-Analysis-
PARIS — It’s a well-known rule: In the market, if you lower the price by around a third, you will generally double the rate of sales. This has to do with what we call constant elasticity, a concept that all of us in developed countries should master to understand the world we live in today.
Let’s focus on the microprocessors that are all around us. In a third of a century, their volume has multiplied by almost 10 billion and their price has been divided by a very considerable 1 million!
This iron law — also known as Moore’s law and that we don’t, unfortunately, teach in school — explains why each smartphone owner has in his or her pocket a product that 30 years ago would have been worth as much as an Airbus 320.
The phenomenon is visible everywhere.
This phenomenon is visible in high-growth sectors such as in computing and telecoms, but it is at work everywhere, even in traditional areas like agriculture. The writings of historian Fernand Braudel — the underappreciated French genius — illustrate that 300 years ago, food took up 85% of each household’s budget (in contrast to 10% today), that the percentage of agricultural workers in the population has decreased in this period from 67% to below 3%, and that our country exports much of its agricultural products.
It’s not the decrease by 1 million in 33 years, but this revolution over the past 300 years, that should make us reflect. These changes are the result of technological growth and progress. They have completely altered our lives, in proportions that we tend to forget too fast.
Certainly, we can all agree that not everything is going well in the real world today. Yet let us reflect well before adopting trendy theories of “décroissance” (degrowth), and make room for science and technology to create sustainable development.
*Xavier Fontanet is professor of strategy at HEC Paris Business School.
