The following appeared as part of an annual report sent to stockholders by Olympic Foods, a processor of frozen foods:
“Over time, the costs of processing go down because as organizations learn how to do things better, they become more efficient. In color film processing, for example, the cost of a 3-by-5-inch print fell from 50 cents for five-day service in 1970 to 20 cents for one-day service in 1984. The same principle applies to the processing of food. And since Olympic Foods will soon celebrate its 25th birthday, we can expect that our long experience will enable us to minimize costs and thus maximize profits.”
Discuss how well reasoned . . . etc.
The argument claims that over a period of time the costs associated with processing go down because as organizations learn how to do things better, they become more efficient. Stated in this way the argument reveals examples of leap of faith, poor reasoning and ill-defined terminology. The conclusion of the argument relies on assumptions for which there is no clear evidence. Hence the argument is weak and has several flaws.
First, the argument readily assumes that all the costs related to processing would go down. This statement is a stretch as taking into account inflation costs of most of the raw materials and human resources required for the processing would definitely go up with time. For example, in India for the past one year the rate of inflation of food items has hovered around 15 %, which means that the basic ingredients of the food processing industry are now much more expensive than they were a few years ago. The argument would have been much clearer if it explicitly mentioned the different costs related to food processing and their trends over a period of time.
Second, the argument claims that since the costs involved in color film processing industry went down, so it will be for the food processing industry. This again a very weak and unsubstantiated claim as the argument does not demonstrate any correlation between the food processing and color film processing industries. To illustrate, there have been many technological breakthroughs in the color film processing industry, such as the advent of computers, mass production of chemicals and improvement in the quality of films. This has led to the time involved in color film processing to go down from 5 days to one day. Thus even though the cost of processing per day is higher, 20 cents as compared to 10 cents earlier, due to the lesser time taken for processing the overall cost has gone down. If the argument had provided evidence that there have been similar technological breakthroughs in the food processing industry which would lead to a reduction in processing time and hence costs, then the argument would have been a lot more convincing.
Finally, we do not even know if Olympic Foods has been able to reduce costs substantially over the last 24 years of its existence. If there is no data to point towards a reducing trend in the costs of food processing for the past 24 years, it is hard to believe that there would be any substantial decrease in the costs suddenly in the future. Without convincing data in this regard, one is left with the impression that the claim is more of a wishful thinking rather than substantive evidence.
In conclusion the argument is flawed for the above-mentioned reasons and is therefore unconvincing. It could be considerable strengthened if the report mentioned all the relevant facts such as historic trend of costs involved in food processing, significant technological breakthroughs that would lead to reduction in costs, if any, and data on the type of costs involved in food processing and their likely future projections. In order to assess the merits of a certain situation, it is essential to have full knowledge of all contributing factors.