The University of Chicago Law School Faculty Blog

Obama's Retrospective

President Obama's recent Executive Order regarding cost-benefit analysis and administrative procedure has drawn criticism both for what it does and for what it does not do.  The Order provides little new guidance on how administrative agencies and the Office of Information and Regulatory Affairs (OIRA) should conduct cost-benefit analysis, and perhaps unavoidably it leaves many pertinent questions unanswered.  But it does issue one significant directive: it requires agencies to formulate plans to perform "retrospective analysis" of existing significant regulations.

Student Blogger - Fall WIP: Randal Picker Debunks the Razor-and-Blades Myth(s)

Stroll through the aisles of an electronics store—or, if you prefer scroll through the pages of Amazon—and you’re bound to see countless examples of an age-old marketing scheme: the “razors-and-blades” business model. The underlying concept is simple—first lure consumers with low-priced platform products, and then increase sales with high-priced complementary goods. For instance, fancy multifunction printers are sold at deep discounts, while the ink cartridges without which the printers would be useless seem exorbitantly priced. With the ascent of e-commerce, the razors-and-blades model has taken on a new relevance, as web entrepreneurs struggle to find a way to monetize the free services they offer. But, as Professor Randal Picker argues in The Razors-and-Blades Myth(s), there are two problems with the model.  First, it doesn’t seem to work in theory, and second, it doesn’t seem to have been used by the very man widely credited with inventing it.

At a recent WIP talk, Professor Picker discussed the origins of the razors-and-blades myth. As the story goes, King Gillette realized that if he sold razor handles cheaply, he could increase the market for his recently invented disposable blades. But if this were so, Professor Picker hypothesizes, why couldn’t a competitor also offer a cheap—or even free—razor handle, and steal away market share? After all, once the initial supply of razors is exhausted, a consumer in the razors-and-blades world would be able to switch costlessly to a competitor’s handle. Alternatively, a competitor could dispense with the razor handle altogether, and focus solely on selling blades that were compatible with Gillette’s loss-incurring handle. Offering low-price handles seems only to make sense, Professor Picker surmises, in a world where either consumers are deeply loyal, or competitors are blocked from entering the market.

As it turns out, Gillette was able to exclude competitors from the market, but even so, the historical evidence does not suggest that he played the razors-and-blades game. In 1904, Gillette was granted patents for his safety razor design. In the patents themselves, Gillette seems to contemplate that the blades would be sold cheaply; indeed, one of the chief claimed benefits of the new blade was that, because they were so cheap to manufacture, consumers would treat them as a disposable rather than a durable good. As Professor Picker concedes, making something cheaply and selling it cheaply aren’t the same thing. However, Professor Picker argues that Gillette had to offer the blades for a low price to entice consumers who had at that point only ever shaved with a straight blade. Offered a new product that was both disposable and expensive, consumers were likely either to stick with their tried-and-true blade, or to make the new blade last longer by resharpening it.

By studying catalogues and newspaper ads from after Gillette was awarded the 1904 patents, Professor Picker determined that, rather than playing razors-and-blades, Gillette was in fact selling the razor handle itself as a luxury good. A Wanamaker ad in The New York Times listed a new Gillette razor plus a dozen blades at $5, and a replacement pack of a dozen blades at $1, making the implicit price of the razor handle itself $4. In contrast, the same ad offered a clearance price of $12 for men’s suits, and $12.50 for newly tailored women’s suits. To put this in context, Professor Picker notes that $5 was the equivalent of “roughly one-third of the average weekly industrial wage in 1900.” It seems that during the time when, thanks to patent protection, it would have made the most sense to engage in razors-and-blades marketing, Gillette was doing the exact opposite.

Gillette’s response to the impending expiration of its patents in 1921 further undermines the razors-and-blades myth. After first securing a patent on a new razor that promised “an increase in shaving efficiency of more than 75%”—leaving unspecified, Professor Picker notes, precisely what that meant—Gillette repackaged its older razor and sold it for $1. Gillette’s annual report for 1921 shows that, based on the success of the lower-priced razor, it had “sacrificed potential razor blade sales by selling razors at a premium price” during its period of patent protection.

The fact that Gillette left the price of blade largely untouched after introducing the “freemium” version of its old razor suggests that Gillette was forced by emerging competition into playing some form of razors-and-blades after its patents expired—selling a cheap handle bundled with comparatively expensive blades. Even if that was so, however, Professor Picker points out that this actually weakens the razor-and-blades model, which in its traditional formulation holds that it is “almost impossible to play razors-and-blades without a way to lock the consumable goods to the platform.” Perhaps, as Professor Picker suggests, Gillette’s willingness to play—and succeed with—this modified form of razors-and-blades may have been in part due to its large installed consumer base resulting from its contract to supply the US Army with razors and blades during World War I.

Professor Picker’s research leaves us with not only the historical curiosity that the man thought to have created razors-and-blades was reluctant to play it himself, but also a puzzle with important implications for our modern world. As Professor Picker remarks about Gillette’s pricing strategy after the expiration of its patents, razors-and-blades “seems to have worked at the point where the theory suggests that it shouldn’t have.” Many current products—such as cell phones and video game consoles—are two-stage platforms similar in some ways to razors and blades. Considering the lessons we can learn from Gillette’s example, it's worth asking to what degree the law should facilitate devices that control access to those platforms. Should, for instance, the Digital Millennium Copyright Act criminalize the circumvention of access-restriction measures? These and many other similar questions continue to be debated. Professor Picker’s revelation that—at least in the supposedly canonical case of King Gillette—the locks provided by the legal system are less beneficial than previously thought is a significant contribution to this ongoing debate.

 

Student Blogger - Fall WIP: Martha Nussbaum examines political emotions

Without harnessing the emotions of its citizenry, a nation would find it nearly impossible to achieve many of its important goals. The armed services, for instance, rely on patriotism to help fill their ranks with willing recruits, while anti-littering campaigns succeed by tapping into a sense of civic pride. Given the prominence of public emotion in political action, then, it seems uncontroversial that governments would devote significant energy to cultivating and channeling the passions of their citizens. But how can they do so while remaining true to the bedrock liberal principles of individual liberty and autonomy, and without veering into dictatorial oppression? Answering these questions is the project undertaken by Professor Martha Nussbaum in a book in progress, Political Emotions: The Public Psychology of a Decent Society.

In several chapters shared at a recent WIP talk, Professor Nussbaum briefly sketched the challenges confronting those leaders wishing to generate, in the words of philosopher Jean-Jacques Rousseau, a “civil religion.” First is the danger of stirring up overly intense and indiscriminately focused emotions. As Professor Nussbaum suggests, emotions are not simply uncritical impulses; they are also normative evaluations. That is, an emotion is an endorsement of a particular political view, and governments must therefore be careful not to foster emotions that have as their object the subjugation or exclusion of certain political subsections of the population.

Second, political emotions require a significant amount of devotion in order to have any practical effect. However, this devotion cannot be blindly unwavering. Instead, Professor Nussbaum argues that emotional devotion must “remain compatible with liberal freedom.”  That is, it must be subject to criticism, subversion, and dissent. Humor, for instance, can help deflate the pretentions of patriotism, and in doing so keep it from metastasizing into warmongering.

One way to resolve the inherent tensions of political emotions, Professor Nussbaum suggests, is for the government to encourage and enable artists to create different conceptualizations of worthwhile political values. While Professor Nussbaum discusses the many political thinkers—including Rousseau, Locke, Mill, and Rawls—who have contributed to the discourse on the significance of moral sentiments, she argues that the power of political emotions is better captured by music, dance, and poetry than by transparently rational philosophy. Indeed, Professor Nussbaum explores in great detail Auguste Comte’s globally influential idea for a “religion of humanity,” but she ultimately rejects it as a suitable basis for generating true public emotions in part because its staunch positivism leaves little room for artists to freely exercise their imagination.

To illustrate this point, Professor Nussbaum focuses in particular on the work of Walt Whitman and Rabindranath Tagore.  In “When Lilacs Last in the Dooryard Bloom’d,” for instance, Whitman creates a public mourning ritual for the loss of Abraham Lincoln, and speaks directly to the deeply felt emotions of a grieving reader. In doing so, Whitman has transfigured Lincoln’s death into a moral symbol for the pursuit of justice, and has elevated the reader’s sorrow in reaction to a specific loss into a rededication to the civic ideals that Lincoln represented. Similarly, Tagore’s “Amar Shonar Bangla,” later adopted as the national anthem of Bangladesh, portrays the natural beauty of Bengal as erotically seductive. Tagore’s poetry suggests a tender, sensuous relationship between the reader and her nation that contrasts starkly with the aggressive imperialism of Bengal’s British colonial rulers.  Both Whitman and Tagore, then, aim to inspire in their readers a passion towards civic institutions, and ask them to engage in the public sphere with a spirit of love.   

Tagore in particular built on Comte’s ideas, but, as Professor Nussbaum notes, he departed from Comte in a number of important ways. First, Tagore’s pluralist humanism seems to be a direct rejection of Comte’s cultural hegemony. Furthermore, Tagore’s poetry embraces an uncertainty that is at odds with a Comtean sense of order and restraint. Indeed, Tagore’s vision for society borrows heavily from the Bauls, a group of mystic Bengali minstrels whose delight in counter-cultural nonconformity would have no place in Comte’s rigid religion of humanity.

Tagore aimed to infuse the Baul spirit in society through education and popular music.  While his school, emphasizing a pedagogy of movement and nature, flourished for a time, it is perhaps in his thousands of popular songs that Tagore’s legacy is most lasting. Gandhi often cited Tagore’s “Ekla Cholo Re” as one of his favorites, and the song’s theme of quiet but courageous resistance resonated deeply within the struggle for Indian independence. Professor Nussbaum detects another echo of Tagore’s work in the rhetoric of Jawaharlarl Nehru, whose “Tryst with Destiny” inaugural address described the unfinished business of building an Indian state as a labor of love.

Having identified the work of Whitman and especially Tagore as promising developments of Comte’s project of engendering political emotions, Professor Nussbaum proposes to focus next on the normative question of determining which values those political emotions should impel society towards. She will then delve into a survey of humankind’s psychological capacities, paying particular attention to play and its importance in fostering a compassionate concern for others. Last, she will explore the options available to a liberal society both at the level of institutional design and in the formation of individual identity. In doing so, and with Whitman and Tagore enlisted as spiritual guides, Professor Nussbaum will map out the terrain of a just, compassionate, and sustained culture of political emotion.