Monday, May 05, 2008

Willing Buyers

John W. Schoen, a senior producer at MSNBC, has forfeited a few moments of his valuable time in order to help a confused reader understand the workings of the Free Market:

If the feds can help with cutting interest rates why can't they do something that really affects everything? Like high prices of gas. How can a billion-dollar industry still be allowed to make so much and affect so many people?
— Lori H., Dodge City, Kan.

There are measures the government could take to ease the pain at the pump, but it’s hard to see how the U.S. government could directly control the price of a global commodity like gasoline — any more than it could limit what you can charge for that big-screen TV you’re trying to unload on eBay. Gasoline prices — like all market prices — are set by a willing buyer and a willing seller. (You may not be a “happy” buyer right now, but your purchases are still voluntary.)
Absolutely correct. No one's holding a gun to Lori's head. If she doesn't want to buy gas at the current price, she has every right to sit at home in her counting-room, cackling over her doubloons and pieces of eight by the light of a tenpenny candle.

Sure, it's possible that she lives in one of those sprawling suburbs that were designed and sited on the assumption that gas would always be cheap, and that mass transit is a socialistic encroachment on the Liberty for which John Birch bled and died, and that only prostitutes and pedophiles would dream of walking anywhere. But if so, she can comfort herself with the fact that this, too, is the result of a voluntary buying decision on her part. She could just as easily live somewhere else, after all (the expense of moving to the Outer Hebrides is negligible when one considers the easy availability of peat).

So let's leave Lori to her malingering, and move on to bigger and better things. While in an unusually frolicsome mood the other day, I wrote a brief post on food deserts. Apropos of which, it's increasingly hard to find supermarkets in the NYC metro area:
The supermarket closings — not confined to poor neighborhoods — result from rising rents and slim profit margins, among other causes. They have forced residents to take buses or cabs to the closest supermarkets in some areas. Those with cars can drive, but the price of gasoline is making some think twice about that option. In many places, residents said the lack of competition has led to rising prices in the remaining stores.
These shoppers may not be happy right now, but whatever purchases they're able to make are, of course, voluntary. And lest we forget, many neighborhoods that lack supermarkets do have very affordable fast-food restaurants.

Granted, fast food is linked in some studies with poor health, but as Jot Contie of the California Restaurant Association says, "in the end, individuals control what, where and when they eat." People who'd rather have fresh vegetables than catsup packets, for instance, are perfectly free to hop in the the car and drive to the nearest supermarket. (If gas is too expensive, they can always eat invasive's a nice way of giving back to one's community.)

There's also the fact that when a supermarket closes, it often creates entrepreneurial opportunities for local residents.

The larger point is that if consumer dissatisfaction were really widespread, multinational agribusiness would hardly be enjoying record profits:
Monsanto last month reported that its net income for the three months up to the end of February this year had more than doubled over the same period in 2007, from $543m (£275m) to $1.12bn. Its profits increased from $1.44bn to $2.22bn.

Cargill's net earnings soared by 86 per cent from $553m to $1.030bn over the same three months. And Archer Daniels Midland, one of the world's largest agricultural processors of soy, corn and wheat, increased its net earnings by 42 per cent in the first three months of this year from $363m to $517m. The operating profit of its grains merchandising and handling operations jumped 16-fold from $21m to $341m.
That's a lot of willing buyers, you'll agree. And given the fact that all this commerce is entirely voluntary, it's easy to see how fixing ADM's prices would be just as unfair as limiting the price you can charge on eBay for the belongings you need to sell in order to afford gas or grain.

You may not be happy right now, but at least you're free.

(Photo: "Food Protest in Mexico," via Treehugger).

1 comment:

chris said...

Yay! You're back.
Welcome home.