How Competition Helped My Honeymoon

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How Competition Helped My Honeymoon

By: John C. Downen
Posted on February 08, 2006 FREE Insights Topics:

My wife and I are taking our honeymoon in February. Since we’ll be gone for three weeks but still want to travel light, I was in the market for a new suitcase. The last time I actually bought a piece of luggage was probably 20 years ago -- an internal-frame backpack with shoulder straps and a belt that stowed away behind a zip-up flap. I was pretty pleased with its multifunctionality and called it my “James Bond bag.”

Given the increasing hassle of air travel and the fact that we’re going overseas, I wanted to avoid checking luggage. I wanted something with wheels that was small enough to carry on. I began my search online and in catalogs, but wanted to see and feel before deciding.

I spent six hours zipping, opening, expanding, and comparing. I was amazed by the features packed into a basic carry-on bag. The last real suitcase I owned had a pocket or two inside and a strap to hold things in place. The carry-on I bought in Bozeman includes a heavy-duty, clip-in plastic bag for wet items or toiletries, an integrated garment bag system for packing a sportcoat without wrinkling, a zip-off bag for my shoes, mesh panels with straps to hold things in place, and pockets galore. That’s all just in the main compartment. There’s also a couple good-sized pockets on the outside (one has pen and card holders in it) and even a zip-open water bottle holder. Plus, the whole thing expands by 2 to 3 inches. Most of the bags I looked at had some variation on these features. Not to mention the standard retractable handle and “in-line skate” wheels.

What all this demonstrates, besides my ignorance of modern luggage, are the benefits competition brings to a market economy. Many fear that free markets and competition lead to Big Business monopolies and homogenization. In reality, competition fosters diversity -- more and better products with more features -- while constantly lowering prices.

In the long run, luxuries transmogrify into necessities. (My father-in-law is waiting for this transformation with plasma-screen TVs.) Even America’s poor today own refrigerators, televisions, and automobiles -- items once available only to the wealthiest.

The drive to stay ahead of their competitors induces firms to innovate and exploit niches. Adding new features, improving quality, appealing to some underserved segment of the market -- all are strategies to attract and retain customers.

Joseph Schumpeter described the market pursuit of profits as a “gale of creative destruction.” New, more efficient firms displace older ones. New products replace obsolete ones (like my carry-on replacing my backpack). Market competition is a discovery process that, perhaps ironically, induces economic coordination and cooperation in a perpetual search for greater efficiency and customer satisfaction. Scarce resources ever move to higher-valued uses. Could a central planner be as effective?

We don’t see such dynamism in heavily regulated industries. When government dictates how to produce a product -- and often guarantees a rate of return or protects from competition in exchange -- there is little incentive to innovate and improve. A comfortable complaisance toward customers ensues.

Restricting competition in the marketplace shifts it to the political sphere. Companies invest in lobbyists and regulators rather than customers. Why? Influencing legislators yields better returns than research and development. Instead of competition improving welfare, it consumes it.

Unfortunately, we often assume the fruits of free markets. We expect products will get faster, smaller, and have more bells and whistles. This is not the result of enlightened regulations, but rather of companies competing for our business.

When problems occur, the instinct is often to exhort government to “do something about it.” But this response fails to recognize the full price of increasing regulation of private business. Firms rarely pay the costs imposed on them. Their customers do, in the form of higher prices, fewer features, less improvement, or laid-off employees.

Were my new carry-on made by the TSA, I’d expect it to disintegrate by the end of the first flight. Since it’s a product of our competitive market economy, I expect after three days in Tahiti and two weeks in New Zealand it’ll be just fine.

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