Planned Obsolescence - Economics of Planned Obsolescence

Economics of Planned Obsolescence

Planned obsolescence tends to work best when a producer has at least an oligopoly. Before introducing a planned obsolescence, the producer has to know that the consumer is at least somewhat likely to buy a replacement from them. In these cases of planned obsolescence, there is an information asymmetry between the producer — who knows how long the product was designed to last — and the consumer, who does not. When a market becomes more competitive, product lifespans tend to increase. When Japanese vehicles with longer lifespans entered the American market in the 1960s and 1970s, American carmakers were forced to respond by building more durable products.

While planned obsolescence is appealing producer, there can also be significant harm to society in the form of negative externalities. Continuously replacing, rather than repairing, products creates more waste, pollution, uses more natural resources, and results in more consumer spending. One workaround for these setbacks can involve a consumer getting more tech-savvy about them so they can jury-rig them to work with newer equipment similar to a MacGyverism; and upcycling the resources can offset the budget for home projects, whereas downcycling allows for more generalized purposes to live on. And those consumer strategies can counter the setbacks.

Others have defended planned obsolescence as a necessary driving force behind innovation and economic growth. Many products, such as DVDs, become both cheaper and more useful the more people have them. Planned obsolescence will also tend to benefit those companies with the most modern and up-to-date products, thus encouraging extra investment in research and development that often has large positive externalities.