Tuesday, March 22, 2011

Market failure?

In the past, I’ve sometimes heard the view expressed that, if a market economy functions efficiently, there should be no need for consumer pressure groups like CAMRA. There’s an example here in a comment on one of my Opening Times columns.

Tim Worstall makes an interesting post addressing this point, arguing that, far from being a sign of market failure, the presence of pressure groups is an integral part of the efficient functioning of markets:

And thus, far from CAMRA (or any other such voluntary organisation or banding together) being something which should be unnecessary in a market economy, they are exactly the manner in which a market economy works: voluntary, not directed, cooperation to achieve the desired goal(s). That spontaneous order coming from the application of the innate human abilities to use agency and cooperation to achieve a collective desire.
In the late 1960s and early 1970s, business was much more in the grip of a corporatist viewpoint and took the view that standardisation and economies of scale were desirable and, to a large extent, customers should be “sold” what the company was willing to make. In this situation it made sense to band together in a pressure group to demonstrate to suppliers that there was a demand for a particular product*.

Nowadays, in the age of niche marketing, mass customisation and the “long tail”, things are very different. Today it could be said to a much greater extent that the presence or absence of real ale in a pub accurately reflects the market demand and is not an imposition from on high. Some pubs have it; others don’t, and it should be fairly straightforward to establish whether it brings any benefit to trade.

Edit: there's another post on this subject on the Left Outside blog entitled The Campaign for Real Ale; Capitalist or Not?

* in fact, I get the impression that, while CAMRA undoubtedly brought things together in the early 1970s, there were already clear signs of consumer dissatisfaction with keg beers in the marketplace.