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  • The Great Lightbulb Conspiracy

    Posted by Grurray on 15th October 2014 (All posts by )

    This year has seen many historical anniversaries, and one that has gotten some recent notoriety is the 90 year anniversary of the planned obsolescence of the light bulb by an industry cartel.

    How exactly did the cartel pull off this engineering feat? It wasn’t just a matter of making an inferior or sloppy product; anybody could have done that. But to create one that reliably failed after an agreed-upon 1,000 hours took some doing over a number of years. The household lightbulb in 1924 was already technologically sophisticated: The light yield was considerable; the burning time was easily 2,500 hours or more. By striving for something less, the cartel would systematically reverse decades of progress.

    It’s even more notable because last week three pioneers in LED technology just won the Nobel Prize.

    We all know about the efficiency standards for light bulbs that are effectively banning incandescent bulbs in slow motion. I’ve noticed during my usual stops at the home improvement stores that the choices for the vintage bulbs are fewer and farther between, and the prices for what’s left are creeping up.

    The promise of the new standards is that the new LED lighting is far superior. While it’s much more expensive, the steady drumbeat of the diffusion of technology is supposed to reduce the costs, eventually putting them within reach of the common household.

    The costs have indeed dropped exponentially, but that’s undoubtedly been helped by government aid and deliberate shortages of the old technology. Besides the federal standards, every state has some sort of efficient lighting rebate program that artificially decreases the price. Tax breaks and other incentives have encouraged manufacturers like GE to expand production in the US and create a few hundred jobs, which, although nice, don’t quite make up for the thousands they shipped to China during the Great Light Bulb Leap Forward. How much of the price gains can be attributed to Moore’s Law type improvements and how much to government supports is a legitimate concern.

    Now there’s some question about how long prices are going to keep falling going forward.

    In stark contrast to the promised dynamics that the technology is supposed to follow, LED prices actually rose considerably last month.

    In contrast, 40W equiv. LED bulb prices were up 14.3% in the U.S. market. Manufacturers including Cree, Philips, GE and other renowned brands have raised prices for certain products in the U.S. market.

    Because of industry consolidation, the top ten LED manufacturers now control 61% of the market. That much control brings pricing power over the market, and they are apparently now using it.

    With green energy executive orders on Obama’s agenda and the unelected EPA issuing mandates, the oligopoly is sure to get worse with permanently higher cost per lumens the possible result.

    The LED industry, taking a page from the incandescent bulb industry so many years ago, is discovering the key to the rent seekers’ success – competition is for losers, and unfortunately sometimes so is progress.

    Posted in Economics & Finance, Energy & Power Generation, Politics, Tech | 21 Comments »