Tag: supply and demand

Do Not Remove This Tag

Unless you’re the customer. Then it’s okay.

Once upon a time, the warning that now reads something like “Under penalty of law this tag is not to be removed except by the consumer” did not include those last four words.

The original wording has been the occasion of much not entirely genuine concern about the prospect that officers of the law will invade the homes of unruly tag-rippers. These renegades were celebrated in song by science fiction writer, libertarian, and singer L. Neil Smith. (You’ll find the lyrics in his novel The Wardove.) More famously, Chevy Chase, in the movie Fletch (1985), bluffed his way out of a tight spot pretending to be concerned about mattress tags.

But if you’re a company selling something with a tag, removing it can be deceptive. Especially if you remove it in order to replace it with another tag that gives customers a very mistaken idea about the product you are selling.

Such a fraud has apparently been committed by a company called Lions Not Sheep, which caters to lions (leaders). The company removed tags saying Made in China from clothing that it sells and replaced them with tags saying Made in USA. For this, the FTC fined the firm $211,335.

Lions Not Sheep understands its market.

Yes, when buying stuff, many people hope to avoid directly or indirectly supporting the Chinazi government to the extent possible. These folks create a substantial demand for goods made not in China but in America (or in other acceptably non-totalitarian countries).

But defrauding the buyer is, of course, not the way to meet this demand.

This is Common Sense. I’m Paul Jacob.

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Tags China, fraud, supply and demand

education and schooling folly free trade & free markets national politics & policies too much government

The Truth About Tuition

tuition, supply and demand, subsidy, government

Subsidize something, and you tend to get more of it.

But wait, what if you subsidize demand for something, but don’t really allow (or continue to disallow) increased supply?

Then prices for that something go way up.

This is elementary economics — nothing controversial about it.

Except that politicians and bureaucrats who make public policy tend not to acknowledge this aspect of reality when they propose subsidies. Instead, they expect praise for their “heroic” and “caring” program of destruction.

They need to be educated. But, alas, all this applies best to college education. How does one educate the educators?

A new study, which reliable economists tell me is “sophisticated,” finds that the bulk of recent college tuition price inflation can, indeed, be directly linked to the federal government’s loan subsidies.

This study makes for some opaque reading, alas: “Essentially, demand shocks lead to higher college costs and more debt, and in the absence of higher labor market returns, more loan default inevitably occurs.” Yikes.

The college education bubble has been much talked-about for years, at least amongst skeptics of government policy. But in hushed tones — the big fear, here, is that a bursting of the bubble will lead to — who knows what? I mean, who-knows-what policy reaction.

Probably just more government subsidy and control. And even higher tuition still. Double yikes.

Thankfully, while the brick-and-mortar higher education institutions suck up more and more government-backed money, the Internet is enabling some great alternatives. The future, I think, does not belong to the university system as we have known it.

This is Common Sense. I’m Paul Jacob.

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Tags college, subsidy, supply and demand, tuition

folly free trade & free markets

Prophecy Failed

Eggs, New York Times, Economics, collage, photomontage, http://cognitivebiasparade.prosite.com/

In the first week of June we were told to expect egg shortages. The avian flu had infected millions of hens: egg production would plummet.

This was news, reported as “Egg Rationing in America Has Officially Begun.” The Washington Post cited a few signs in Texan retail groceries warning customers that the stores were not in the wholesale biz, supplying eggs for restaurants and the like.

And then the follow-up: On Tuesday the New York Times reported, “Bird Flu Sends Egg Prices Up, but Slowing Demand Prevents Shortages.”

Author Stephanie Strom is probably not responsible for the title. Her copy was not horrible.

It’s hard to get over the title, though. Economist Mike Munger offered his reaction headline: “NY Times Causes Head of Mungowitz to Explode.”

Why?

One word: “but.”

The title should have read, “Bird Flu Sends Egg Prices Up, So Naturally Slowing Demand Prevents Shortages.”

Why that “slowing demand”?

I’ll let Munger explain it:

There can never, NEVER be a shortage if prices are free to adjust. Because a shortage is insufficient supply at current prices. Lagniappe: This was in the “Science” section. Yes, it was.

People buy less when prices rise. So those who value eggs less cede those humpy dumpties to folks who want them more. Fitting. Harmonious!

So the title was witless, Munger insists, “on the order of ‘Water: Still Wet!’ or ‘That Crazy Sun: Rising in the East Again This Morning.’”

I like “good news” stories. Too bad the Times wasn’t quite up to delivering the good news that was clearly fit to print.

This is Common Sense. I’m Paul Jacob.

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Tags economics, New York Times, supply and demand

free trade & free markets too much government

Heap Bad Medicine

Could medical insurance — insurance for “health care” — itself act like a drug?

Are we addicts?

Third-party (“insurance”) payments sure are super-convenient. But their convenience comes at a cost: insurance (and other third-party payers) that remunerate doctors and hospitals directly is what’s driving much of the price inflation in this sector.

Automobile insurance policies overwhelmingly pay the insured, not the mechanics, and we have no automobile repair crisis.

This was related with utmost clarity by Jeffrey A. Singer in his recent Wall Street Journal commentary “The Man Who Was Treated for $17,000 Less.” A patient got an astoundingly better price for a surgery by simply setting aside his insurance program and paying in cash. Singer explains why:

“Hospitals and other providers make their ‘list’ prices as high as possible when negotiating contracts with health plans and Medicare regulators. No one is ever expected to pay the list price.”
“[M]ost people these days don’t have health ‘insurance.’ They have prepaid health plans. They pay premiums to take advantage of a pre-negotiated fee schedule arranged for and administered by a third party.”
“It is the third-party payment system that interferes with true price competition, so ‘market clearing prices’ can’t develop.”

Singer reminds us that specialty services like Lasik eye surgery, which tend not to be covered by insurance policies, have improved in quality and gone down in price.

Alas, as he laments, the United States is “headed in the exact opposite direction” from a real, cost-reducing solution. To a nation addicted to third-party payers in medicine, Obamacare is nothing more than upping the dose of the same old drug.

This is Common Sense. I’m Paul Jacob.