Just yesterday, I noticed some dog bowls for sale for $22. (Well, technically, for $21.99; but that is really over $23, given a sales tax of 9.75 percent.) My guess is that these bowls probably cost no more than three or four dollars--at the most--to produce. To my way of thinking, that is simply unconscionable. It is whatever-the market-will-bear pricing--rather than pricing to turn a reasonable profit. And the former is certainly not what capitalism is all about, in my view. Comments?
The consumer of dog bowls has complete control. Don't like $23 dog bowls? Tell the seller and the tax man to stick it. Seriously, how do you propose to fix this "problem"? A government agency to set price controls on dog bowls?
Certainly not! More government rules and regulations is about the last thing that we need. I would just prefer to see some merchants acting more ethically and responsibly, by going to a reasonable profit model, rather than a whatever-the-market-will-bear model.
Much of the cost of consumer items carries over from physical rent space or the risk of unsold inventory. The actual cost of that item to the business only makes up a small fraction of the selling price to the consumer. Internet selling can go a great ways towards trying to solve these problems, but for small lower cost items it often isn't practical taking into account the cost of individual shipping. It's hard for people to ever understand this until they start a business themselves. In many areas the rents are very high, and huge amounts of the inventory you bought never sell, or are very slow to sell and sit around taking up valuable storage space. So if I buy 100 dog bowls for $1 each, well, I may have to add on $1 for labor, $2 to pay for rent, another $2 to cover the dog bowls that may never sell, and then another $1 to make a profit. So it will end up costing you $7. A big part of the cost of cheap consumer items is distribution. Consumer prices will be highest both in very high cost of living areas or very sparsely populated areas.
I appreciate the response and that you and I are in agreement on government controls. In the end, the market will take care of the issue. If a certain number of consumers don't mind paying $23 for a dog bowl, then there is a place for $23 dog bowls. Of course, a quick check on Amazon will reveal some nice dog bowls for as low as 5 bucks also.
Alowing the market to decide pricing is the most effective system although there are anomalies at times. A free market always corrects itself due to competition. If these dog bowls are selling well at $22, how long do you think it will take before someone else produces the same thing for $12 and takes away the market from the overpriced seller? Where capitalism fails is when government interferes and limits the ability of competitors to enter the market by way of regulation. Government regulation is never meant to protect consumers, it is always meant to protect market share for large corporations who pay government to eliminate competition by passing expensive regulations.
And even a $12 dog bowl would be vastly overpriced. (Probably around three or four dollars would be about right.) Agreed. You may notice that I never--never!--called for government regulation here. (More rules and regulations are about the last thing that we need.) I was merely calling out the seller of these bowls (or perhaps the distributor, if the wholesale price is astronomical) for his (or her) greed.
I cannot fault them. In a truly free market, people should be free to ask or pay whatever price is agreed upon by both parities. So long as no force is applied by either side, the non-agression principal has not been violated. In a true free society, we do not have a right to not be offended by something.
Well, I certainly can. As I think that I have noted previously, I consider capitalism to be the very apotheosis of an ethical economic system--certainly, vastly more so than socialism (even if the latter were workable). Yet I see nothing especially ethical about greed.[/QUOTE]
Just a small technical point. Some economists would point out that in smaller consumer areas that can only support one store that sells that consumer item, that the concept of natural monopoly may come into play. Basically, the store can set prices higher because there is no other competition, and there will be no other competition because there is no other way another store could afford to do business there because there is not enough consumer money to support two businesses. This probably doesn't apply in this example of the dog bowl too much, because really any retail store could sell dog bowls. If they noticed there was an opportunity there.
If you started up a new business, how much would you have to sell dog bowls for to make a profit with your business? There are many expenses you would never consider until you actually tried starting a business for yourself. You are free to start a business if you think there's loads of money to be made. But I wouldn't advise it. Typically in most of these businesses profits represent a very small percentage of total sales. I know of many businesses that are not really that profitable unless you do the work yourself. If you had to pay what it would cost for some other competent person to do the management work, it almost wouldn't be worth it.
[/QUOTE] Free markets are the only ethical system, period. All other economic systems require theft by force to function.
That is a fair question. And the answer--truthfully--is that I do not know. (It would depend upon the wholesale price--plus whatever I paid for rent of the store, plus advertising--if any--and any other expenses, which I cannot currently think of.)
I suspect the wholesale price would only be a tiny consideration. What you likely have no idea about, the final consumer price of something small like a dog bowl most often has very little to do with how much a business needs to charge. I know that sounds strange, but for many of these businesses, the wholesale merchandise cost is only a small part of their total business expenses. Now, I will admit $22 is kind of outrageously expensive for a dog bowl, but maybe it was a nicer one meant to last more than a year? Do you live in a high cost of living city? (i.e. apartments cost more than $1200 per month)
That is a good point. However, the fact is that I live in a city that has a very low cost of living. (It is in Middle Tennessee--not far from Nashville.) I take home just over $44,000 per year--my wife takes home far less than that--and yet we live a quite comfortable lifestyle. If we resided in New York or Los Angeles, we would be nearly impoverished, on that meager amount of income.
When you invest your retirement savings do you make sure you only invest in companies that do not make too much profit? Can you give me some examples of these companies or some mutual funds that guaranty they will not make too much money?
This is a comparison of apples with oranges. I am now retired; and I invested in mutual funds. But I would imagine that high-risk, high-potential-return stocks would invest in companies that have the potential to turn a large profit. If they succeed, that would certainly be to the benefit of the investor (which is to say, the consumer of that stock). An unconscionably high price on material items, on the other hand, is surely not to the benefit of the consumer.
AGREED! But I'm not sure it can be changed. And it applies to lots of things from dog bowls to drugs; lawn care products to laundry products. The problem is that a persistent profit margin of 1 or 2% is considered "failing". The hope is to book a 3% profit year-on-year. But a 3% compounded rate of return is not sustainable. After a century of 3% average GDP growth, it owns nearly the entire economy. And it all ties in with our flawed banking system that invents money out of debt and has most businesses borrowing money to keep growing. We need an economic system that doesn't require growth and a national banking system like the Bank of North Dakota.... IOW we need to nationalize the banking system because it is out of control and destined to destroy us.
A lot of businesses would never get started if the profits on investment were only 3%. There's a lot of work that goes into a business, and there can be a lot of unexpected risks. Not to mention liquidity traps. (You can't always convert your capital back into money without continuing to run the business, and you can't continue to successfully run the business without keeping a certain level of money invested into capital, so it's not like you could just quit the business any time you want, you would lose a big chunk of the money you invested)
That may be true, but individual business profits do not work the same way that growth in the economy works. That would be the fallacy of composition. It's easily possible (hypothetically) for all businesses in an economy to make 15% profit on average, even if there is 0% growth in the economy overall.
I would strongly oppose anything that pushes us a bit closer to a Marxist system; or that gives the federal government more power than it already has.
I would oppose anything that pushes us farther into a "free market" system or a capitalist class that has more power than it already has.
Well, this is a free country. That means that you are free to endorse socialism (even though it has been a spectacular failure whenever and wherever it has been tried). And I, likewise, am free to endorse capitalism...
And that is a very nice-sounding slogan that is used often to fool everyone. Analysis shows it to be so. Whatever turns your crank. I didn't say what you or anyone else should do or think.
Would you prefer that I should say that you are not free to speak as you wish? I am just not sure that I get your point... Sounds just a tad condescending And disrespectful. But, hey. Whatever...
