Question

Writing about a trip to Switzerland in an article in the New York Times, economist Daniel Hamermesh noted that electrical outlets in Switzerland use an unusual threeprong plug. Adapters for that type of plug are not typically included in adapter sets, so he and his wife weren't able to plug their computers into their hotel's outlets. Hamermesh wondered: "Why does Switzerland renounce the network externalities that would come with using standard European plugs with their standard 220 -volt electricity?" How is Switzerland "renouncing network externalities" by not using standard European plugs?

Short answer

Switzerland is 'renouncing network externalities' by not using standard European plugs because, by doing so, it reduces the value of the network of standard European plug users. This can discourage foreign tourists and business people from traveling to Switzerland, due to the inconvenience of having to get a unique adapter only for that country.

Step-by-step solution

Understanding Network Externalities

Network externalities are the effects that one user of a good or service has on the value of that product to other people. In this case, the more people use the standard European plugs (the network), the more valuable those plugs are to each user, as they increase the users' ability to connect their devices in different places.

How Switzerland is renouncing network externalities

By not adopting the standard European plug system, Switzerland makes it harder for foreigners to use their electronic equipment in the country without obtaining a unique adapter. This decreases the value of the 'network' because the standard European plug becomes less useful. The network here is reduced because it does not include Switzerland.

Interpreting the Effects

This can discourage tourism or business activity, as foreigners may find it inconvenient to obtain an adapter unique to Switzerland. Although this unusual requirement might benefit Swiss adapter manufacturers, the overall effect is likely to be negative, given the potential inconvenience for travelers.

Key concepts

Standard European Plugs

Imagine traveling throughout Europe and seamlessly plugging in your devices wherever you go - this is the convenience brought by standard European plugs.

The standard European plug, also known as the Europlug, is a flat two-pin plug that fits into any socket that accepts 2.5 mm round contacts on 19 mm centres. They are designed for use with devices that require 2.5 amps or less, which typically means they're safe for chargers, laptops, and other small electronics.

Despite being hailed for its convenience, not all European countries have adopted this standard. Switzerland, notably, has its own unique three-prong plug, which creates a scenario where travelers from other parts of Europe and the world cannot plug their devices in directly. This need for an adapter not only adds an extra item to pack but also complicates what could be a straightforward process.

Therefore, by not adopting the standard plug, Switzerland misses out on these network externalities, meaning the inherent value that is created when more people uniformly adopt a product or system. Uniform plugs across Europe exemplify a shared standard that simplifies and enhances connectivity for everyone involved.

Economic Effects of Product Compatibility

Product compatibility plays a significant role in the economy by leveraging the strength of network externalities.

The concept is quite simple: when a product is compatible with others in its network, its utility and hence the demand increases. This principle is often discussed in the context of technological goods like DVD players needing to be compatible with different discs, or smartphones with various apps.

In terms of economic impact, product compatibility can lead to standardization across an industry, reducing the need for a myriad of variants and simplifying supply chains. This, in turn, can lower production costs and prices for consumers.

Conversely, when Switzerland opts out of the common plug system, it affects its economy by creating barriers. These barriers can manifest in the form of reduced tourist convenience, potentially leading to a slight decline in travel desirability. Moreover, it goes against the grain of the 'single market' ethos that the European Union strives for, which aims to reduce trade barriers and enhance economic efficiency. The direct and indirect costs associated with this lack of compatibility can be seen in the need to produce and purchase separate adapters and the possible hesitancy of people to engage with a market that is seen as less accessible.

Adapters and Electrical Outlets

Adapters and electrical outlets are the bridge and the gateway for our electronic devices to function in foreign lands. But when the gateway is unique, as is the case with Swiss outlets, the bridge - an adapter - becomes a necessity.

An adapter allows a device plug that is shaped for one region's outlet design to fit into another. Though it sounds simple, it's an extra piece of equipment to purchase, carry, and sometimes even to remember to bring. In the context of Switzerland, this requirement creates a slight hiccup in the flow of electronic device usage for those visiting from abroad.

From an energy perspective, the design and function of electrical outlets and the adherence to voltage standards are critical for safety and effectiveness. Swiss outlets themselves are designed to cater to the three-prong plug that runs on the standard 220-volt electricity used throughout Europe, indicating compatibility in terms of power transmission but not in physical design.

On a larger scale, the inconvenience may seem minor, but multiplied by the number of visitors and business transactions missed or hindered, there emerges a clear picture of lost economic opportunities and a slight dent in the hospitality aspect of the nation's image on the international stage.