Pingback: Cordial and Sanguine, Part 33: A Choice, Not an Ecch()
What business does this Carson fellow have outdoing himself? Bad form, old chap. Very good piece, though.
Thanks, Joe, but yeah, I know. It’s not sportsmanlike to keep running up the score.
“As a consumer, Julia will pay prices consisting largely of rents on artificial scarcity enforced by the state… She’ll buy sneakers with a $195 brand-name premium over the $5 the sweatshop charged to make them, and a camera whose price comes mainly from embedded patent rents rather than actual parts and labor. She’ll pay a markup of about 20% as the result of price-fixing on goods manufactured in oligopoly industries.”
You’re making an artificial distinction between markets and the rules and institutions that develop in and around them. I get why. You may want to be able to argue that those things are imposed by nefarious actors looking to constrain choice and extract rents. To some extent this is true, but you’re only telling half the story.
People pay $200 for Nikes to show other people that they can afford $200 Nikes. People value the ability to signal and in a market economy, anything with value will come to be priced accordingly. It is basically just a form of price discrimination in which certain brands are able to capture and increasing level of producer surplus. Once that happens you’re going to start to develop a economic, social, and legal framework that supports this.
Some might argue that the desire to signal through over-paying for consumer gods is the manifestation of some character defect bred specifically into us by the organs of state capital in order to keep us chasing an unattainable end on some eternal treadmill. That, however, just begs the question of how those organs came to develop and gain power in the first place.
It’s true that signaling is one reason that people pay markups. But there are also plenty of people who don’t much care about signaling and would be happy to pay lower prices if they could. We see a nice example in the fashion industry, where there’s no real IP protection, and the expensive originals do sell, but those who either can’t afford the originals or don’t care can buy cheap knockoffs — so that works out ok for both groups of customers. But when IP protection makes cheap knockoffs illegal, the second group is out of luck.
Absolutely. And there are all sort of ways that people who don’t care about signalling are coerced into paying more for attributes that they don’t really care about. It’s just important to remember that consumer choice is as much a factor in getting us to our present equilibrium as are the effects of state capital.
All to often, libertarians across the diaspora do this thing where we list of all the good things and attribute them to choice and free exchange and then list all the bad things and blame them on state coercion or corporatist rent-seeking.
I accept the “mutualist” label myself, but I’m also a contrarian by nature, so here goes.
Competition would drive the prices Julia pays down to the actual cost of production.
Competition does not drive prices to the cost of production in a free market, and we wouldn’t like it if it did. Producers seek profit, i.e. they continually reorganize resources toward more profitable organization. Ideally, profit measures added value, the difference between consumers’ valuation of productive inputs and outputs, so seeking profit seeks greater consumer satisfaction. A market without profit and profit seeking would be a very dull market.
Of course, profit can also measure successful rent seeking, and this sort of profit does not add value.