Thursday, April 7, 2011

Missing the connection

Electric car makers in Europe were asked to agree on a single plug by 31 March of this year. They have failed. Germany insisted on its design, France and Italy opposed it, with the consumer once again nowhere in sight. It's clear that if a single plug were developed for cars, that it would eventually spread to other electric equipment, at least on the rest of the continent. Except perhaps for Britain which always does its own thing and doesn't care what everyone else is up to.

Europeans know it well, as do visitors conducting a multi-country tour. In many cases, switching countries requires switching plugs. It's an unbelievable pain in the neck if you're a consumer. And while the consumer suffers, governments are insisting that it's their way or no way.

In economics class, we teach that this is a case of transaction costs...that the cost to consumers of switching from one plug to another prohibits switching. But this latest episode shows that's just nonsense. It's comparative advantage for companies and the national governments putting politics in front of better, simpler life.

But just imagine...Europe could use an economic stimulus along with that better, simpler life. What better way than giving people an incentive to upgrade their electric sockets?


  1. Are you sure this is a case of transaction costs? I would model this as path dependence, but that's just me. (I jused to have a page in my thesis about the Swedish shift from driving on left side of the road to the right side, but I cut it because I had too many examples of path dependence & switching costs already. It's still a cool story, though.)

  2. Yes, that's what I meant. Path dependency for the most part relies on transaction costs. Not always (as in the case you mention), but often.