Sunday, December 23, 2007

Infinite Confusion

Disclaimer: This post isn't really finished. Yes, it has a beginning, middle, and end, but I still had more to say and wasn't quite sure about what I did say. But screw it. I haven't posted in days and I'm sure my loyal readers are starting to get a bit antsy about it. But just so you know, this post is NOT backed by my 100% accuracy guarantee. Sorry.

Conservatives have this weird idea that economic prosperity is infinite and that it is possible for everyone at any given time to be rich and prosperous, if only they worked hard enough and weren’t stifled by government regulations and taxes. And if that’s the case, then the only cure is to get rid of the government, and make sure that people have plenty of incentive to work hard.

And in the long term, they’re right. Economic growth is essentially infinite, particularly if the human race never ends. Even now our economy is doing better than previous generations could imagine. In 1972, the Dow Jones Index briefly broke the 1,000 mark for the first time. In 1995, it was considered a huge event when the Dow broke the 5,000 mark. Now, it’s considered a catastrophe if it goes below 10,000. In contrast, the Dow hit a high of 381 shortly before the Great Depression, which was clearly a huge bubble about to burst.

And this is real growth. This is an expansion of the basic economic picture. In other words, the pie got bigger. That’s not to say that everyone shared that pie growth equally; but it did get bigger.

But in any given economic picture, the pie is finite. If one person has more, someone else has less. It’s that simple. There’s only so much to go around, and everyone knows it. Unless, of course, they're conservatives. Because the conservatives' "free-market" solution only makes sense if they pretend the pie is always infinite. I put “free-market” in quotes because these people don’t really believe in a free-market any more than they believe that their right to kick me in the balls is equal to my right to kick theirs. They want to kick me in the balls with impunity. That’s their definition of free-market.

Wii Woes

I was thinking about this while reading a messageboard at regarding the Nintendo Wii. A year after introduction and the thing is still sold-out. But part of the problem is that professionals are swooping in and buying the things to sell at outrageous rates. And for as many people as there are complaining about it, there are just as many defending the practice.

But it’s ridiculous, as the defenders insist that it’s just a simple supply and demand issue. But it’s clearly not. Because the only reason the supply of these specific Wii’s is low is due entirely to these people who buy them with the intent of extorting higher prices out of the real buyers. Because every single one of the Wii’s that these guys sell was one that someone else wanted to buy at the regular price. And so by buying them first, they’re preventing the other person from buying it, and forcing them to buy it at a higher price.

Ticket scalpers do the same thing. They’re not providing a legitimate service. They’re thieves who force other people to pay a premium because they happened to get to the tickets before the other person could have. There is a one-for-one trade-off here and the scalper provides nothing but higher prices to the consumer. Perhaps these free-market gurus can understand how adding an extra layer of middleman aids the free-market’s efficiency, but I’m just not getting it.

I mean, how is this any different than if you went into a store, bought a Wii, and then had a bully take it out of your hands in the parking lot and insist that you pay $100 to get it back? The only distinction is a timing difference; one which I find meaningless. I believe there are laws preventing people from doing this kind of thing with real estate. And can you imagine the outrage these people would stir if the government created an agency that did nothing but buy rare products and sell them for inflated costs?

Middle-Men Markets

To the defenders of this practice, this is just standard free-markets. Yet it’s obvious that this is really a huge inefficiency with the markets. Doing a quick search on eBay shows that there are 20,892 Wii’s up for auction; 1,624 used and 18,615 new. And while it’s possible that at least a few of those are stolen or fraudulent, and that this only represents about 1% of the Wii’s manufactured each month, that’s still about 18,000 machines that should be in the hands of a consumer.

(Note these numbers were as of the date I wrote this, last week. I just checked and there are now only 4745 new Wii's for sale; suggesting that these pricks already cleared out their supply for Christmas. Either that, or they found out that ol' Biobrain was writing an exposé on their dastardly practices and they put themselves out of business.)

None of this is to suggest that we can do something to prevent these assholes from stealing this money. It’s just to say that the free-markets clearly have some inefficiencies in them and that most free-market gurus haven’t the slightest clue what they’re talking about. The fact that Mercedes can charge a fortune for a car makes sense to me. The fact that some people are stuck paying a 100% mark-up on a Nintendo Wii to a guy who happened to get lucky and buy up the supply at his store just sucks.

These guys aren’t helping solve a supply issue. They’re making it worse. And I say that, not just as a amateur economist who writes about how hard it is to buy a Wii, but also as someone who wants to buy one. And that’s all I really wanted to write about. If you’ve got a Wii you want to send my way before Christmas, you’re running out of time so hurry the fuck up. Thanks.

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