Earlier quoted context omitted.
> I don’t think this leads to market collapse You must have read that the Market for Lemons is a type of market failure or collapse. Market failure (in macroeconomics) does not yet mean collapse. It describes a failure to allocate resources in the market such that the overall welfare of the market participants decreases. With this decrease may come a reduction in trade volume. When the trade volume decreases signific…
The Wikipedia page for Market for Lemons more or less summarizes it as a condition of defective products caused by information asymmetry, which can lead to adverse selection, which can lead to market collapse. https://en.m.wikipedia.org/wiki/The_Market_for_Lemons The Market for Lemons idea seems like it has merit in general but is too strong and too binary to apply broadly, that’s where I was headed with the suggesti…
The real effects are way smaller then claimed in the paper and market collapses don't or almost never happen for that reason.
And in real live many people drive reliable used cars. And may people buy used cars over and over again. Because its not about verification, only about picking one of the better options, and many heuristics can be applied to do that.
If market forces push everything towards lower quality. Why are cars (and everything else) today so much more energy efficient and more comfortable. Why are phones so much better? Why is pretty much every product today so much better then it was 50 years ago?
Somehow everything gets worse, yet my operating system on my computer crashes far less often. Despite many more features. My hardware fails less often to, harddisk, then and now, its a joke.
The food is better, both in quality and diversity when I go to restaurants.
I really don't understand how people can argue against this claiming quality is going down over time. Outside of very specific things very temporarily, like twitter, this isn't the case.
There are many reason for this, and only focusing on finding a list of as many 'market failures' as economist can come up with, misses so much about how in the real world people (including governments) deal with many of these things.