Econ 101: Prices and scarcity (a contrarian view)

The news is that gas prices are rising "in response to market pressures", and so on. The news reports talk of prices as if they were natural phenomena, and go up or down entirely on their own. Which is of course utter nonsense. Prices are human constructs, and human decisions cause them to change.

A price does not rise or fall, someone decides to change it. There is no such thing as market pressure, there is only the belief by some people that a commodity is or will be in short supply. If they are sellers, they decide to ask for more. If they are buyers, they decide to offer more. If a sufficient number of buyers and sellers share that belief, and if the buyers cannot do without the commodity, or cannot delay their purchase of the commodity, higher prices will be paid. And so on. The converse happens when some people believe that a commodity will be in abundant supply.

The theory of the free market is said to assume that buyers and sellers have the same or at least similar information, and that the transaction is based on this information. This too is nonsense. Firstly, it is not information that matters, but belief. Secondly, information functions to justify belief, and it is belief that drives the decision to buy or sell. Thus, buyers and sellers may justify their decisions based on some very different information, or disagree about the significance of common information.

Either way, however, it is the apparent scarcity that drives pricing decisions. Both buyer and seller will attempt to control information, but for opposite reasons: the seller, to make the commodity seem scarce, the buyer to make the commodity seem abundant. Scarcity justifies the seller asking for more, abundance justifies the buyer's offering less. Thus the only information that seems relevant to pricing is information about scarcity.

It is the function of advertising to make the buyer believe that the commodity is scarce in some way. This is true even of advertising that offers goods at lower than usual prices: the implication (sometimes explicitly stated) is that goods at this low a price are scarce, so get them now before the price is raised. Luxury goods are luxury goods not because they are better than other goods, but because the sellers and buyers conspire to limit the supply: there must be just enough of the precious item available that only those few worthy of owning one can buy it. Scarcity explains the high values placed on antiques, most of which are merely the kitsch of earlier generations. But people discard kitsch in enormous quantities, so that little of it survives. Scarcity accounts for the high, sometimes outrageously high, prices paid to athletes and actors for their performances. The ultimate scarcity is that of the item advertised as unique, tens of thousands of which are sold to people who hope thereby to express and announce their unique individuality. What's truly scarce, apparently, is individual worth.

The Hike up Parker Ridge

 

Parker Ridge Trail is a popular hike. The parking lot was about half full. The information posters showed the flowers we could expect to find along the trail. Marie studied these, and stopped frequently to examine the flora. Several other people set out from the parking lot the same time as we did. We were: Robert and Roswita, Tim, Jenn and Vic and CJ and Caitlin, Peter and Marge, Catherine F, and Marie and me. A dozen of us.

They first hundred yards or so are easy, and most hikers struck a brisk pace. I foresaw a stiff climb up the steep mountain side; Tim had studied the maps (he's a geographer), and told us it was a 1200ft vertical difference in about 1-1/2 miles of trail. Recalling what I had learned about hiking as boy in Austria, I started walking at what even to me seemed a very slow rhythm, and let others pass me. Eventually, I passed most of them.

Within a couple of hundred yards up the trail, I knew I'd made the right decision. I maintained the rhythm to the top, never varying its speed, just taking shorter or longer steps depending on the terrain. About 1/3rd of the way up, I passed a gentleman who had raced ahead of me. He was standing by a bench, chest heaving, chuffing like a broken steam engine. I greeted him without pausing, and kept on. The wind picked up the higher I got, and began to chill me, despite the wind-proof jacket I wore, and which had seemed too warm just minutes earlier, when I was sheltered by the forest. I reached the top before the others.

I carried a kite that had never flown. At the top, there were two stone-built low shelters, one occupied by a family of four. I sat down in the second one, it reached part way up my back. I was glad I'd tied my hat on, else the wind would have blown it down into the valley. Then I flew the kite, a parasail about 20" wide. I paid out about 150 yards of line, and watched the kite soar off the brow of the ridge and out over the valley. The rest of our group saw it, too, and took some photos. CJ showed up, and held onto the kite. The wind was strong, he hard a hard time holding it. Eventually, I reeled the kite down. Tim helped me retrieve it as it came into the turbulence below the ridge and dived onto the rocky ground.

On the other side of the ridge a small hollow sheltered us from the wind. We had our lunch there, sitting in a raggedy row along the east-facing slope. To the north, a small pine tree, sheltered by the hollow, demonstrated that the tree line is a zone, within which minor differences in micro-climate determine whether or not a tree survives. After lunch (and lots of photographs), we held a short ceremony committing Mum and Dad's ashes to the ground, scattering them under the pine. I read parts of the service from the Book of Common Prayer, which Mum preferred over the more modern forms. Catherine F. read a few words on her own behalf, and a letter from old friends on the Island. We stood for few moments in silence, said the Grace, and broke up.

We went on the trip because Roswita insisted on it. At first, I didn't think much of it, agreed mostly because Roswita is my favourite (and only) sister, and because it was a good excuse to see Tim, and Jenn and her family. But Roswita was right, it was good thing to have a committal rite.

I printed off some of the photos for Cassandra, Niobe, and Jon. I especially like the one of the tree with the higher mountains in the background, for Parker Ridge is only the first in a series of ridges that lead up to the peaks. I used a cheap panoramic camera, the kind that magazines once gave away as subscription premiums, and which one could find at Value Village. This one has a glass lens, so it takes reasonably sharp pictures. I will use it again.