The idea that market forces will naturally make prices cheaper is often touted by eejits who hate any and all existence of government because it imposes some kind of barrier to their imagined liberty, including when all available evidence shows that market forces do not of themselves naturally make prices cheaper.
The general idea of the market in economics is a theoretical concept, which looks at prices and volumes that buyers which to buy some particular good/service at, and the prices and volumes that seller which to buy some particular good/service at; then describes the relationship between them. Of itself, the market is only truly concerned with prices and volumes: that is, the price and amount that a contract is concluded at by the buyer and seller.
It is important to note that of itself, the mechanism of the market is a perfectly amoral beast. It cares not an iota or a jot about the moral goodness or fitness of the good being sold, as evidenced by the fact that markets exist for hard drugs, weapons and firearms, and even the going rate for contract killings; nor does it care an iota or a jot about the moral goodness or fitness of the players involved in the buying or selling of goods, as evidenced by the fact that things like slavery and sex trafficking, both are bought and sold by nefarious cusslords.
It should also be noted here that the market of itself, does not care an iota or a jot about the relative power that the various parties have within the market, as evidenced by the fact that the United States' healthcare market profits amazingly by selling essential drugs and treatments to really vulnerable and desperate people because they can get away with it. If anyone wants to point to the moral goodness and fitness of the United States' healthcare market as being the shining example of how markets work, then you must conclude that they are either an idiot or a cusssmith.
Setting all of this up by way of background, I note that the supermarket duopoly of Colesworth, as two of the ten largest companies on the ASX by market capitalisation, have both decided to rip the wallets of the general public for fun and superprofits; for not other reason than because they can get away with it. Admittedly this isn't quite the moral quandry as hard drugs, firearms, slavery and sex trafficking, but the amount of price gouging going on has been enough to warrant at least raised eyebrows from the Federal Government:
Prime Minister Anthony Albanese has accused Coles and Woolworths of adding to inflation and higher interest rates after the competition watchdog alleged the supermarket giants manipulated prices on hundreds of everyday staples to boost their bottom lines.
- Sydney Morning Herald, 23rd Sep 2024
Speaking as someone who has been conditioned most of my life to think that the idea of something being "on special" is an intrinsic lie because as someone who is inside a shop at a particular place and time, there really is no other contract on offer for that good at that time, I have always gone shopping with the expectation that the price listed is the price listed, and that as a customer I can either choose to accept or reject that particular contract at that time. There are no forward rate contracts. There are no grandfathered price contracts. Nevertheless, when it comes to buying things I am very much painfully aware of the weight of the money in my pocket; to the point that I pinch pennies so hard that they squeal.
Consider this:
This is the price of a packet of Tim Tams at Woolworths in Prospect.
This is the price of that sane packet of Tim Tams at Tesco in Inverness .
At the current market rates, Au $6.00 = Au $6.00. Also the current market rates, GBP £2.50 = Au $4.86.
There are some things which are so incredibly baffling, that the great Sherlock Holmes thought that this was too much and decided to take up apiary, that Jane Marple thought that this was all too much and decided to take a mental health trip to Bertram's Hotel, and that Farmer Giles Brown had a case of their airs with excitement because he could see and identify the massive pile of male bovine excrement here.
Now I don't to wish to embarrass a poor operative at Woolworths because I know that this whole issue has to do with forces and motives way beyond this person's control but when I emailed Woolworths to get an explanation of what was going on, I received this glorious piece of marketing puffery:
Please understand that our prices have been changed because of increased distribution costs. We hope that you continue to enjoy the savings at your local Woolworths.
- email from Woolworths, 24th Sep 2024
I love this.
Firstly, this takes no responsibility for their own choices in price setting and instead shifts the blame onto an unnamed third party.
Secondly, this poor operative at Woolworths knows that I am clearly a nutbag who is a bad faith actor who has asked a question knowing full well that both they and I are chained to system like thespians in a morality play who are both doomed to play the parts given to us.
Thirdly, we both know that Michael Bliss has been hauled into an Uber against his will. This takes the Mickey Bliss. We have all bene taken for a ride. There is no way in Hades, Mordor, Valhalla, Sheol, Abaddon, or any other of the clubs in the Nefarious Football League (NFL) that the excuse of "increased distribution costs" makes any sense at all.
Even if we were to assume that's true, the total distance from the factory that makes Tim Tams, to the Woolworths distribution centre in Minchinbury, to Woolworths in Prospect is less than 16.5km. The total distance from the factory that makes Tim Tams, to Tesco in Inverness, is just a mere 16,797km. It is brazenly illogical to blame "increased distribution costs" when the retail price that same good landed at a place literally a thousand times the distance, is 19% cheaper.
You can not blame distribution costs, or wages which are roughly similar, or taxation because the retail price in Inverness which includes 20% VAT is still less than the retail price in Prospect which includes 10% GST. No. This is possibly the classic example of where market forces are in action, where the mechanism of the market is a perfectly amoral beast and cares not an iota or a jot about the the moral goodness or fitness of the players involved in the buying or selling of goods. This has to be about the purest example that exists where price gouging occurs purely for no other reason than because they can get away with it.
So the next time that someone wants to tell you that market forces will naturally make prices cheaper, you should laugh in their face and they should accept it because this is clearly a comedy routine and they are a clown. They are not a very good clown and unlikely to get a gig in the Melbourne Comedy Festival, but at least they tried.
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