Monday, June 24, 2013

When you shouldn't be mad about mediocre service


Sometimes we feel like there are industries in which all firms do a mediocre job. It is tempting to get annoyed or even mad in those situations and to say something like this: Even I could do a better job, if I only put some time into it! Just recently, I felt like that when I took my car for polishing at a local auto body repair shop. They didn't do a bad job; they just didn't put that extra effort that I initially expected. Later, I realized that no body shop would put that extra effort. This indicates that putting that extra effort is not profitable for those businesses.

This is a perfect example for applying our economics theory. I was not happy with the service, but, in retrospect, I know that I would not try to do the polishing myself even if it meant far better quality compared to what I received from any auto body shop. It would just take too much of my time to do the job "right." What does this mean? This means that my time is more valuable to me if I used if for doing something else, say, writing about economics, than if I used it to polish my car. So, even the mediocre service I received was good enough to keep me from doing the polishing job myself. The auto body shops don't need to do a better job than I ever could; they just need to do as good of a job as it is sufficient to keep me from becoming self-sufficient in my car polishing needs.

This is what we economists call the law of comparative advantage. Even though I am better than any auto body shop both in writing about economics and in car polishing, I chose to devote all my time to writing, and to let them provide me with the car polishing service. I am better off this way than if I used some of my writing time for car polishing. This is the beauty of specialization, or--letting others do something for you instead of you doing it yourself. Specializing in some activities and letting others do other activities for you makes you better off even if you can do everything better than anyone else. This is why you should not be mad if the best you can receive on the market is mediocre service, as long as the service is not bad enough for you to decide to do the job yourself.

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