I’ve noticed that prices for computers and computer equipment keep going down. I’ve also noticed that automobiles keep getting more expensive. Why is that? Supply and Demand?
More supply than demand, I’d guess. The costs of building a computer (or making computer components) fall. Since car-building is a mature technology (or for whatever other reason) most of the innovation goes in to quality improvements rather than cost savings.
Well, the building techniques for cars has remained relatively stagnant over the years compared to computer development. Aside from minor tweaks to engine configurations, improvement of design, and the occasional new bell 'n whistle, there’s not much that can be done to a car. But with computers, the control and mastery over the teensy-weensy components is improving daily.
I believe this could explain a great deal about the situation. Do you have any idea how much it costs to keep a black hole at infinite mass?
According to this Cato Institute Policy Analysis, federal (and this does not even include state and local!) regulation cost $710 billion dollars in 1997 for “agency maintenance, compliance, and paperwork”. The number of pages in the Code of Federal Regulations increased from 54,834 in 1970 to 124,156 in 1996.
Consider the cost of lawyers, politicians, endless staffs of bureaucrats, buildings, land, and a host of ancillary expenses to regulate automobiles and you’ll get an idea of why, with every new requirement on automakers, prices go up and up and up. And this does not even include “soft” economic influences like the multi-billion dollars Chrysler bail out.
If you were to put computer manufacturing into this quagmire, you could reasonably expect to see prices rise. But don’t worry; it’ll likely happen soon enough.
Computers are an aging technology, and they get out dated quickly. The new, top of the line PCs still cost a pretty penny or two. Then you have cars, which will get you around just the same, for 5 or 6 years without every dreaming of an upgrade. It is simply a matter of what supply the demand needs.
Keeping this remark as GQ as possible, I believe that that is an associative or causative fallacy. It is entirely possible that the demand for upgrades causes the supply of them and not the other way around, in which case the price of computers, if heavily encumbered with frivolous arbitrary regulation, would go through the roof. They haven’t (yet), so it is likely that supply-demand dynamics for computers is like the supply-demand dynamics for cars in simpler times, as when my father paid $1,800 for his brand new 1962 Chevy Impala.
Think cigarettes. Think oil. Then think marijuana. Think prostitution.
I forget who it was that said that if the car market progression had followed the computer market model, today’s cars would cost $1000, get 100 miles to the gallon, and then once a year for no particular reason explode and kill all of the occupants.
Lib is generally correct in his opinion that car prices are kept relatively high by government requirements on those cars. Yes, Lib’s father could buy an Impala for $1800 in 1962. Of course, adjusted for inflation, that’s $10,009.00 in 2000 money (source: The Inflation Calculator). Still, that’s generally a bit less than the 12-14K most modern cars go for; however, the '62 Impala had little or no regulations on emissions; internal safety such as airbags, seatbelt design, etc.; or gas mileage; not to mention neat features such as automatic lights, CD changers, cruise control, better seat design, etc.- those amounts probably make up the $2-$4K difference.
As for computers- keep in mind that we’re still relatively in the infancy of personal computing. Cars were first developed in the latter part of the 19th century, and were originally seen as luxury items for the very rich. It wasn’t until Ford’s mastery of the assembly line in the late teens to early twenties that we began to see cars designed for and priced for the average American, and the twenties’ car market was akin to our modern computer market- prices dropping while features increased (windshield wipers! Turn signals! Seat belts!) until a general critical mass was hit, and prices (and features) remained relatively stable.
I agree that the government doing this bailout was probably wrong. If I go out of business for whatever reason I guarantee you the government will not come in and bail me out. On the contrary, they will line-up with the rest of the vultures to pick at my carcass. I realize Chrylser and its economic ‘ripple’ effect for going out of business is far greater than most but it must be nice to be able to run your business like crap and not worry about consequences.
Nevertheless it bears noting that Lee Iacocca repaid the government loan, with interest, several years ahead of schedule (IIRC Chrysler had 10 years to repay and Iacocca did it in 7 or 8 but I’d have to look it up to be certain). So, in this case the government got its money back.
Also, far from increasing prices, the loan probably helped to lower car prices. The more players in the marketplace the more competition which generally means lower prices. The loan to Chrysler might have increased the taxes consumers pay but I doubt it increased the price of cars.
Finally, I will agree with Lib that government regulations can get out of hand (to the tune of 120,000+ pages). I would also like to point out the benefits such regulations have had. I do not believe simple competition would suffice to see emissions be a serious concern for manufacturers. Likewise with fuel efficiency (as evidenced by the plague of SUV’s, which are exempt from such regulations, on Americas roads). Safety? Maybe, maybe not. Some people buy Volvo’s because they are safe but you would almost certainly see ‘budget’ cars where safety was minimal to non-existant so as to cut costs. What cost would litigation today be like if the fatal accident statistic went through the roof? Your car might not cost more but your insurance sure would.
I’m not sure this is quite true. Perhaps the technology of car-building has been stagnant, but techniques seem to have changed a fair bit over the past couple of decades. The major car makers seem to have changed from manufacturers into designers and assemblers. Several car models are made from the same basic platform and many different brands share components.
Excellent response, John. I’d just like to add that several years ago, Car and Driver magazine compared a modern car to one ten years older (I believe an '87 Acura Legend vs. a '97 Honda Accord EX V6). The Accord had all the luxury features of the Legend, was approximately the same size, had a more powerful engine, got better mileage, had better safety features, and was actually less expensive after adjusting for inflation. So when you take content into account (even a $14K Honda Civic has power windows these days. And that same Civic has grown in size each time it was redesigned) I think you’ll probably find that car prices have remained relatively stable.
The major car manufacturers would love to outsource a complete vehicle, and be nothing but designers and salesmen. I believe Daimler-Chrysler has worked out such a concept with a supplier in Europe for a certain model.
Technology certainly has changed, and has been far from stagnant. The changes encompass all facets of production processes, from supply, to quality, to process. As far as the “machinery itself,” look at the intrusion of robots in the last 20 years, the last 5 or 6 being the most important. I only mention robots, as that’s what most people unfamiliar with all of the specifics of auto manufacturing can relate to. But flexible-automation (including robots) is an entirely recent concept in manufacturing. New ways of doing old things involve new technology: the use of laser welds versus arc welds, for example. The replacement of fluid logic and relay logic with programmable logic was a huge leap. I could go on and on, but I won’t. I will answer specific questions, though!