Friday, August 15, 2008

The Big Ripoff

While reading a recent newspaper article I was struck by how economically naive a large part of the population is. The article was in reference to recent high gas prices. After rising to record high prices, oil finally started to drop. It was a great relief to drivers, but there was a week or so delay between the drop in oil prices and drops at the pump. Apparently, according to the article, there were some petrol stations which lowered their prices slower than others.

So far so good; sounds like different areas of Sydney have slightly different factors of competition and availability which makes such large swings in prices noticeably uneven. Pretty simple supply/demand type stuff. What bothered me about the article is the way it referred to these higher prices with sentences such as “motorists being ripped off by major petrol companies,” “many motorists were still being ripped off,” and “motorists would continue to be ripped off.” This phraseology betrays a complete misunderstanding of the operation of the market.

It’s one thing to state that the high prices are a “rip off” if there are lower prices elsewhere. This colloquial use of the term simply indicates that a smart shopper should look elsewhere. But that’s not the way it was used; it was used in the sense that denotes a fraud or a swindle. I’m assuming that these “ripped off” motorists were fully aware of the price when they entered the stations, the price that was posted on signs and pumps was the price that they paid, and no one threatened to harm them if they didn’t purchase. So wherein lies the rip off?

Nowhere, that’s where. Those higher prices were not ripping off consumers any more than the higher prices of designer handbags rip off fashion consumers. People paid higher prices because they were not willing to find or patronise stations with lower prices, plain and simple. The owners offered a good a certain price and people chose to buy of their own free will.

Now, there’s a whole other argument buried in there about free competition and government intervention in the petrol market, but we’ll leave that for another day (I’m sure you can guess where I stand on that issue). But the end result of this is that I’m now slightly more saddened about the state of the world. When simple economic concepts are complete voodoo to supposedly educated people like professional journalists it doesn’t bode well for the future of the nation, or the world.

Saturday, August 9, 2008

The Third Wave

I’ve been thinking recently about Alvin Toffler’s seminal book The Third Wave, which I read several years ago. The basic idea of the book is that we are now entering the third wave of societies. The first wave was agrarian, the second industrial, and the third informational. The question I’ve been wrestling with is where does a voluntary society sit in this continuum?

I often hear the argument that voluntary societies can’t exist because they haven’t existed. This is obviously a very weak argument if you take it at face value. But I think that the argument is actually quite a bit deeper and more nuanced than that. What they’re really saying is society always forms into some form of coercive government because that is the only thing that can work. In other words, voluntary societies have been discarded by societal evolution. A society of one person (let’s assume that “society” is the right word here) is obviously voluntary. A society of two is likewise voluntary unless one of them uses force on the other. A society of three the same, and so on. Eventually someone uses force and a government is formed in response, and since this has always happened at some point in all societies, it must mean that the voluntary society cannot work.

I’m of the school that this is partially true. Voluntary societies couldn’t have existed in the past. A truly voluntary society must be built on a framework to support it. Much like computers couldn’t have existing 200 years ago because it took time to develop all the necessary pre-requisites; voluntary society requires that some groundwork be laid. This brings us back to The Third Wave. It’s instructive to consider the political structures that existed, primarily, within each of the waves.

Agrarian societies had very tall and rigid hierarchies. Birthright was paramount and the sovereign was usually ordained by God. Classes were very strictly enforced and mobility between them was rarely achieved.

Industrial societies changed that by flattening things out. Contrary to what socialist apologists would have you believe, the industrial revolution was more to the benefit of the working poor than the capitalised rich. Mass production was the order of the day, and that included mass production of political power. Democracies sprang up as fast as shareholder-owned corporations. To be certain, there was still a hierarchy, but it was shorter and wider. Mobility between classes became a reality, if a relatively uncommon reality. Classes themselves became less distinct, and based more on achievement than birth.

What about informational societies? That question has yet to be answered. I believe we are still only at the very earliest beginnings of the informational shift. It seems that most post-industrial societies are moving toward socialism, that is certainly true in the United States and Europe. But I contend that this move isn’t a furtherance of drive toward informational society, but is instead a reaction of that drive. It’s the outgrowth of the conflicting pull between the two types of societies. The real trend will be to continue the flattening of hierarchies and even more massification of production. But massification in a different way. Industrial societies were about increasing the amount of production. Informational societies are about increasing the amount of producers.

Another great read on the topic is The Long Tail: Why the Future of Business is Selling Less of More by Chris Anderson. The world is moving to a mass of producers, as evidenced primarily by the entertainment industry. No longer is television dominated by a handful of national networks. Now there’s cable, on demand, Internet video, DVDs, video games, and a host of other options available to consumers. This new trend of massification applies to everything, even, the seats of power. Exactly how this will play out is yet to be seen, but I believe that eventually the great monolithic government will go the way of the birthright ordained monarch. In its place will be a society based on individual choice, and a total decentralisation of power. But it won’t be without a fight, and we can expect those who have attained power will try their damnedest to maintain it.

Sadly for them, like the Luddites of days gone past, progress will march on regardless of how they try to stop it.