February 11, 2007
The Not So Invisible Hand Posted by John Steele Gordon at 05:30 PM EST The invisible hand, Adam Smith’s most famous phrase, comes from his Theory of Moral Sentiments (1759), not his far more famous An Inquiry into the Nature and Causes of the Wealth of Nations (1776). Smith held that the rich “are led by an invisible hand to make nearly the same distribution of the necessaries of life which would have been made, had the earth been divided into equal portions among all its inhabitants.” To put that another way, the pursuit of self-interest is good for everybody in the long run, rich and poor alike. Wal-Mart is certainly rich and is now planning a campaign, along with General Electric, that might well make them even richer, at least in the short term. The campaign will also do their customers good by saving them considerable money and do the environment a lot of good by saving prodigious amounts of energy. The invisible hand is moving. The campaign aims at convincing the public to shift from the incandescent light bulbs that now dominate the market for household lighting, and which are essentially the bulb that Thomas Edison so famously invented in 1879, to CFL’s—compact fluorescent light bulbs. The latter have been around for over 20 years but have been unable to capture even 10 percent of the market. There have been two reasons for that. One is that the early models were terrible. They were very slow to turn on, didn’t produce much light, and what light they did produce was often harsh. Many of them made an annoying hum and didn’t fit in many existing lamps. Those problems have all been fixed. CFL’s today take perhaps a minute to reach full brightness but are bright enough right away and otherwise are indistinguishable from incandescent bulbs. The other problem is price. CFL’s cost at least three times as much as the Edisonian bulb. So why should the public switch? Again, there are two reasons, both powerful. First, the CFL bulb lasts upwards of 10 times as long before needing to be replaced. So while CFL’s are three times as expensive to buy, their purchase price per hour of use is less than one third as much as Edison’s bulb. The second reason is even more powerful, for it involves immediate payback. A CFL bulb uses 75 percent less electricity to produce a given amount of light. An incandescent bulb produces mostly heat and can reach 300 degrees. A CFL bulb heats up only to about 100 degrees. So despite the higher initial cost, consumers would be in the black, thanks to energy savings, in just five months and saving money every month thereafter until the bulb burns out in eight or ten years. Now comes the really good part, thanks to the law of large numbers. There are about 110 million households in the United States. If every one of those households switched just one incandescent bulb to a CFL, it would save as much electricity as is produced by two average power plants. In terms of fossil fuel not burned and greenhouse gases not put into the atmosphere, it would be the equivalent of taking 1.3 million cars off the road. And how many lightbulb sockets does the average American household have? Believe it or not, the average is well over 50. I just counted and I have 43—from outdoor floodlights to 15-watt pseudo-candle hall lights—and I have a relatively small house. Some of my palazzo-dwelling neighbors must have 200 or more. Do the math, and there is the clear potential for a mammoth reduction in energy use and carbon emissions at absolutely no sacrifice by the average consumer. Talk about a win-win situation. Wal-Mart and GE, which has 60 percent of the domestic light bulb market, are hoping to double the CFL share of that market this year and have it grow steadily thereafter. In the short run, they will sell a lot of light bulbs at higher prices than the bulbs they sell now, but once saturation is reached and the incandescent light bulb joins the phonograph and the stock ticker among the Edison inventions retired to the Smithsonian, they will, presumably, sell far fewer. It is a risk they seem willing to take, perhaps in hopes of reaping a major PR benefit. That, of course, remains to be seen. It’s an old saying that no good deed goes unpunished, and if you’re a corporation, that goes double. For much more on this, see here.
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