Oh! Inverted World!

I may not be an economist, but it recently occurred to me that something seems to have gone awry in the modern, mass-production-oriented marketplace.

As we all know, the principles of supply and demand are considered to be of fundamental importance in the workings of a healthy free market economy. The greater the demand for a good or service, so one crucial thread of the idea goes, the higher the fair market price of that good or service on the open market, particularly if the means to produce the good or service are in short supply. On the other hand, the price of a particular good or service might still be kept relatively low despite high demand if the good or service can be cheaply made available. In this way, supply and demand in classical economics act as counterweights to one another, theoretically, and ultimately work to bring consumer prices, producer costs, and everything else into a kind of optimal equilibrium.

But consider this: In modern, industrialized, mass-production-oriented economies, goods and services that aren’t in great demand actually cost more to produce than those that are in greater demand because the costs associated with large-scale manufacturing technology and infrastructure make it cost-prohibitive to produce smaller quantities of most goods.

Suppose, for example, that I wanted to buy a left-handed patio chair. What’s a left-handed patio chair? It doesn’t really matter, but let’s just say it’s a variation on the common household plastic patio chair.

So I drive down to the local patio furniture outlet and ask them how much it would cost me to buy a left-handed patio chair. Naturally, the salesman looks at me as if I’m crazy. I reassure him that I’m not, and I go on to explain exactly how a left-handed patio chair differs from a typical patio chair. After some back and forth, he tells me he can’t help me but directs me to the chair factory downtown that produces all the chairs sold in his shop. I thank him and continue along my way.

When I arrive at the factory, I tell the factory boss what I’m looking for, and he apologetically says that there just isn’t enough demand to merit producing left-handed patio chairs in his factory, but he knows a craftsman up in the Catskills who can whittle such a chair for me for about $500. I tell him I need it in plastic, like an ordinary patio chair. “Then you’re out of luck, “he replies, because he doesn’t even know if that’s possible.

As this rhetorical example illustrates, in a mass-production oriented economy, goods for which little or no demand exists are nevertheless significantly more expensive on the open market than goods that are in higher demand even when the raw materials needed to produce them are abundantly and cheaply available!

Doesn’t it stand to reason, then, that mass-production oriented industries are fundamentally incompatible with the most basic axioms of a healthy free marketplace?