Wednesday, February 15, 2012

Breaking news: When demand for a product goes up, the price of that product goes up too

And the seller apologizes for following the law of supply and demand.


posted by John Althouse Cohen on Wednesday, February 15, 2012
Tags: , , ,

5 comments:

Bob Ellison said...

Gouging!

But people seem to feel there's a public trust in some goods. Oil, for example: if there's a shortage and oil suppliers raise prices more rapidly than might otherwise seem predictable according to capitalist economics, society has a claim that it's not fair, because we all need oil, we made it possible for the oil companies to profit in the first place, blah blah blah Elizabeth Warren blah blah.

This case is similar: people think of Whitney Houston as something of a public trust. We all made her famous, and her fans love her all together, so we have a piece of this, and it's unfair for Sony to profit more than might seem predictable.

Right? No, but I think that's what's going on.

February 16, 2012
John Althouse Cohen said...

I wouldn't even agree with that position on oil. Contrary to popular belief, many economists, such as Thomas Sowell in the book Basic Economics, have pointed out that there generally aren't market failures causing oil to be overpriced. (If anything, oil is underpriced because of negative externalities.)

While you can say that society helps the oil companies profit (which no one would dispute), the reverse is also true: oil companies benefit society. So that's a wash.

And as you suggested, the concept of a "public trust" is ludicrously misguided as applied to Whitney Houston mp3s. When a phrase like "public trust" is so poorly defined that it could apply to almost anything, it means almost nothing. Same thing with the word "fair" as applied to prices.

Since you mentioned Elizabeth Warren, here's my take on her famous quote: #1, #2.

February 16, 2012
Bob Ellison said...

Jaltcoh, thanks for the links. Good discussions.

You hit on something RE: the discussion of Elizabeth Warren's comments that I think is similar to this "public trust" concept: many on the left view tax policy as a moral thing (witness "The moral case for taxation" from the TNR essay you cited). Many on the right have abandoned viewing tax policy as having moral basis-- the Laffer curve argument is probably the most hyperbolic example of this. "Why tax more if it raises less revenue?!" There's a grain of truth there, but not a whole loaf. (I've lost track of why it seems similar to the "public trust" argument...I think it's just because I sense people drawing conclusions from emotion rather than from observation or from principles.)

I find the morality v. empiricism duality on both left and right fascinating. Rightists tend to hate abortion because it seems immoral, but they tend to disfavor highly progressive taxes because they seem empirically ineffective. Leftists tend to hate capital punishment because it seems immoral, but they tend to disfavor harsh drug laws because they seem empirically ineffective.

I think people-- even smart, schooled ones-- mostly don't think about the principles, or lack thereof, that lie behind their choices. Philosophy, policy, and law present a buffet table to them.

February 16, 2012
John Althouse Cohen said...

I find the morality v. empiricism duality on both left and right fascinating. Rightists tend to hate abortion because it seems immoral, but they tend to disfavor highly progressive taxes because they seem empirically ineffective. Leftists tend to hate capital punishment because it seems immoral, but they tend to disfavor harsh drug laws because they seem empirically ineffective.

I agree with all that — the left and right both have tendencies to get moralistic and to get empirical, just with different issues. There doesn't seem to be any firm principle behind these tendencies. To be clear, there are good principles underlying both moralism and empiricism, but I don't see any principle that guides when people rely on one vs. the other.

Actually, I'm not sure there's such a clear distinction when it comes to liberals' views on the death penalty and drug crimes. Empirical arguments against the death penalty are very common: people claim the data show it's not a deterrent. That's open to question, but people do make the claim. And people will make moral arguments about how there are too many people incarcerated, and the ones who least deserve it are the ones with drug convictions. In fact, some of the most common empirical arguments against drug crimes are very weak: when people say, "Anyone who wants to use drugs can do it anyway," they're ignoring the fact that the criminal laws make drugs more costly, which disincentivizes drug use even if it doesn't make drug use physically impossible.

I think people-- even smart, schooled ones-- mostly don't think about the principles, or lack thereof, that lie behind their choices. Philosophy, policy, and law present a buffet table to them.

I couldn't agree more. What drives me crazy is the part about how, as you said, this is true of even the really smart people. It's isn't enough to be intelligent and educated — one has to be motivated to be consistent and principled. So many people don't have the motivation, or haven't even considered it.

February 17, 2012
Bob Ellison said...

Excellent points. You're right that the distinctions I drew are questionable; I was being simplistic in the interest of brevity.

Thanks for the discussion. I'll keep reading!

February 17, 2012

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