Feeling Thankful, Cars Edition
The automobile industry exemplifies the power of free markets.
I have owned four different cars in my life, from a 1984 Chevy Celebrity to my recent purchase of a 2023 Kia Niro. Each upgrade has felt magical as the year-by-year incremental improvements suddenly accrue all at once. The window crank becomes a powered button, air conditioning becomes standard, and even the lowest trims of entry level vehicles often now come with blindspot detection, automatic emergency braking, and backup cameras.
Buying a new car is like an exercise in time travel. Flash forward a decade and every car is now a luxury car, filled with comforts that were once available only to the select few if at all.
It is equally remarkable just how much more durable cars have become. In the 1970s, it was considered fortunate if your brand new car made it to 100k miles before total engine failure. Today, the average vehicle life expectancy has doubled to 200k and continues to rise.
In just a generation, we drive cars that are vastly more comfortable and last twice as long without costing all that much more.* (Prices are steady for entry level crossovers and sedans, but the trend towards larger trucks and SUVs has driven up the average price.)
These gains in convenience and durability are the product of market competition as manufacturers attempt to woo fickle consumers with new features and improved brand reputation. This creates a quality "ratchet" effect, as I call it, driven by private sector actors, including important mediating institutions like Consumer Reports and AAA.
Yes, the federal government -- via agencies like NHTSA -- creates incentives around vehicular safety; for example, it has accelerated automatic emergency braking adoption at the margins, although that role is primarily about adoption rates rather than actual innovation. Regardless, the government plays no role in vehicle comfort or longevity.
Interestingly, the improving quality of vehicles defies what critics of market capitalism predict should happen. Notionally, markets are supposed to create an incentive to bake in "planned obsolescence," intentionally designing products to fail in order to sell more of them.
To be fair, this can and does happen, but it’s typically a marker of an industry with dominant incumbent firms facing little market competition. In other words, it’s a sign of stunted markets rather than free markets. Indeed, the very idea of “planned obsolescence” was invented to describe the car industry in an earlier oligopolistic era.
In the mid-20th century, manufacturers were insulated from foreign competition by a web of tariffs and subsidies, the sector rapidly consolidated behind the Detroit “Big Three,” and car manufacturing turned into as much a mechanism for delivering union jobs and votes as it was for delivering a consumer product. The manufacturing cartel had a captive consumer audience and acted accordingly.
That changed with tariff reforms in the 1970s and 1980s, which brought in a wave of foreign imports that quickly outcompeted domestic firms on price, quality, and durability. In other words, a freer market featuring more competition has propelled a new golden age of vehicular innovation over the past 40+ years.
So next time you climb into your reliable, comfortable, and (relatively) affordable vehicle, it’s okay to be thankful for the markets that made it possible.
Sidenote #1: No market is perfectly free, a fact still demonstrable in the car industry. Flawed government interventions are responsible for much continuing idiocy in the industry, including how misguided fuel efficiency mandates accidentally killed off the station wagon and how tariff exceptions and the tax code have propelled the rise of oversized pickup trucks. Play stupid regulatory games, win stupid vehicular prizes.
Sidenote #2: Although cars have gotten far better, they are still actually the worst. But that's a category error since by nature they're expensive, depreciating assets that are an incredible suck of time and resources. The true lifetime cost of a car can be half a million dollars or more! We’ve become inured to it, but it’s still insane that buying a car is like signing up for a second mortgage but on an asset whose future value is zero.
And, thanks to progressive urban planners, industry rent-seeking, and our expansive geography, America’s dependence on cars has fundamentally reordered the landscape of our daily lives with pernicious effects. In so many ways, we build our communities around cars instead of people.
Thus, cars are individually miracles and categorically nightmares. Hold both truths in your head at once.