How Markets Turn Lousy Products into Great Ones

By Malachy McDermott

Most people have managed to get through life without ever seeing Texas Chainsaw Massacre: The New Generation. It currently stands at a 16 percent score with critics and an 18 percent score with audiences on Rotten Tomatoes, so most people, we can conclude, have dodged a bullet by not seeing it.

However, this production does have two very interesting features: Matthew McConaughey and Renée Zellweger. That’s right, two of Hollywood’s biggest names are in a movie that not even one in five people think is passable. McConaughey’s net worth currently stands at $150 million, while Zellweger’s stands at $90 million.

So, what is the leap from a direct-to-video flop and multi-award-winning, highly paid actors? Well, it has to do with how capitalism approaches inefficiencies. Markets can take bad products, learn from them, and turn them into great products that give the public what it wants and needs.

To illustrate this best, let’s look at what happens when there are no markets. In command economies, producers don’t learn from bad products and inefficiencies. As a result, the public doesn’t get what it needs. We’ll use an extreme example to illustrate the point clearly: the Lysenko disaster.

For those who don’t know the story, in brief, Trofim Lysenko was a Soviet scientist who was determined to prove that his own pseudoscientific theories on botany were fact. Lysenko’s actions and practices contributed to the famines that killed millions of Soviet people. Eventually his practices had to be outlawed; they were so dangerous and destructive.1

Although evident from the start, Lysenko’s inefficiencies were allowed to continue due to a combination of party loyalty, fear, and idealism. The Soviet leadership liked Lysenko’s ideas so he was able to keep on with his terrible plans for a long time.

A profit motive or price indicator, or even a robust scouring of the data and its results, could have halted this in its tracks, saving millions of lives and allowing the people to adopt actual scientifically proven policies.

When an individual or group is allowed to exist outside of the profit-making and price indicators spectrum then either many costly reviews of their findings will be needed or gross inefficiencies will be made. This is one of the benefits of the “invisible hand” and thus why capitalistic production remains one of the best passive methods we have for rewarding people for good work that is in demand.

Now back to the movies. How can capitalists (who rave about efficiency) justify the production of a film like The New Generation? The answer is in the stars! When Renée Zellweger took to the screen for this picture, it was her first lead role. Although the movie was universally panned, Joe Leydon of Variety magazine lauded Zellweger, calling her “the most formidable scream queen since Jamie Lee Curtis went legit.”

The rest, as they say, is history. McConaughey was coming off the back of the hit Dazed and Confused and so was already on the way to success. But everyone has to pay the bills.

And that’s the point.

The overall product of the movie was, according to critics and audiences, fairly dismal. But the individual performances were noted as being standout at the time. Not to mention that most of the crew were locals trying to make a few dollars, Zellweger’s comment that “[i]t was kamikaze filmmaking” is probably more than true.

However, without all of those combined individual efforts that were monetarily rewarded, the movie may not have happened, and Hollywood would have been deprived of one of its more profitable actors.

This is an example of how skills that are learned, honed, and perfected on a bad project are, within the capitalist mode of production, not wasted. The individual is rewarded and can go on to enjoy the benefits of their hard work in new projects.

Those responsible for the poor quality (producers, directors, etc.) are admonished, and people are wary of hiring them again. Kim Henkel, for example, who directed this movie, would never direct again and went back to writing and producing, which he seems to be pretty good at, remaining in constant work. And more recently, a new iteration of Texas Chainsaw Massacre is due to be released in 2021, with Henkel as producer.

When contrasted with the idealism of Soviet pseudoscience, it’s clear that the damage done to an economy by a centrally planned system is not just shoddy products or bad service, but that people remain working toward inefficient goals long after their results have been shown as faulty.

We need to produce bad movies, in order to make good ones. We don’t know what will be big (Clerks, for example, cost $27,575 to produce and went on to make millions, launching the career of Kevin Smith) or what will flop (Ghostbusters, released in 2016, cost $144 million to make and is estimated to have lost $50 million). But aside from that, we don’t know who will be in those movies ready to be noticed and give the world something great.

This is the same reason we need bad products and services; we don’t expect them to last, and we don’t want them to make profits, but we do want those who have shown individual greatness to be recognized.

A true meritocracy does not rely on party loyalty, idealism, or fear to function. It only needs a system whereby work is rewarded, that no one be coerced into continuing to make bad products, and that those responsible be held to account by the consumer.

Malachy McDermott has a degree in economics from University College, Dublin in Ireland.

Image: G Yancy/Flickr

Source: Mises.org