Diseconomies of Scale
Tuesday, July 3rd, 2007
One of the concepts that I imagine will turn up more than once in this blog is what I like to call a diseconomy of scale. I don’t mean it in the corporate sense, but rather in a personal sense where bigger is not necessarily better despite strong intuitions to the contrary. A simple example of this might be sodas at a movie theater. The base price for soda is very high and adding additional capacity to one’s soda is relatively inexpensive. Initially this seems like a simple economy of scale: the more soda one buys, the cheaper it is per ounce (and therefore the cheaper it is per unit of pleasurable drinking experience). However, other factors such as number of empty calories consumed and likelihood of having to run to the restroom during the climactic moments of the film are also increased when you spring for the extra $.30. Depending on one’s priorities and the rate of diminishing returns on the drinking pleasure, one might actually be paying more for a net negative, all things considered.
That said, I think housing decisions can often fall prey to fallacious economy of scale thinking. Presumably this is what leads to the often-mocked McMansion phenomenon. Illustrating an alternative to this kind of thinking, Inhabitat has a neat little article up listing their top five tiniest prefab homes. Obviously, as a house becomes smaller it takes much less energy to heat and cool it, light it, and less material to construct it, among other efficiencies. I want one!