Good article. The “excessive prices” framework gets really complicated really fast. Who defines an excessive margin and how? Margins on some items are 50%, others are 2%. We could get into the world of dairy commissions and wheat boards setting prices, but that can’t scale across the economy.
As you note, the high prices are a symptom of concentration and anticompetitive practices. Dominant retailers can demand high fees and kickbacks and pricing restrictions from their suppliers. Outlaw the kickbacks and restrictive covenants, then break up the dominant firms, and watch prices come down.
Great article - I think one factor we're not discussing but should be, is how our monetary policy has been driving up the prices of goods such as groceries. If you look back to when currency was fixed, prices on many goods actually dropped between the late 1800's and the 1950's. This was driven by trade but also largely by technological innovation.
In the 1990's we had a huge boon with free trade agreements and the advent of the Internet, which should have had the same effect in pushing down prices, but instead we've seen a steady upward tick in prices. This is due to a monetary system which is designed to foster inflation which we're told will lead to growth, but largely seems to be a failed experiment. I'm not saying we need to go back to the gold standard, but limiting the creation of new currency might be a potential solution to better manage costs...
Good article. The “excessive prices” framework gets really complicated really fast. Who defines an excessive margin and how? Margins on some items are 50%, others are 2%. We could get into the world of dairy commissions and wheat boards setting prices, but that can’t scale across the economy.
As you note, the high prices are a symptom of concentration and anticompetitive practices. Dominant retailers can demand high fees and kickbacks and pricing restrictions from their suppliers. Outlaw the kickbacks and restrictive covenants, then break up the dominant firms, and watch prices come down.
From a reader:
Great article - I think one factor we're not discussing but should be, is how our monetary policy has been driving up the prices of goods such as groceries. If you look back to when currency was fixed, prices on many goods actually dropped between the late 1800's and the 1950's. This was driven by trade but also largely by technological innovation.
In the 1990's we had a huge boon with free trade agreements and the advent of the Internet, which should have had the same effect in pushing down prices, but instead we've seen a steady upward tick in prices. This is due to a monetary system which is designed to foster inflation which we're told will lead to growth, but largely seems to be a failed experiment. I'm not saying we need to go back to the gold standard, but limiting the creation of new currency might be a potential solution to better manage costs...