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Source link: http://archive.mises.org/16931/the-pricing-politburo-slams-shampoo/

The Pricing Politburo Slams Shampoo

May 13, 2011 by

Would-be planners are not interested in the interactions of thousands of voluntary decisions (i.e., market exchanges) that go into determining whether to charge 77¢ or $1 for shampoo. The planners demand and impose their view of order.

FULL ARTICLE by S. M. Oliva

{ 31 comments }

Enjoy Every Sandwich May 13, 2011 at 8:31 am

The raging contempt that the State’s minions and defenders have for individuals is just breathtaking. They don’t credit us with the intelligence or wisdom to buy our own shampoo!

I wonder why they don’t apply the same standard to the political system. It seems to me that the “major” political parties have a lock on all of the “shelf space”. Isn’t that a little more important than shampoo?

RG May 13, 2011 at 8:39 am

Skip, your passion is infectious and I rarely fail to get worked up when reading one of your articles/posts. You make it difficult for someone transitioning from military supporter and apologist to pacifist, but I appreciate the tests.

J. Murray May 13, 2011 at 9:25 am

The best part of his writing is how he is so adept at spinning sarcasm in with the article and make it work.

J. Murray May 13, 2011 at 9:26 am

Just wait until the DOJ decides that the market for Suave is a total monopoly. We can’t have one company controlling the sales of Suave branded shampoo.

Drigan May 13, 2011 at 9:58 am

I long for such a day . . . all IP would suddenly fly out the window!

Kunsthausmann May 13, 2011 at 9:32 am

By forcing the sale of the V05 brand to a firm other than Alberto Culver and Unilever, the Division is in effect micromanaging the allocation of retail shelf space.

In other words, the government is commingling itself with private enterprise and making business decisions for business. This is ironic given leftists’ love of governmental meddling in business and their habitual quotation, usually shrill, of Mussolini’s claim that fascism is the merger of the corporation and the state. Unfortunately, leftists are not alone in their craving to commingle government with business. Consider how many think tanks–not the LvMI however–which profess desire for free markets but which espouse merger of government and prvt enterprise in other ways. You see them in action when, for instance, they call for education vouchers that can be used at private schools.

Also, the DoJ reports at its website that

Ms. Varney manages an annual budget of over $160 million and staff of over 800, including more than 360 attorneys, 55 economists, and 180 paralegals.

“55 economists”. Simply amazing. The Antitrust Division’s org chart, too, is telling. (DAAG means Deputy Assistant Attorney General.)

Tim Kern May 13, 2011 at 9:39 am

…makes you wonder how they got 55 economists (perhaps they’re “paraeconomists”) to agree. Oh, wait — paychecks!

Tim Kern May 13, 2011 at 9:38 am

Using the HHI for governmental control shows a lack of understanding of the HHI’s purpose and is a blatant misuse of a tool.

Having central planners employ it is like giving a hand grenade to a monkey. I cannot imagine any sort of good result that can come of this.

IVF-MD May 13, 2011 at 10:52 am

Three gas station owners are sitting in a jail cell.
The first one says, I charged a few cents more for my gas than everybody else and the government locked me up for PRICE GOUGING.
The second one says, I charged a few cents less for my gas than everybody else and the government locked me up for PREDATORY PRICING.
The third one says, I was careful not to do like the two of you. Instead, I charged exactly the same for my gas as everybody else.
“Oh, so what are you in here for?”, asked the first two.
“The government locked me up for PRICE COLLUSION”. -_-

D Storey May 13, 2011 at 11:23 am

Walter Block’s telling of this joke makes me chortle every time. I wonder whether he really did deliver it to a room-full of anti-trust attorneys, as he claims.

Heath Nestor May 13, 2011 at 11:22 am

Government grossly underestimates consumer sensitivity to price differentials. I find them a bit mind boggling myself. Consider that the average supermarket profit margin is 1 percent or less. By raising prices 1 percent supermarkets could double their profits. Would anyone notice or care if a dollar item went up to $1.01, or $10.00 to $10.10? Yes, they would. We can be certain that if that 1 percent price increase would increase profits supermarkets would have done it. They don’t do it because the mere 1 percent would drive away customers and reduce profits

Shay May 13, 2011 at 12:46 pm

I at first disagreed with you, but remembered that in my local supermarket I’ve recently seen several “markdown” tags on things where the price has literally gone down three cents. The most recent I remember was a 12-pack toilet paper going from $5.25 to $5.22, with a “new lower price” tag.

Bill May 13, 2011 at 1:36 pm

A drop of 3 cents may not seem like a lot to you but, in the last weeks, the US$ fell by nearly 9 cents against the Euro. So, in the same way that gas prices are up and down like a whore’s nightie (well, mostly up, I guess, these days, seeing that everyone wants a piece of us), your toilet paper actually fell by more like 6%.

Bill May 13, 2011 at 12:17 pm

The anti-trust people really missed an opportunity. If, as the article points out, they are allowed to define the market, then each individual brand could be a separate market – the mind boggles!

Who empowers these people? Who sets their targets and lauds their achievements? Are they insane, or is that an aid rather than a requirement?

J. Murray May 13, 2011 at 12:27 pm

Take it another step and each person is a separate market. How dare Procter & Gamble enjoy a monpoly control over my shower with Head&Shoulders brand shampoo? When will the DoJ bust up this monopoly?

Bill May 13, 2011 at 1:22 pm

The DoJ should be effective under this leadership? Never, this comes under the heading of the president’s “creating jobs” program and it’s better than teaching as far as job security goes – by defining your own target market you create the perfect perpetuum mobile without having to deal with raucous kids whose parents, now, probably work for the government, anyway.

JP May 13, 2011 at 12:54 pm

What if one of the companies would have raised their prices once the merger was challenged. They could have raised them just enough to exit the “value shampoo market”, and enter the more general shampoo market. I realize that this is unecessary posturing, that still does divert resources away from production, but I do love it when the better minds in private industry find a way to out manuver the government idiots. It always makes me laugh.

Freedom Fighter May 13, 2011 at 1:48 pm

It’s quite ridiculous and quite silly for the government to regulate the price of shampoo, why not chewing gun while we’re at it.

But such silly examples are a good way to demonstrate the absurdity of price control. If it’s absurd to control the price of shampoo, then it should strike the readers that it is equally absurd to control the price of oil or certain foods.

The current increase in the price of oil and gasoline is prompting certain governments to implement price controls and price ceilings. Most people, statists, socialists, liberals and other economic illiterates will accept such moves as being necessary to help the people. But really, controlling the price of gasoline is no less silly than controlling the price of shampoo.

What price controls will do, especially price ceilings is to make the commodity even more scarce. Any state that will implement gasoline price ceilings will experience periodic gasoline shortages and long waiting lines at the gas pump, it will exacerbate problems and people with money and willing to pay more for their gasoline will end up having to wait and do without.

Bill May 13, 2011 at 3:09 pm

So, do you think that the government IS or ISN’T trying to micromanage prices?

Freedom Fighter May 14, 2011 at 8:05 am

There is no trying. The government is definitely micromanaging prices.
When it cannot dictate the price directly, it sets prices floors and price ceilings.
Sometimes it’s politically motivated, like setting price ceilings in the face of rampant high gasoline prices, but sometimes it’s petty bureaucracy in this case of shampoo prices.

Anyways, tempering with prices lead to shortages and malinvestments.

Seattle May 13, 2011 at 9:21 pm

why not chewing gun while we’re at it.

Well, that’s one way to solve the problem…

Eric May 13, 2011 at 6:19 pm

I wonder if they know I can buy a big jug of “horse” shampoo for $1 at the local dollar store – which is about 4 times the size of normal shampoo containers. I use it as a form of liquid soap, since I’m too lazy to lather up with a bar of soap. It does contain some fine print saying it’s safe for humans.

I hope this loophole continues to exist and stay under the radar of the regulators. Perhaps they might fear I’d grow a mane and have an urge to whinny.

Freedom Fighter May 14, 2011 at 8:01 am

Shhhh, don’t spill the beans.

Jim P. May 13, 2011 at 6:58 pm

What’s the big deal? I just use a tablespoon of phosphate in the shower.

jmorris84 May 13, 2011 at 10:58 pm

LOLLLLLLL!!!!!!!!!!!!!!

Freedom Fighter May 14, 2011 at 8:09 am

That was funny, LOL :-D

But phosphate is just a scrubber, not an emulsifier. You still need soap to cut through the grease. Once the grease and grit is cut, the phosphate carries it away. Phosphate is the chemical equivalent of an abrasive, you still need the soap and the shampoo.

clever-title May 13, 2011 at 8:02 pm

Perhaps the DOJ should start an investigation of corporate Antitrust attorneys. They seem to be acting in collusion to restrict the market for comptent representation.

James Moore May 14, 2011 at 3:47 am

They might control about 90% of the market? Hogwash! What about all of the $1 store brands. And how do you justify defining a “market” with a 77% price differential? Justice doesn’t provide a comprehensive survey showing pricing clusters. It may be that $1 and $1.77 products are in completely different markets.

Shay May 14, 2011 at 2:20 pm

What about the market for $0.99 (and not $1.00 or $0.98) shampoos? They have that market cornered! Walgreens apparently wants a monopoly on the $0.77 shampoo. Better warm up the legal machines.

Freedom Fighter May 14, 2011 at 8:13 am

The purchase dynamics might not be the same at the grocery store than they are at the drug store. It might be fine to sell your shampoo higher at the grocery store because people might buy out of impulse but you sell it cheaper at the drug store because people there are more conscionable and take the time to buy value.

Drug store vs grocery store is definitely not the same market, even if they are 10 feet apart physically, they can be light years apart psychologically.

That’s why you will never see a corner restaurant sell hotdogs at $8.00 a piece nor beer at $9.00 a glass but you will see such prices at a sporting event. It’s definitely not the same market.

L June 2, 2011 at 12:54 pm

I am in the Old City of Jerusalem for a few days and there are two shops next to each other selling ice cream treats. For the same watermelon popsicle (I highly recommend it if youre ever in Israel), one store had it at 7 shekels. The adjacent store had it for 5.5 shekels.

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