Is it true that Hanes could sell rip-less hose for $52? Not if the production cost (including normal profit) were only, say, $10 because of market entry. The point is, that with competition firms will not be able to exploit the demand curve the way Landsburg says. This does not obviously undermine his general argument against the concept of planned obsolescence. After all, why should the profit rate be higher producing ripping hose to sell at $2 rather than rip-less hose at $20? If the market is working (something proponents of planned obsolescence would of course dispute), producing rip-less hose must be unprofitable, otherwise it would be done!

This reader thinks Landsburg under-emphasizes the role of monopoly in the higher-education textbook market:

Concerning the argument that textbook publishers could charge more for their product if they were worth more on the resale market, there is an essential flaw. Assuming things haven't changed much since I left undergrad 3 years ago, textbook sales are essentially a monopolized market. If your professor tells you to buy a $90 textbook, even if there's a compatible textbook for, say, $19.95, you buy the $90 textbook. Why? You have no choice, the professor chooses the book, you buy the book or risk being out of step with a class that you're paying upwards of $2,000 for already. And if that $90 book happens to be written by, say, the professor, so much the better for him I suppose.

Now, the publishing companies will claim up and down that this is due to the printing costs of huge textbooks for very limited runs. This may be partly true, but there's an easy way to test this out. Eventually (hopefully sooner rather than later) devices like the Rocket eBook will allow students to carry their entire school library around without inducing a hernia, without any printing costs (besides formatting) to the publisher.

Will prices then come down to something reasonable? Let's see, it'll still be a monopoly, and "printing costs" will suddenly be "the cost of new technology" (which is why we still pay 50% more for CDs that cost less to produce than tapes, over 10 years after CD's entered the market). This will probably never change, though it's been known for quite some time that higher education is one of the biggest scams going... but that's a rant for another time.

This farmer's daughter adds some wisdom of her own:

It is obvious that the author is not a farmer and knows virtually nothing about farming. Farmers always purchase seed each year; they do not use seed from the previous year's crop. This is because seed is usually coated and treated to prevent decay and disease. Seed companies purchase a percentage of a year's crop and treat the seed for resale. The reason Monsanto wants to sell infertile seed is so that they retain control of their new hybrids. If only Monsanto can produce seed for a particular variety, they can charge whatever they like for the seed.

While this Fray poster writes about the economics of genetically modified seed:

Please note that the U.S. Department of Agriculture and Delta and Pine Land Company jointly invented the technology that enables infertile seeds. Monsanto would have obtained the invention with their planned purchase of Delta and Pine Land Company.

Also, seed companies charge more for genetically modified seeds than for other seed. Seed companies have spent multibillions of dollars developing modified seeds and those costs have to be recovered. Unfortunately, the marginal rate of return is very small.

Farmers purchase the genetically modified seeds as a form of insurance if there is not a great pest load on the crop and, if there is a great pest load, as means of cutting down on the cost of herbicides and pesticides. The EPA and FDA are doing their part by forcing off the market agrichemicals of known effectiveness and making the development of replacements very expensive.


--Michael Brus (10/14)

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