"People can't make informed purchasing decisions in a free-market", Causes monopolies

[ClayTrainor]

Many things limit the public from making informed decisions about products.

Time: doing research takes time, most people are unwilling to take the time to do it.

Lack of infomation: for every peice of relivent infomation on the internet, there are 20 peices on found online.

Lack of research skills:
Most people think wikipedia is either always accurate or always inaccurate, and have no idea how to treat secondary sources of infomation. And you expect people to make informed decisions?

Ignorance:
Most people simple don't understand the ramifications of their choices as consumers. Just as most people do not realise the innumerable ways in which their lives have been improved by science, most also not able to run a cost benifit analysis on the foods they purchase. Without this, a true free market cannot function

I have never said that they are complete slaves, however, advertising and other forms of psychological purchase control, such as raising the temperature in shops and lay out items do have a major impact on people purchasing habits. While this is the case, in an unrestrained market, there is an innevitable trend towards monopoly.
Oh and you suppose that american purchasing habits for large, very expensive, unfuel effient vehicle which most have no actual use for is a natural trend do you?


I'm just curious how some of our informed economics people, would respond to the above email? :)

[ClayTrainor]

bump..

[noxagol]

Uh, Consumer reviews, magazines, people already do the research for them? And what in our history shows that lack of government control leads to monopoly? It clearly shows that increasing levels of government control leads to increasing amounts of monopoly, because, gasp, big business buys off big brother!

[brandon]

While not every single person always makes the best possible decision, the majority of people make good decisions.

In other words, sure maybe one person will buy some piece of shit, poorly designed, over priced automobile. But most people won't. Ultimately, the masses will discover just how much this product sucks and will not continue to purchase it.

[brandon]

Oh and you suppose that american purchasing habits for large, very expensive, unfuel effient vehicle which most have no actual use for is a natural trend do you?


Is it really up to the person who wrote this email to determine weather or not someone has a use for an SUV? Sure in his mind there is no actual use for it, but the people that buy them believe they do have a use for it; even if the use is just to simply look cool driving an SUV.

People want SUV's and the market delivers.

I fail to see the problem.

[Epic]

Without advertising, there would be higher barriers to entry and more stagnation/"monopoly", not less of it because newcomers to the industry couldn't advertise. Companies couldn't alert users to their inventions and improvements. So his argument is wrong.

And, in the Misesian sense, whatever level of research a person decides to do before buying a product, that is the course of action that the person deemed to be most beneficial (ex ante - beforehand). If it wasn't the most beneficial, the person would have done something else. This is the action axiom.

There are articles on mises.org in defense of advertising and on monopolies. The only free market monopolies that exist are when a company serves their customers so well that no customers choose a different provider. There are no major cases of this in American history.

[angelatc]

Is it really up to the person who wrote this email to determine weather or not someone has a use for an SUV? Sure in his mind there is no actual use for it, but the people that buy them believe they do have a use for it; even if the use is just to simply look cool driving an SUV.

People want SUV's and the market delivers.

I fail to see the problem.

It actually was a very natural trend. The government subsidizes the oil companies and the oil companies in a myriad of ways, perhaps the least of which is creating huge barriers to market entry. Heck, the SUV's were even subsidized by a government that wrote special exemptions to the tax codes to allow for them.

There's no incentive to bring down price or increase fuel efficiency when the market ensures that all cars are essentially the same, gasoline is essentially the only fuel we're allowed to use, and there are only a small amount of suppliers even allowed to deliver that fuel.

His argument about SUV's being an unnatural consequence carries no weight. If people wanted to buy fuel efficient cars, there are already several to choose from. As more people made that choice, the selection would increase. Americans like big cars, and we could afford them.

His whole argument is simply that people are stupid and need to be treated like children. I reject that. Just because the government insists that people are stupid doesn't mean they are.

[angelatc]

Uh, Consumer reviews, magazines, people already do the research for them? And what in our history shows that lack of government control leads to monopoly? It clearly shows that increasing levels of government control leads to increasing amounts of monopoly, because, gasp, big business buys off big brother!

The thing about monopolies is that they always fail if the government doesn't intervene. Sure, a monopoly is free to jack up prices as high as it wants to, and usually opts for the price that will bring in the largest profit. (But just being a monopoly doesn't guarantee a money fountain. This is especially true in areas with a small population. It can be difficult to enter a small market, where demographics only barely can support the business.

But here's the rub -if monopolies raise their prices too much, competition will enter the market, but only if they're allowed to.

The energy market is a prime example of that. With the best of intentions, the government made sure that rural America was wired with electricity, subsidized by all the taxpayers. If the market had been allowed to work naturally, I am confident that alternative energy technologies would be 60 years ahead of where they are now. Ensuring that everybody has cheap energy removes all incentives from developing cheaper energy.

[MoneyWhereMyMouthIs2]

I'm just curious how some of our informed economics people, would respond to the above email? :)

Giggles.




Lack of infomation: for every peice of relivent infomation on the internet, there are 20 peices on found online.


WTF does that mean?


All of the issues raised also apply to anyone making the decisions for someone else too, and worse, it also leaves out the knowledge of what those people actually want. (supposing you know what people need without asking them causes all sorts of problems.)



I have never said that they are complete slaves, however, advertising and other forms of psychological purchase control, such as raising the temperature in shops and lay out items do have a major impact on people purchasing habits. While this is the case, in an unrestrained market, there is an innevitable trend towards monopoly.


Those two claims don't even belong together. This person has problems forming reasoning for his arguments. It sounds like they are repeating a mish mash of things they've heard somewhere without really understanding them.

I also have disdain for various advertising methods. But expressing a dislike for something doesn't make random alternatives better.


I'm just curious how some of our informed economics people, would respond to the above email? :)

I'd tell that person not to email me anymore.

[TastyWheat]

Monopolies are not inherently bad. If only one company offers a specific product, but they do with great customer service and at a reasonable price, what is there to complain about? If a business uses its power of monopoly to provide sub-par products and unreasonable prices then they open themselves up for consumer backlash and make a competitor more likely to succeed.

Microsoft pretty much had a monopoly on the web browser market and with operating systems. Then other products came out (e.g. Firefox, Opera, Safari) and they were better and faster than Internet Explorer. This could've been because of superior programmers or software engineering practices, but it was likely because of that safe and lazy feeling that monopolies get. The same thing with Windows. It had an overwhelming monopoly in operating systems but now it's losing that with the Vista flop. If Windows 7 isn't a great improvement OS X and Linux will grab more and more dissatisfied customers.

[james1906]

Monopolies are not inherently bad. If only one company offers a specific product, but they do with great customer service and at a reasonable price, what is there to complain about? If a business uses its power of monopoly to provide sub-par products and unreasonable prices then they open themselves up for consumer backlash and make a competitor more likely to succeed.

Microsoft pretty much had a monopoly on the web browser market and with operating systems. Then other products came out (e.g. Firefox, Opera, Safari) and they were better and faster than Internet Explorer. This could've been because of superior programmers or software engineering practices, but it was likely because of that safe and lazy feeling that monopolies get. The same thing with Windows. It had an overwhelming monopoly in operating systems but now it's losing that with the Vista flop. If Windows 7 isn't a great improvement OS X and Linux will grab more and more dissatisfied customers.

With all the government rules and regulations, this creates barriers to entry, which is why big business loves rules and regulations. What we have now is oligopoly from there being barriers to entry. Big business wants to keep out upstarts. That's what's going on with the FDA regulations of tobacco.

[Working Poor]

What about Monsanto? They have taken over farming even making saving seeds illegal geeze I can't believe what they are doing to food and they are lobbing to make laws that will drive the small farmers out of business...

[Highmesa]

Do markets tend towards monopoly? There is no one answer to that question. Some markets do and some don't, but advertising and sales tactics have very little to do with it. Actually, I should say that some markets tend towards oligopoly. Actually monopoly pricing is pretty much impossible to maintain for long without government protection.

What then makes a market tend towards oligopoly? Number one are barriers to entry. High capital investment, high technical knowledge, high sales or distribution costs can keep new entrants out of a market. But for markets where these conditions don't exist, competition often abounds.

He uses the example of the auto industry. Domestically this has been the classic oligopoly, but the reasons why have as much to do with government protectionism as anything else. For decades, the auto companies have been able to pay off congress to shield them from foreign competition, which in turn led to crappier autos from a lack of r&d.

To say that people can't make an informed decision about buying an auto is ridiculous. People ARE taking into account many factors in deciding which model to buy. Those factors include price, safety, fuel/operation costs, repair costs, resale value, comfort, on and on. The problem is that they are not making the choice HE wants them to make, so therefore they must be uninformed. This is pure arrogance.

What does this guy propose? That markets be eliminated and governments decide what products people can buy? If so, he's fallen in into the whole calculation problem/fatal conceit trap. Markets drive technological advancement and improved product efficiency. Once a government takes over the role of determining a basket of goods, technological advancement slows to a crawl as there is no one willing to risk capital without an opportunity to regain that investment. This btw, is another argument against a single-payer healthcare system.

[Brooklyn Red Leg]

If the market had been allowed to work naturally, I am confident that alternative energy technologies would be 60 years ahead of where they are now. Ensuring that everybody has cheap energy removes all incentives from developing cheaper energy.

Well, we can thank asshole JP Morgan, among others, as to why Tesla's wireless radiant energy is only now starting to emerge from the black hole it was thrust into more than a century ago. Had we had a real free market, Tesla would have had backers lined up by the dozens to electrify the world. Morgan used his undue influence to end that possibility. When Nikolai died, douchebag J Edgar Hoover had his FBI goons grab all of Tesla's notes that were unpublished and had them classified. Its probable the HAARP (High Altitude Aurora Research Program) was among Tesla's inventions.

Alternating Current, while also a Tesla invention, is so far behind the technological curve its pathetic. Every household in the world could have been powered by the electromagnetism inherent to the Earth. It would most certainly have lifted the 3rd World out of the hellhole its in now as free electricity would bring them up to our level. Obama's Crap and unTrade would have been stillborn.

[tangent4ronpaul]

Your correspondent does bring up some interesting points, but you might advise them to use a spell checker. They also point out problems, but offer no solutions. From the SUV comment, I'm guessing this person is an Obamatron that thinks the government should make these decisions for you.

> Many things limit the public from making informed decisions about products.
> Time: doing research takes time, most people are unwilling to take the time to do it.

There are a couple of factors here. As a society, being conditioned to expect "instant gratification" is one of them. I'm reminded of the PhD student that came into the LoC and requested a printout of everything that had ever been written on their dissertation topic... Needless to say, they left less than happy.

> Lack of infomation: for every peice of relivent infomation on the internet, there are 20 peices on found online.

They obviously mean "not found online". They are actually off on that number. Of the available information, roughly 1% is online, and only 1% of that can be found via a search engine - the rest is in the invisible or deep web and is created dynamically, so can't be indexed. There are some search engines that will crawl a corner of it with your query, but it's a tiny corner. Also, many of these sites are commercial.

> Lack of research skills:
Most people think wikipedia is either always accurate or always inaccurate, and have no idea how to treat secondary sources of infomation. And you expect people to make informed decisions?

There is a reason Wikipedia citations are not allowed in academia. They are, however a good place to look for keywords/phrases, ancillary information and citations to the literature.

We can thank the public fool system for this problem (Lack or research skills). Research really isn't taught in high schools anymore, beyond maybe a lecture on search engines (where the student probably knows more than the teacher) and taking a class off to take everyone to the library for a crash course in how to use the card catalog and the basics of the Dewey Decimal or LoC cataloging system. Worse, at the University I went to there were few research classes offered and you had to be in a particular major to take them, as they were specific to that major. There was one "honors" research class, but the instructor got to choose their students and it was very basic.

Most people have never accessed information on microfiche or film, used vertical files, ERIC, FBIS, GovDocs, or tracked down gray literature. Most use public libraries and are unfamiliar with university, government, specialist and private libraries. Public libraries leave a lot to be desired unless you are looking for a novel, how to make sock puppets or build a bird feeder. However, every one I've been in has subscribed to consumers reports!

If you go into a brick and mortar bookstore, you will be lucky if you can find one or two books on library research as opposed to online research.

As to online research, most people have no clue about advanced google syntax, +, -, quotes, that stemming is used and words like "the" are thrown out, site:http:// ... that anything past 6-8 keywords is ignored, that a string is a single keyword, or that if you re-order your query terms you will get radically different results, and so on... Most grad students I know are unaware of the commercial databases available to them, and then there is also a learning curve in many cases as new search syntax must me learned. The availability of these databases is also a problem as most are marketed to businesses and they are expensive.

> Ignorance:
Most people simple don't understand the ramifications of their choices as consumers. Just as most people do not realise the innumerable ways in which their lives have been improved by science, most also not able to run a cost benifit analysis on the foods they purchase. Without this, a true free market cannot function

I think we are talking nutritional knowledge and math skills here. Again, if the public fool system spent a bit less time teaching PC BS and focused on the basics...

I think the author is off base here in a couple of regards, for one, consumer research is very different than other kinds of research. If something has a UL label or a good writeup in consumer reports, you can count on a good product - Unless you buy it at Walmart because while the product will look exactly the same, it's been manufactured with substandard materials and workmanship per Walmart contract to get a better price. Reviews in most magazines are not to be trusted, as you will always find a full page add for said product in that same issue. However, if you search the web there are many review type sites were actual customers have left comments about their experiences. In this way, online product research can be very effective.

>I have never said that they are complete slaves, however, advertising and other forms of psychological purchase control, such as raising the temperature in shops and lay out items do have a major impact on people purchasing habits. While this is the case, in an unrestrained market, there is an innevitable trend towards monopoly.

On layout - yes, name brand expensive items tend to be at eye level, better deals are more to the bottom or top shelves. End of isle displays, and so on. There is considerable deception at work here by major chains. For example, in advertising supplements, people assume the items are on sale. They often are not. Likewise, the trend with bonus cards, prices are marked up so you can "get a deal", were other places you'd get the sale price by default. In electronics in particular there are all sorts of games. "branding" CPU's and not telling you how fast they are, printers for a song, but you pay out the nose for replacement ink cartridges, and at least with chains, the visible specs will be minimal and on a card. Most items are designed to break and if they last too long they are discontinued, along with support for them.

As to the monopoly comment, monopolies don't normally exist in an unrestrained environment. They require government intervention to create artificial advantage for their survival.

They also practice really scummy tactics. If a Walmart or Home Depot moves into an area, they normally under price their merchandise until the competition (local shops) have been driven out of business. As a rule, 2.5 local jobs will be lost for every new Walmart job - sounds a lot like the "green collar" initiative, except that Walmart Jobs tend to stay. This doesn't always work I know of one Home Depot that moved in across the street from a long standing family run hardware store that had customer loyalty, a good selection, staff that knew their field and were willing to help and quick service. All things the Home Depot lacked. The Home Depot was the one shuttering their doors this time.

> Oh and you suppose that american purchasing habits for large, very expensive, unfuel effient vehicle which most have no actual use for is a natural trend do you?

Before there were SUV's there were station wagons and mini-vans. People want something they can haul kids and stuff around in. Try moving or going camping in a VW bug sometime.

-t