Wednesday, July 02, 2008

WALL-E and Competition

I went to see Pixar's WALL-E last night with my wife and her parents. It is a beautiful, fun, touching film. Take some tissues if you go see it. I'll be getting the DVD as soon as it's available.

(Minor Spoilers) One of the background elements of the story is that a huge corporation took, "Buy-N-Large", over the world, filled it with trash, and then moved all the humans off-planet. (Slightly Bigger Spoilers) After 700 years of luxury, the humans on this ship, The Axiom, have become large, lazy blobs, their every whim catered to by robots. Think of this as Idiocracy with slightly less contempt for the average consumer. Fred Willard makes a couple jolting but hilarious appearances as the pre-recorded President of Buy-N-Large from 700 years ago (He and a few other humans in other videos are the only ones that are not computer generated).

This all reminded me of the old Kenneth Galbraith line, "the trouble with competition is that in the end somebody wins." That quip was intended to criticize economists' love of competition, and the belief that competitive markets can be left alone (absent other market failures, such as externalities). The problem with this quote is that it makes sense in the context of, say, a marathon, or a baseball game, or a round of Battlefield 1942, but it doesn't make much sense in a market context. There is no finish line in a market. There are no forty-five minute halves, no referee blowing the whistle at the end of the game. The market game goes on forever. Even a firm that gets a monopoly is not guaranteed to keep it. Wordstar was replaced by Wordperfect, which was replaced by Microsoft Office, but not even Office is safe from competition. If someone creates a better product, people will switch (I use OpenOffice on this computer because it is free and works fairly well).

The idea of one huge company taking over everything is unrealistic. There simply aren't enough natural barriers to entry to allow a company to get so big in so many markets (without some kind of external help). Furthermore, if it were to happen, I don't think the results would be as pleasant as those suggested by WALL-E. It would likely be far more tyrannical, and more poorly run.

WALL-E is not the first to hypothesize such an end to competition. In Demolition Man Taco Bell has "won" the fast-food wars, becoming the only surviving restaurant. Consider how nonsensical this is. New restaurants are opening all the time. What would stop someone from starting a new business to compete with Taco Bell or Buy-N-Large for such a long time? Only one thing could stop them: government. Yet I do not think that WALL-E or Demolition Man were intended to be a fable criticizing government regulation or regulatory capture. At least Idiocracy has a slightly plausible justification for the world being taken over by businesses: people have become too stupid to do anything about it.

The film also suggests that we are filling the earth up with garbage to such an extent that the entire planet is covered with mounds of it (again, much like Idiocracy). WALL-E's job is to pick it up, compact it into cubes, and stack them to help clean up the mess. This also seems unlikely without some change in policy or human behavior. Lack of landfill space is not currently a problem and will not likely be a problem, aside from local NIMBY difficulties. If it does get scarce, putting trash in landfills will get expensive, which encourages recycling and innovations to reduce the size or amount of material that goes into landfills.

Let me reiterate that WALL-E is a fantastic film, and I am merely quibbling. Go see it.

On other topics, check out Art Carden's blog entry on Gapminder. I show this to students in several of my classes, because the software is just too awesome. Also check out his depressing post on Japanese internment. Removing people from their homes and businesses "as a Democracy should", says the man in the video. Amazing.