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In theory, the free market and democracy both work because suppliers are incentivized to provide products and services that people want. Economists consider it a perverse situation when the market does not provide what people want, and look for explanations such as government regulation.
The funny thing is that sometimes the market doesn't work, and I look and look for the reason why, and all I can come up with is, People are stupid.
I've written before about the market's apparent failure to provide cup holders in cars. I saw another example this week in the latest Wired magazine, a piece on page 42 about a start-up called Thinx to make re-usable women's underwear that absorbs menstrual fluid--all of it, so women don't have to slip out of the middle of meetings to change tampons. The piece's angle was that venture capitalists rejected the idea because they were mostly men and so didn't "get it".
I'd guess they "got it". It isn't a complicated idea. The thing is, there are already 3 giant companies battling for that market. The first thing a VC would say when you tell him you're going to make something better than a tampon is, "Why haven't Playtex, Kotex, or Tampax already done that?"
So, Thinx did a kickstarter and has now sold hundreds of thousands of thousands of absorbent underwear for about $30 each.
The failure in this case is not that VCs are sexist, but that Playtex, etc., never developed this product, although there evidently is a demand for it, and there is no evident reason it couldn't have been produced 20 years ago. The belief that the market doesn't fail then almost led to a further failure, the failure to develop the product at the present time, because the belief that the market doesn't fail implied the product could not be profitable.
I just now came across an even clearer case of market failure: Sugar-free Tums.
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