An interesting item from Jeff Jarvis: “eBay is fast becoming one of the largest employers in America. Of course, it hardly employs anyone, but it enables a lot of people to employ themselves and run their own businesses: 724,000 people are using it as their full- or part-time employment, up 68 percent from a year ago; another 1.5 million use it to supplement their income.”
Thanks to Eric Scheske and The Daily Eudemon.
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According to John Edwards, these people don’t exist.
But, as my father used to say, we’ll never get rich taking in each other’s washing.
While this sort of thing does add value, it can only do so as one single part of a value chain. We can’t all do it, or there wouldn’t be anything else left to generate the things being handled by this stage. At best it can help trickle things down, not generate the trickle; it is inherently limited.
We can’t all do any given job in a division-of-labor economy. So what?
eBay is a tool, just like any other tool some people can make money (add value) by utilizing it. There is no difference between my socket-wrench set and the one that the mechanic down the street owns. Yet he makes money with his.
I expect that the states and Fed.gov will begin their crack-down on “uncollected” sales taxes and “avoided” income taxes very soon. The visibility of eBay is becoming too big to allow it to occur without regulation.
Is government evil, stupid or both? I vote for both.
I say both. I think the government will have a harder time than it anticipates regulating internet transactions (like ebay sales). It’s a similar problem they’ll have in trying to stop drug sales from Canada. I say Hurray for decentralization and individual autonomy. Hurray for the internet!
Mr, Singleton:
You’re confusing two entirely separate market phenomen in likening lower-than-market drugs from Canada to ebay sales. The likeness, the degree to which both are facilitated by the internet, is entirely superficial.
The difference lies in the source of the profit, which is rooted, in the case of the drug sales, in economic peculiarities entirely unlike the ordinary goods and services sold through ebay.
The source of the drug-import profits is the differential between the domestic and foreign pricing. This differential arises because the companies manufacturing the drugs find they can maximize their gross profits by selling at a lower version of “what the market will bear” in foreign countries. As long as they can sell quantities at some figure greater than their marginal production cost, profit is increased, In this effort, they are aided by two features of existing law: 1.) laws–patent law, for instance, which effectively limit competition on both the domestic and foreign market; 2. treaties and agreements whereby the foreign governments presumably cooperate to enforce distributorship agreements precluding “export” of the imported product–the reimportation we have seen. Technically, both the Canadian dealers and their American confederates and customers are all violating various federal statutes and are probably prosecuted (or even apprehended) as seldom as is the case more on account of “public relations” issues than anything else.
The drug companies, themselves, could eliminate this problem by not selling at lower prices in foreign markets–but that would, in their judgement, lower their profitability. They would lessen their losses by raising their prices in those foreign markets to a degree, thereby getting a larger share of the amount paid by the reimport customer to offset the amount lost as the result of losing the domestic sale. Though I know nothing of the matter specifically, it would be my surmise that this price-rise will already have taken place.
It would be a mistake to view the activity under discussion as merely an expression of entrepreneurial desire to serve a market. Specific illegal acts must accompany all of the activities by means of which a “supply” is gained with which to serve the market. And the long-range, most probable effect (though not absolutely ascertainable) is to raise the prices
paid by all, but most particularly by the “regular” US consumer.
Gene, I have not been paying attention to the drug reimportation issue, but your comments attracted my attention, so i took a quick look into it. I was wondering if when you say “Technically, both the Canadian dealers and their American confederates and customers are all violating various federal statutes”, you are suggesting these people are acting unethically, or are you merely stating the fact that they are violating some likely unethical federal statutes? I’m guessing the latter.
Most governments impose price controls on pharmaceuticals. That is the source of the disparity between Canadian and U.S. prices.
It would be nice to see the amount of government intervention in the medical industry go down, since it is the primary reason that medicine and medical care is so expensive. But I won’t hold my breath…
Paul:
I wouldn’t argue with your characterization–your summation is an accurate portrayal except for the “ethical” part or, perhaps, the definition of that word itself.
In general, it seems that this site leans toward a more “radical” view of the government-enforced monopoly right granted (temporarily for a period of years) than was ever expressed by Mises (though I can’t cite offhand). My view (and that of Mises), I believe, is closer to the ordinary or “man-in the-street” view which finds not only justifiable but societally beneficial some regime converting certain categories of ideas into a form of disposable property. There are many positions which may be taken against various facets of the arguments for the status quo and, in fact, are taken lucidly, eloquently, and frequently by Steve Kinsella, whose writing and polemic organization I admire, though, in sum, I find them entirely unconvincing. But it is not my purpose to criticize radical libertarianism–at least not in this specific instance. It is enough at this juncture to point out that the entire tissue of justification (including the implication of “ethicalness” to the activities and behavior of the reimportation complex) depends, to a very great extent, on a total rejection of the legitimacy of the state–any state–and certainly of the idea that any coercive authority can have any other object in mind than oppression.
Once is admitted legitimacy (and I do not mean mere legal “allowableness” but its basis in individual liberty constrained by “ethical” considerations), it is clear that the “supply” devoted to reimportation is gleaned not merely from the evasion of oppressive laws but constitutes a series of deliberately-broken, previously-made legal agreements (contracts), acts of fraud and theft, and likely various non-, mis-, and malfeasance, particularly by authorities in the re-exporting country. At least theoretically, illegal trade in reasonably harmless recreational drugs or those intended for medicinal use is perfectly ethical by comparison.
The entire process is that the “entrepreneur” discovers a “two-tier” market in which the monopolist manufacturer “dumps” in one (although not at the true “predatory” dumping price–below cost) market and “engrosses” a portion of the dumped supply by suborning agreement-bound participants along the supply route and then locates end-use customers willing to violate smuggling (and other) laws in order to buy at less-than-domestic pricing. THEFT is taking place in which the losers are the drug monopolist and the intended beneficiaries of their legitimate pricing policy, the thus-precluded potential foreign consumers. The pool of money from which both the profit and the lower cost to certain domestic consumers is drawn entirely in a zero-sum fashion (i.e., without any entrepreneurial value-addition) in which the gross “psychic” benefit value must obviously be significantly reduced (by the costs and risks associated with the conduct of such enterprise).
That’s my opinion, Paul (and I would surmise that of Mises, were he alive) and (in the words of Dennis Miller), “I’m stickin’ to it!” (Though I’m confident enough of my analysis and understanding to omit his “But I could be wrong.”)
Again, I reiterate that my point of view generally differs from (and excludes) that which proposes elimination of such legal entities as patents and resides in the mainstream belief that encouragement to innovation is significantly enhanced thereby and at small (and temporary) cost to the rest of us.
Gene: Well answered. On the question of Mises and patents, i’ll just share with you why i lean Rothbardian there (and now I’m even worse: I’m Kinsellaian). It was after having read “Human Action” a few times and struggling to grapple with his Monopoly Prices discussion there. I wasn’t getting it. Then i read Rothbard’s perspective on Monopoly. BINGO. All of a sudden i saw it: How do you get monopoly prices? Use government coercion. The market won’t allow a monopoly unless the consumers ask for it. But i liked your answer anyways!
Paul:
It is in the nature of human beings, in their use of reason as an aid to the ascertainment of the relevant shape of an uncertain future (i.e., to remove as much of that uncertainty as is possible) to have a general and pervasive interest in good (i.e., true) ideas. “Science” comprises that human activity dedicated to replacing bad (or merely insufficiently explicatory) ideas with the better, whether in the realm of the “hard” (physical, inductively demonstrable) or “soft” (social, whether buttressed inductively or deductively). People (in the general and all-inclusive sense) share an interest in the general advancement of scientific knowledge. I believe these broad statements not only true but unquestionable, even non-controversial. Humankind is in a continual process of replacing established but “bad” ideas with the better (truer, more “scientific”).
About 25 years ago, after some years of studying Mises, I began to reflect on the stubbornness with which some demonstrably “bad” ideas clung to existence, no matter how conclusively had their insufficiency been proven. Very quickly, it became apparent that those types most likely to survive, even prosper, belonged to the subset “social,” the type not–or not satisfactorily–explicable through inductive methods. It is, on the other hand, an almost everyday occurrence that the better ideas arising in the “hard” science sphere routinely replace the former, inferior versions with hardly a ripple of comment or discontent. Autos (and trains and planes) supplant horses and rickshaws almost entirely; fertilizers and plant hybridization and both chemical and genetic-based pest control relegate prayer, incantation, and sacrifice to backwater existence only; no one believes the earth flat, and few doctors would advance the “humours” theory of disease today (though there is a fascination with the very-similar regime of the accupuncturist).
At that point, an essentially undiscovered and general hypothesis (concerning human behavior with relation to “ideas” in general) began to form in my mind–one that involved the differential “marketability” of ideas dependent on inductive vs deductive (i.e., generally, “phjysical” vs “social”) support.
My hypothesis is actually easy to understand. It is simply that, because of the multiplicity and interconnectedness of causal factors involved in the “social” set of ideas AND concomitant difficulty in demonstrating an unquestionable superiority of one over another with the degree of conclusiveness common in the physical realm (i.e., it “works” better), any “bad” idea in the social sphere is able to survive to the extent that its propagation is able to generate an income (or, in some cases, some other desirable end) for its proponents. In other words, no matter how discredited is such an idea, it can never be “killed off” as long as there is sufficient profit remaining to support an ideological leadership.
Not having any academic or intellectual background, acquaintances, nor connections, I sought someone with whom to discuss my ideas and, thus, telephoned FEE (of whom I was a minimum-level subscriber and contributor) for advice (on with whom I might discuss, etc.). To my very great surprise, the phone was answered by Leonard Read himself. As I went through my hypothesis (not much differently than laid out here) and finished, he became extraordinarily excited and expressed his total agreement with my text. He said (and I do not doubt) that I had expressed succinctly and EXACTLY something that had been already years in his mind but that he had not ever expressed openly only because he’d not formulated it in words. He then said that at some time (2 or 3 weeks distant) was to be held their annual meeting and that he was very desirous that I should come and address the assemblage with my ideas on the subject. Moreover, he offerred that I could choose the order in which I was to be presented (two other speakers, one of whom was Ron Paul) and need not make up my mind as to that order until shortly before actual commencement of the meeting.
I made no promise except to attend and, a few days later, tickets to the event arrived in the mail for me and my (then) business partner.
I never spoke at the meeting (for reasons unimportant here) and we left immediately after the pre-meeting dinner (at which we were seated with L. Fertig). I’m actually glad that I passed; I now understand the basis of my idea on an even deeper and more comprehensive level–rooted in biological evolutionary theory and the concept of “reproductive fitness.” That’s it, Paul. We (all of us) do it to get laid. And, to the extent it’s successful in that quest, especially in adolescence and young adulthood, we do more of it and the doing of it forms a large part
of what becomes our “personality,” our “identity,” our raison d’etre. In that particular quest, there’s actually an advantage enjoyed by the proponents of bad ideas–and that is, because of their infinitude, each such offers a niche in which competition for “distinction,” a type of prowess display, is actually easier: spaces as outstanding athletes, scholars, and proponents of already-accepted ideas are more severely limited–inaccessible to most–and therefore subject to intense competition.
Now you understand damn near everything.
Hi Gene: You’ve certainly given some thought to some questions that have made me shake my head in wonder. Thanks!
A hilarious and quite artistic explanation!
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