Market Failure – Lost Luggage Edition

TRAKDOT-DEVICE-250x200Markets fail. That’s why we need markets.

I read a column by that name from Arnold Kling a couple years ago and it has stuck with me since. When a market fails (I would argue that happens much less frequently than some would have you believe), statists immediately call for government to step in and solve the alleged problem. But in many cases  markets can and will correct themselves.

[I think too often when some group doesn’t like the outcome of a well-functioning market, they describe the outcome as a “market failure.”] (pic via Trakdot)

One of the classic examples might be the used car market (see George Akerlof). Sellers of used cars know much more about them than potential buyers (information assymetry). The sellers don’t want to sell for less than the perceived value of the car. The potential buyers are hesitant to buy for fear of buying a lemon, so they would prefer a lower price. It seems like an intractable situation, a market failure. But what happens? Markets solve the problem with used car reviews, professional inspectors, guarantees, and no-questions-asked return policies. I’m sure I haven’t done the subject or example justice, but I think you get the point.

Anyway, here’s where this is all going. We might be able to think of the airlines frequently losing luggage as a market failure, and this as the market solving the problem. If you are a high-roller and travel a great deal this might be well worth the money.

Airline lost your luggage? Track it on a map with this cellular device – Ars Technica: Dealing with an airline that’s lost your luggage and doesn’t even know what city it’s in is always a frustrating experience. One startup at the Consumer Electronics Show says it has the answer: a $50 cellular device that sits in your luggage and pinpoints its location. The product is called Trakdot and was made by a company called GlobaTrac, which says it’s in a pilot production run and will be sold to consumers in March. The device will cost $50 and require a $12 yearly charge to use the service, which lets you track the device on a website and get text message alerts about your luggage’s location.

Additional links:
Markets Fail. That’s Why We Need Markets – Economics – AEI

  • jonnygalt

    Wait…a $50 device that you leave in your luggage? Better equip it with a camera so it can photograph the TSA goon that steals it!

    • http://pretenseofknowledge.com/ speedmaster

      Hehe, yeah, well, there’s that, too.. ;-)

  • http://twitter.com/DWMFtweets DWMF

    I dunno, I seem to recall stories about people who had tracking software on the Iphones, and when they got stolen, took it to the police and the cell phone companies who refused to do anything about it whatsoever.
    I envision someone standing at the American Airlines baggage claim place arguing with a clueless minimum-wage employee: “I don’t care what your little computer says, we checked for your bag and it isn’t here. Now go away or I’m gonna get the TSA guy to taze you”