In the days and weeks following the demise of the Berlin Wall near the end of 1989, West Germans witnessed a curious sight: East German residents, finally able to travel freely, flooded western streets and roads with their Wartburgs and Trabants.
Like many vehicles built in Eastern Europe and the Soviet Union during the communist era, these cars were throwbacks to earlier days of the post-war European automobile. The Wartburgs and Trabants were especially notable. They featured three-cylinder, two-stroke engines that produced large amounts of exhaust smoke and noise. East Germans often waited 12 to 15 years for delivery after ordering one.
As one might expect, these vehicles were boxy, slow, uncomfortable, and prone to breaking down. However, in East Germany in 1989, at least they were not obsolete. The situation was very different in the West, where such cars had long since been replaced by vehicles that performed far better.
### The Myth of Planned Obsolescence
Socialists and critics of the market often claim that one of capitalism’s evils is its promotion of “planned obsolescence.” According to the AFP news site, planned obsolescence “is a widely criticized commercial practice in which manufacturers build in the expiry of their products so that consumers will be forced to replace them.”
The idea seems simple and logical at first but is mostly wrong. People who believe in planned obsolescence as a tool forcing consumers to constantly buy new models assume that companies introduce new product features solely to make current models unusable within a short time.
Take laptop computers, for example. Many of us have purchased a laptop, knowing that within a year, newer models with better features will be available. We can then either keep our current machine for a while or upgrade. There are many reasons companies continually develop new products, and these are rarely nefarious, despite what some critics claim.
### The Apple iPhone Controversy
Sometimes, accusations about planned obsolescence have serious consequences. Apple recently admitted to “intentionally slowing” some older iPhone models, allegedly to encourage people to buy new products. This admission led prosecutors in Paris to open a probe to determine if Apple’s actions warrant charges or even criminal prosecution of some executives.
However, as some experts explain, the slowdown was technical, not commercial:
> “Apple isn’t slowing down iPhones to convince you to switch to a newer model. Instead, it’s to prevent unexpected shutdowns on older devices operating at peak power.”
While some users might choose to upgrade to a newer iPhone rather than deal with a slower device, Apple even made a new battery available to older iPhone users for $29—a cost significantly less than purchasing a new phone.
Nevertheless, accusations that Apple “planned” to make older phones obsolete to boost sales persist, much like Ralph Nader’s accusations more than 50 years ago that U.S. automakers engaged in planned obsolescence to “force” Americans to buy new cars.
### Economic Perspectives on Planned Obsolescence
Economic analysis provides crucial insight into the planned obsolescence debate. Economists Armen Alchian and William Allen argued that planned obsolescence, if used to drive new sales, would be self-defeating. In their book *Exchange and Production: Competition, Coordination, and Control*, they explain:
> “A depressed resale value of a good results in a lower price for a new good.”
Rapid depreciation means the product’s resale price is low, which lowers the product’s “present value.” Producers who intentionally reduce the durability of their products lose profitability on initial sales and risk losing customers to competitors offering longer-lasting goods.
### Automobiles: Evidence Against Planned Obsolescence
Contrary to accusations, cars today last considerably longer than they did 50 years ago. In the 1960s, it was rare for a car to reach 100,000 miles without major repairs. For example, the author learned to drive in 1969 using a 1967 Pontiac Tempest, which managed 100,000 miles but required two engine rebuilds and many other repairs.
Compare that with a 2002 Honda Odyssey van driven until recently, which had nearly 330,000 miles without major engine or transmission repairs. The vehicle was only retired due to accident damage—not age or malfunction.
While Honda may have preferred an earlier sale of a new vehicle, the evidence suggests the planned obsolescence doctrine doesn’t hold. If it did, automakers would continue producing cars that broke down sooner and performed worse over time.
Cars like Volvo and BMW, renowned for longevity and performance, sell at higher prices compared to brands like GM or the more affordable Kia and Hyundai. High resale values of durable vehicles like Volvos correlate with their higher new prices, aligning with economic principles.
### Technology and Product Improvement Over Time
The same principles apply to mobile phones and laptops. Over recent decades, computer prices have plummeted while performance has improved exponentially.
To illustrate, in 1982, the author’s late father purchased a Digital computer with 64K memory, two disk drives, and a dot-matrix printer for $4,000—equivalent to about $10,500 today. Yet today’s laptops and printers, vastly superior even to those from five years ago, can be found for around $500.
Consumers do not lament the obsolescence of older technologies like floppy disks, just as no one investigates car manufacturers for evolving air filter designs. Technological progress naturally renders some products outdated, but this is not malicious planned obsolescence.
### Returning to East German Automobiles
Back to the East German Wartburgs and Trabants seen after the Berlin Wall fell: between 1959 and 1989, these cars changed little and resembled the old Volkswagen Beetle that East German authorities hoped to emulate. By 1989, however, communist-era cars made the Model T look reliable and comfortable.
If authorities in Paris were to apply their current reasoning rigorously, nearly every automaker outside the former communist bloc would be under criminal investigation.
### Conclusion
In reality, the concept of planned obsolescence is economically flawed and often serves as a pretext for government agencies to target innovative entrepreneurs.
This should not surprise us, considering these same elites have long touted the socialist systems that produced cars like Wartburgs and Trabants as superior to the “horrors” of private property and free markets.
Innovation, product improvement, and changing technology are natural and necessary features of a vibrant economy — not evidence of some conspiracy to force consumers into repeated purchases.
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*By understanding the true economics behind product cycles and durability, we can better appreciate the complexities of modern markets and resist oversimplified critiques that serve ideological agendas more than facts.*
https://mises.org/mises-wire/myth-planned-obsolescence