Crony capitalism: How private industry used government force to kill the traditional light bulb for higher profits
Mark J. Perry | January 10, 2014, 1:34 pm
1. In the Reason.tv video above, Nick Gillespie makes the case that the worst nanny state ban going into effect this year is the federal prohibition on traditional incandescent light bulbs. Here’s more:
Before the incandescent bulbs go out for good, it’s worth shining a light on its cause: The ban was pushed by light bulb makers eager to up-sell customers on longer-lasting and much more expensive halogen, compact fluourescent, and LED lighting.When customers balked at paying more for home lighting, General Electric, Sylvania, and Philips did what corporate behemoths always do: They turned to the government for regulation that rigs the market in their favor.
So when you throw out that last 40 cent 40 Watt light bulb, remember that you’re not just tossing out a piece of history, but a piece of what used to be a freer market.
2. In his recent Washington Examiner column, Tim Carney explains that it was “ Industry, not environmentalists, that killed traditional bulbs,” here’s a slice:
The 2007 Energy Bill, a stew of regulations and subsidies, set mandatory efficiency standards for most light bulbs. Any bulbs that couldn’t produce a given brightness at the specified energy input would be illegal. That meant the 25-cent bulbs most Americans used in nearly every socket of their home would be outlawed.
People often assume green regulations like this represent the triumph of environmental activists trying to save the planet. That’s rarely the case, and it wasn’t here. Light bulb manufacturers whole-heartedly supported the efficiency standards. General Electric, Sylvania and Philips— the three companies that dominated the bulb industry — all backed the 2007 rule, while opposing proposals to explicitly outlaw incandescent technology (thus leaving the door open for high-efficiency incandescents).
Technologies often run the course from breakthrough innovation to obsolete. Think of the 8-track, the Model T or Kodachrome film. But the market didn’t kill the traditional light bulb. Government did it, at the request of big business.
3. Writing in Reason this week (“ Lights Out For America’s Favorite Light Bulb“), Shawn Reagan reminds us that when industry and environmental groups claim that a regulation will solve all of our problems, consumers should be very skeptical – it’s likely “green cronyism” in disguise, here’s more:
The [incandescent bulb] ban is crony capitalism in its most seductive form—when it’s disguised as green. Major light bulb manufacturers supported the ban from the outset. The profit margin on old-style bulbs was pitifully low, and consumers just weren’t buying the higher-margin efficiency bulbs. New standards were needed, a lobbyist for the National Electrical Manufacturing Association told Congress in 2007, “in order to further educate consumers on the benefits of energy-efficient products.”
So Philips Electronics and other manufacturers joined with environmental groups to push for tighter lighting standards. As the New York Times Magazine explained in 2011, “Philips told its environmental allies it was well positioned to capitalize on the transition to new technologies and wanted to get ahead of an efficiency movement that was gaining momentum abroad and in states like California.” After much negotiation, a classic “bootleggers-and-Baptists” coalition was born. Industry and environmental groups agreed to endorse legislation to increase lighting efficiency by 25 to 30 percent.
The light-bulb ban is an example of how political coalitions are formed to force regulations on the general public that benefit a few large producers. A recent survey found that six out of every ten Americans are still in the dark about the latest bulb ban. Meanwhile, the dimwitted light-bulb policy just became the law of the land. The lesson here is straightforward: When industry and environmental groups claim that a regulation will solve all problems, consumers beware. It’s probably green cronyism in disguise.
MP: The industry-driven ban on traditional light bulbs is a classic, public choice example of how a small, well-organized, well-funded group of private firms engages in socially wasteful rent-seeking to influence the political process and enact legislation and regulations that increase the private profits of rent-seeking firms in the industry. Those higher profits though come at the expense of the general public and consumers – who are dispersed and disorganized and at a significant disadvantage in having their interests recognized and served. To paraphrase H.L. Mencken, the political process is frequently like two foxes (e.g. the light bulb manufacturers and their government accomplices) and a chicken (US consumers) taking a vote on what to eat for lunch. Light bulb manufacturers will now be more profitable in the years to come, but millions of Americans will pay a higher price – both in terms of the increased costs of the new light bulbs, and also in terms of a permanent reduction in our economic freedom.
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