So I was stunned to hear President Obama claim exactly the opposite in a speech to the US Chamber of Commerce. He ridiculed those who predicted disaster from government regulations as far back as 1848. “It didn’t happen,” he said. “None of these things came to pass.” Then he went further to say that government regulations “enhanced” industry and “made our lives better.” Regulations “often spark competition and innovation.”
What immediately came to mind is a picture of a race in which some overlord is clamping shackles on the runner’s feet. No, that does not stop the race. The runners develop innovative ways to keep going. Nor does competition stop; it might even become more intense as runners develop new skills they would otherwise not need. All that’s true, and yet we wouldn’t look to this race as the one that is going to set new speed records. Everyone would be better off without shackles.
But Obama’s claim really goes further than saying that somehow industry overcame the costs of regulation. He suggested that we are actually better off than we would otherwise be due to regulations. And he gave the specific example of automatically defrosting freezers. He really did. Here is the statement:
The government set modest targets a couple decades ago to start increasing efficiency over time. They were well thought through; they weren’t radical. Companies competed to hit these markers. And they hit them every time, and then exceeded them. And as a result, a typical fridge now costs half as much and uses a quarter of the energy that it once did — and you don’t have to defrost, chipping at that stuff and then putting the warm water inside the freezer and all that stuff. It saves families and businesses billions of dollars.
Well, this is a precise claim, and it can be checked out. Thanks to many commentators on the Mises Blog and LvMI’s Facebook page, who did some extensive sleuthing, here is what we found.
In 1928, the US Patent Office issued a patent for “defrosting of the cooling element or unit of a refrigerating system.” Still, invention is one thing and marketing and production is another. It took a very long time for these to be seen in real life. More and more patents were issued all throughout the 1920s and 1930s. Most likely, the innovations occurred before this time and would have sped more quickly into the consumer market without the patents, but regardless, an article in Chain Store Age in 1947 writes as follows:
“Auto Defrost,” a recently developed electronic circuit for automatically controlling water defrosting of refrigeration coils has been announced by the Bush Mfg. Co., Hartford [founded 1907], Conn. Advantages claimed for this device are its low price, its ease of installation on existing water defrost systems, and it works independently from the refrigeration system.
Recall that Obama spoke of how the relevant regulations came about “a couple of decades ago.” Well, his timing is off by some 63 years! What’s more, these items were already reaching a retail market by 1948.
A March 13, 1948, edition of the Billboard posted a story datelined from Oakland, California:
Frosted Food O’Mat, Inc., of this city is readying a new ice cream vending machine, designed for grocery stores, super markets, and department stores. Dispenser will be offered both as a coin-operated and a manual device. The vendor will hold up to six flavors, and its makers claim that it has an automatic defroster.
By 1951, these items were already being pushed in homes. An advertisement in Popular Science reads as follows:
By 1958, it seems like the great innovation was already old news. An advertisement in Life Magazine from 1958, this time from Westinghouse, references a “frost-free, Auto-Defrost Refrigerator” as if it was nearly a standard feature. The main pitch here is that the refrigerator has “cold injector” that chills food faster. It is also styled in the “Shape of Tomorrow.”Von Schrader Mfg., Co: Amazing Attachment MAKES OLD REFRIGERATORS INTO MODERN Automatic Defrosters! Thirty Million Prospects. Sell without “selling pressure” on sensational Free Trial Plan. Just plug it in and leave it. Frees women from drudgery and mess of defrosting. Saves electricity. Keeps food longer, better. Gives longer life to refrigerator … Women buying by the thousands!
Now, this is interesting to me since I can remember problems with freezers in my own lifetime, so it is not automatically crazy to believe that something happened in the regulatory environment of the early 1970s that would have prompted the universalization of frost-free freezers. During this period there began a government push for energy efficiency, and makers were required by government to meet certain targets, just as the president says.
But there is a serious problem. An automatic defroster increases, not decreases, the overall energy use of refrigerators and freezers. As this government report said in 1998: “Refrigerators with automatic defrost have higher occupant consumption (on a label-normalized basis) per unit of occupant activity than refrigerators with manual defrost.”
In other words, the more straightforward way to meet regulations would have been to take defrosting devices out, not put them in! The devices therefore exist not because of standards but in spite of them.
All evidence suggest that the truth is precisely the opposite of what Obama claimed. Frost-free freezers came about in the normal market way. A company found a way to package it as a luxury good available in some markets. Another company saw the advance and emulated it, offering it to still other markets (though the process was likely slowed by the government regulation called the patent). Other companies saw the potential for solving a monstrous household problem and began making them more cheaply and more efficiently, as the target market gradually went from luxury to mainstream. Over time, the improved product was ubiquitous.
This is pretty much the story of every innovation in the history of the world. Whether it is the spinning wheel or the smart phone, private companies innovate in order to outdo their competitors in serving the consumer. They all have reason to become ever more excellent in the service of others. They learn from each other and improve on what exists (in the absence of patents).
It is hard to imagine the alternative scenario that inhabits Obama’s mind. It goes something like this: Private enterprise comes up with a technology that it can fob off on customers and people like it fine but for some maddening problem. Private enterprise doesn’t care. So long as the profits are there, the problems persist. No one in the private sector has reason to change anything. Stasis prevails.
Government regulators, who are constantly scouring around consumer markets to find ways to innovate and improve products, notice the problem and issue some mandate. After some careful deliberation, they march into manufacturing plants with guns:
Listen up: our citizens have a problem with their freezers. They are building up ice. We want you to find a way, some way, to fix this problem. You have until next winter to figure it out. If you do not, you are dead meat.
Industry complies under the gun, scrambling to improve products only because government bureaucrats demand it. Under government edict, enterprise makes the thing, and problems go away. This process is repeated for thing after thing and we are gradually made better off, thanks to the central planners and wise public servants who know better than everyone else. Under this model, the entire developing world might be improved in a matter of months!
This is of course sheer fantasy. So is the claim of Obama that we should be grateful to regulators for all the blessings that flow to us. How many iPhone apps have bureaucrats invented? Will the president’s next claim be that bureaucrats gave us the Wii?
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This speech was given at the Mises Circle, Colorado Springs, Colorado, September 18, 2010.
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