Thursday, January 29, 2009

Those Merciless, Greedy Consumers Run The Show

The consumers are merciless. They never buy in order to benefit a less efficient producer and to protect him against the consequence of his failure to manage better. They want to be served as well as possible. And the working of the capitalist system forces the entrepreneur to obey the orders issued by these consumers.

~Ludwig von Mises from "Bureaucracy" (via today's The Gartman Letter)

Here's a dirty little secret about capitalism: consumers, not corporations, run the show. If you find something about the marketplace objectionable, it would be more appropriate to blame those who actually call the shots: the ruthless, cutthroat, and disloyal American consumers.

Consumers are the kings and queens of the market economy, and ultimately they reign supreme over corporations and their employees. When corporations make mistakes and introduce products that consumers don't want, which happens frequently, you can count on consumers voicing their opinions forcefully and immediately by their lack of spending.

In a market economy, it is consumers, not businesses, who ultimately make all of the decisions. When they vote in the marketplace with their dollars, consumers decide which products, businesses, and industries survive—and which ones fail (see chart above of the 1.5 million business bankruptcy filings since 1980). It is therefore consumers who indirectly but ultimately make the hiring and firing decisions, not corporations. After all, corporations can make no money, hire no people, and pay no taxes unless somebody, sooner or later, buys their products.

What consumer sovereignty in a free marketplace translates into is each person husbanding his resources for the greatest benefit to himself and his family, which in turn translates into the greatest efficiency in the consumption of the world's scarce resources. If you don't like the message of the marketplace, don't assume that corporations and greed are to blame while consumer behavior and consumer greed play no role in the outcome. We should be thankful, in fact, that the marketplace puts consumers on such a powerful pedestal.

22 Comments:

At 1/29/2009 8:24 AM, Blogger @sethstorm said...

On one scale, perhaps.

On the other, not so much. Being fed inaccuracies with regards to quality being one of the sticking points.

 
At 1/29/2009 8:41 AM, Anonymous Anonymous said...

I was listening to a local radio show when I lived in San Diego. A caller was complaining about the oil companies "gouging" the consumers with high gasoline prices.

The host asked the caller where she lived (near the beach) and how much she paid for her home (about $250K). Her home was easily worth over $500K at the time. When the host asked if she would sell him her home for $350K, she responded with an adamant "No".

So, it was priceless when the host asked her if she was going to "gouge" him on the price.

 
At 1/29/2009 9:22 AM, Anonymous poor boomer said...

What about people without dollars?

They get screwed by the ones with dollars, especially in markets for things with low demand elasticities.

Poor people had to pay $4 to put a gallon of gas in their car to get to work because gas guzzlers were willing to pay as much.

 
At 1/29/2009 9:26 AM, Anonymous poor boomer said...

Thanks, Anonymous! I wrote my rant before reading your gem.

Rental housing - another item with low demand elasticity - is my primary pet peeve.

I gotta live in a house with nine people because everyone else has more money and I can't afford what they're willing to pay for more than a 10 x 10 room.

 
At 1/29/2009 9:32 AM, Blogger The Therapist Is In said...

Such is not always the case, as in health care. i subscribe to Anthem Blue Cross of CA and as a concerned consumer, find it outrageous that after ten days of trying, I am unable to actually speak with a human being on the phone to assess my different options in changing plans; seems the combination of laying off everyone and raising their prices by as much as 30% globally this past week has really assaulted and denigrated the integrity of the consumer in this case.

 
At 1/29/2009 10:32 AM, Blogger 1 said...

"Consumers are the kings and queens of the market economy, and ultimately they reign supreme over corporations and their employees"...

Hmmm, something that history has proven over and over again...

REA freight forwarders

Rexall drug stores

Woolworth Five & Dime

"Poor people had to pay $4 to put a gallon of gas in their car to get to work because gas guzzlers were willing to pay as much"...

Who's fault is that they are poor?

Obviously its the poor's fault... ha! ha! ha!

 
At 1/29/2009 11:03 AM, Anonymous poor boomer said...

1 (still a blogger without a blog) said:

Who's fault is that they are poor?

Obviously its the poor's fault... ha! ha! ha!


Maybe yes, maybe no. Do you believe that every poor person is to blame for their poverty?

Let's postulate that I wake up tomorrow morning with an accounting degree. Do you think I could get an accounting job?

 
At 1/29/2009 11:13 AM, Anonymous Anonymous said...

Rags to riches. It's an American story.

At least we have the opportunity to succeed. I'd hate to be poor and living in another country without economic freedom.

I think Dr Perry is correct. How often is it remarked that we should buy "American Made"? How many people ascribe to that concept then go buy the best deal they can get despite the source of the product?

Choices, choices.... Life is funny that way.

 
At 1/29/2009 11:52 AM, Anonymous poor boomer said...

And then after buying all those imported products, people complain about our balance of trade deficit and weak dollar.

 
At 1/29/2009 12:44 PM, Blogger 1 said...

"Maybe yes, maybe no. Do you believe that every poor person is to blame for their poverty?"...

In this country the answer is a resounding yes...

"Let's postulate that I wake up tomorrow morning with an accounting degree. Do you think I could get an accounting job?"...

In a heartbeat...

"And then after buying all those imported products, people complain about our balance of trade deficit and weak dollar"...

Which people?

 
At 1/29/2009 5:23 PM, Anonymous poor boomer said...

1 said:

Maybe yes, maybe no. Do you believe that every poor person is to blame for their poverty?"...

In this country the answer is a resounding yes.


So what can I do NOW to get out of a dead-end existence? Going to school is not an option (no money), starting a business is not an option (no money), getting a job promotion is not an option (no internal advancement available), making a lateral move is unlikely (too much competition, too old), and getting a better job is extremely unlikely (dead-end job history, no marketable skills). Not to mention that I absolutely, positively, do not want to stay in my present line of work.

I didn't make any of the usual bad "culture of poverty" decisions.
---------------------------------------

"Let's postulate that I wake up tomorrow morning with an accounting degree. Do you think I could get an accounting job?"...

In a heartbeat...

You don't think my age would be an impediment? Plenty of newly-minted accounting graduates half my age are available; hard to see how I could outcompete them when employers wouldn't expect me to have 15 good years left.
---------------------------------------

"And then after buying all those imported products, people complain about our balance of trade deficit and weak dollar"...

Which people?

Well, I was intentionally fuzzy here. You know, people...SOME people whom I can't readily identify. Talking heads I've seen and heard in the media.

 
At 1/29/2009 7:49 PM, Blogger @sethstorm said...


The host asked the caller where she lived (near the beach) and how much she paid for her home (about $250K)

I would have stopped that guy at the point and said "That is completely a different situation and that you already have a pre-ordained conclusion. Just cut to the chase and get to what is your point."

They are people who lack the correct information.

 
At 1/29/2009 7:50 PM, Blogger @sethstorm said...


In this country the answer is a resounding yes...

Hardly if the means are removed ala the Rust Belt.

 
At 1/29/2009 7:53 PM, Blogger @sethstorm said...


I think Dr Perry is correct. How often is it remarked that we should buy "American Made"?

Often enough for me to use a US-built HP-28S over a third world knockoff, to buy US-manufactured Altama boots over another third world knockoff, to buy from what is a Detroit brand of car and for some of IBM's higher end US-built equipment.

There's your answer.

 
At 1/29/2009 7:56 PM, Blogger @sethstorm said...



So what can I do NOW to get out of a dead-end existence? Going to school is not an option (no money), starting a business is not an option (no money), getting a job promotion is not an option (no internal advancement available), making a lateral move is unlikely (too much competition, too old), and getting a better job is extremely unlikely (dead-end job history, no marketable skills). Not to mention that I absolutely, positively, do not want to stay in my present line of work.

"1" only wants your kind to die off by attrition. He has no care for you to be able to live - you have the wrong mindset according to him.

 
At 1/29/2009 7:57 PM, Blogger Craig said...

"I am unable to actually speak with a human being on the phone to assess my different options in changing plans"

What a very odd way to go about things. When I left my cellphone carrier, for example, I didn't call them up to discuss my quitting options, I asked the new carrier what he could give me that surpassed them.

Just leave already! Your story of poor customer service combined with your freedom to quit is actually a perfect example of how the customer is king!

 
At 1/29/2009 8:00 PM, Blogger @sethstorm said...


Just leave already! Your story of poor customer service combined with your freedom to quit is actually a perfect example of how the customer is king!

Try leaving when all the options present equally bad service and there is no option to start an alternative.

They are far from being king.

 
At 1/29/2009 8:09 PM, Anonymous poor boomer said...

Ever notice how it's okay for customers to have a sense of entitlement, but a disgruntled employee is ungrateful?

 
At 1/30/2009 6:55 AM, Blogger 1 said...

"Ever notice how it's okay for customers to have a sense of entitlement, but a disgruntled employee is ungrateful?"...

Unlike customers which actually bring money to the table, a disgruntled employee is just a money losing leech...

 
At 1/30/2009 7:40 AM, Anonymous poor boomer said...

1 said:

"Ever notice how it's okay for customers to have a sense of entitlement, but a disgruntled employee is ungrateful?"...

Unlike customers which actually bring money to the table, a disgruntled employee is just a money losing leech...



Perhaps you assume too much. My problem is with the 10-20 percent of people who come into the store not contributing anything to the bottom line, seeking freebies or scams of one sort or another.

There are a lot of homeless/street people in the neighborhood who often come in`trying to scam something. Then there are the scavengers who want to cash in trash bags full of returnable cans and bottles they collected off the street with no regard for what evil lurks within (used syringes, stale beer and tobacco, lime slices, you name it). Then there are the people trying to get change (w/o buying anything) for a parking meter or bus. The ones who pop in just to use the microwave for free, or grab some free napkins or condiments. The shoplifters, the gangbangers. Oh the humanity!

 
At 1/30/2009 3:17 PM, Blogger 1 said...

seth makes the following comment: ""1" only wants your kind to die off by attrition. He has no care for you to be able to live - you have the wrong mindset according to him"...

No, not attrition, that take far to long... A swan dive off of a tall building with a face plant into the concrete will do...

poor boomer says: "I didn't make any of the usual bad "culture of poverty" decisions."...

Well obviously you did otherwise you would've have been doing something different...

I know people who were in their late forties and early fifties and had worked for outfits like RCA and CDC (yes, mainframe work) who made the very rough movement into something else and now really do have something to show for it... One of them actually became a CPA and now has retired to a life of luxury...

"Well, I was intentionally fuzzy here. You know, people...SOME people whom I can't readily identify. Talking heads I've seen and heard in the media"...

Well now poor boomer to me that's a problem...

I wouldn't take their collective word for the time of day let alone whatever else they may be pushing...

 
At 2/01/2009 4:27 PM, Anonymous poor boomer said...

1 said:

One of them actually became a CPA and now has retired to a life of luxury..


Now this is what I wanted to do, but that requires formal education I can't afford. (Funny how colleges insist on getting their money up front.)

I actually believe I'm capable of passing the CPA exam on my own, but the pesky education requirements excluse those who don't have the money for the required coursework.

So how can I become a CPA now? I certainly think I have the ability to acquire CPA skills.

 

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