They Lost Their Land, But At Least They Get Some Sweet Kicks

Here is an interesting article on the failure of the market to properly satisfy the needs of minority. The article cites Nike's unveiling of a new, wider shoe designed for Native Americans, whose feet are about 3 sizes larger than the average American. The problem lies in that the Native Americans had to wait so long for Nike to make the proper accommodations to their needs - something which, theoretically, the free market should have done a long time ago. From the article:

John Stuart Mill pointed out that voting gives rise to a tyranny of the majority. If we vote on what color shirts to make—or whether to make wide or narrow shoes—then the majority gets what it prefers, and the minority does not. The market, on the other hand, is supposed to work differently. As Milton Friedman eloquently put it in 1962, "the characteristic feature of action through political channels is that it tends to require or enforce substantial conformity. The great advantage of the market is that it permits wide diversity. Each man can vote, as it were, for the color of tie he wants and get it; he does not have to see what color the majority wants and then, if he is in the minority, submit." This is a wonderful argument. Except that for many products and for many people, it's wrong.

Two simple conditions that prevail in many markets mean that individual taste alone doesn't determine individual satisfaction. These conditions are 1) big setup costs and 2) preferences that differ across groups; when they're present, an individual's satisfaction is a function of how many people share his or her tastes. In other words, in these cases, markets share some of the objectionable features of government. They give bigger groups more and better options.

Although the Nike example may seem a bit trivial, market failures such as this have serious implications in other commercial sectors, such as health care:

The tyranny of the market arises elsewhere. With drug development costs near $1 billion, if you are going to be sick, hope that your disease is common enough to attract the interest of drug makers. If you want to fly from your town to Chicago, hope that your city is big enough to fill a plane every day.

When you're not so lucky, you benefit when the government steps in on your behalf, with subsidies for research on drugs for rare diseases or for air service to small locales. For a generation, influential economists have argued for letting the market decide a wide array of questions, to protect your freedom to choose whatever you want. This is true—if everyone agrees with you.

I think his focus on population size in determining market power might be slightly misplaced. Wealth probably has a much stronger influence in the production of certain goods. The profitability of producing a treatment or cure for a disease is really the stronger impetus for research and development of a drug, but the prevalence of the disease might have little influence.

Sean

p.s. does the font size seem to change throughout my post? I feel like it does, or maybe I've just been staring at this computer screen for way to long...