Ministers, teachers and consumer power in the economy

How much power do consumers have in our economy?  In theory they have all the power but in reality their power varies according to the degree of competition in any industry and their own personality.

Economic power means the ability to make decisions about what and how much is produced. If we lived  in small self-contained communities such as a Pacific island these decisions would be made mostly by people for themselves.  If we had perfect competition we would also make these decisions for ourselves and the market mechanism would transmit our decisions to producers.  As there are lots of people who want to make decisions for others one of the conflicts of our society is over economic decision-making.

Two examples illustrate how decision-making by individuals can vary according to competition in the industry.  The provision of spiritual services is, at least in Canada, the industry which comes closes to perfect competition.  Education is a mostly a monopoly.

As most of us Canadians have a strong commitment to freedom of religion people are free to attend the church of their choice or not at all. This means governments do nothing to restrict competition. Anyone with an inclination to preach can rent a school or community hall on Sunday mornings and some congregations allow anyone to do services.  No licenses are required by the government although some denominations use ordination, a form of licensing.  A minister’s career path is determined by his ability and his/her reputation. The Bible and most other religious texts are not copyrighted.  Churches receive no government subsidies other than an exemption from property taxes (which makes entry into the business easier).

On the other hand governments interfere extensively in education.  Parents are required by law the send their children to school, teachers must be licensed and governments closely supervise curriculum. Teachers generally must be licensed and are very difficult to fire.  Job security goes with length of service rather than teaching skills.  The result is a monopoly which is strongly defended by its employees.

In the spiritual world the customers are kings and make their own decisions.. :People can and do express dissatisfaction with their feet and some people go church shopping.  Ministers can be and are fired.  (My observation is that ministers are asked to leave for one of two reasons:  They get into an inappropriate relationship or they stay too long.)  Those people with the right skills rise to the top and those without the skills drop out.  To survive churches and staff must satisfy the spiritual needs of their congregations.

In education the customers (or their parents) make very few decisions.  They have no say in the curriculum and very little over who teaches their children.  Education is one of the most important things parents should give their children, yet it is where they have the least control.  This may be why home schooling and private schools are appealing to those who can manage them.  I believe education is too important to leave all decision-making to those employed in the field.

In other sections of the economy producers have to be more creative in influencing customer decision-making. Governments are usually willing to limit competition with licensing, tariffs, subsidies, patents and copyright.  Some firms can use the media to make emotional appeals to customers. Consumer power comes from being able to switch to another provider. The reaction to emotional  appeals may vary by person and personality. Maybe those people who don’t watch television have it easier when it comes to economic decision-making.

Another aspect of economic control is money creation.  The fractional reserve money we currently use creates money when bankers make loans.  This gives bankers a great deal of power to decide what economic activity happens and who does it.  On the other hand creating money  via a national exchange trading system as proposed in the essay “LETS go to market: Dealing with the economic crisis” on this weblog would transfer this power to individuals.

Some of us like to make our own decisions, some people like to make decisions for others and probably some people don’t care.  As one of those who likes to make his own decisions I like the perfect competition model.

 

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

Protecting customers from the banks

What can governments do to help consumers protect their interests when dealing with financial institutions? (Or any other industry)   I suggest increasing competition and requiring firms to publish more information would be more effective than regulation.

I figure governments pass legislation to restrict competition.  This allows firms in the protected industry to collect  profits they wouldn’t otherwise get.  When the firms protected by the legislation get out of hand and blatantly exploit their customers governments introduce regulations to limit the offensive behavior. This is to protect consumers.

Generally the way to restrict competition in the financial industry is via licensing.  Therefore the way to increase competition is to loosen licensing requirements so that more firms can get into the industry.  More competition should reduce the opportunities for exploitive behavior.

The other way to protect the interests of consumers is to require firms to publish plenty of information about their business so their customers have the knowledge with which to protect themselves.  In banking this should include detailed information about their loan portfolios.

Shouldn’t  depositors have the right to know to whom their money has been loaned?   If a depositor has this information then he or she can evaluate the safety of the deposit.  If there are concerns about where a firm is lending one’s money then one can take the deposit someplace else.

This post was written after reading in The Guardian a concern that financial reform in Britain will not lead to more competition.  You can see the article here.

Decision making and subsidies for bio fuels

In spite of low prices for shale gas there appear to be increasing concerns about energy availability.

We need energy to keep our bodies alive and we need energy to operate the machines upon which we depend. All energy comes from the sun and we use it in different forms for food and fuel.

The problem comes when the same form of energy can be used for both  as is the case with bio fuels such as corn and sugar.  Who is to decide the balance?

Some people concerned about fuel shortages have sought and been given subsides for bio fuels.

The chairman of Nestle, wanting people to buy more of his processed food products is complaining about the subsidies as they appear to be contributing to high food prices.

So long as the subsidies continue the balance is being determined by some politician and/or bureaucrat.

If there were no subsidies you and I would be making the decision in our shopping  decisions.

As we live a 45-minute drive from the store where we do most of our shopping our decisions would probably be different from yours. If all government subsidies for all products were to be dropped we would probably have to make some major lifestyle changes.

Even so, I repeat that subsidies should be given to consumers rather than producers.

 

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

How many subsidies?

A blogger who is opposed to subsidies because they distort prices and who believes subsidies should be given to consumers rather than producers cannot ignore this link.

It features a graph showing many ways in which governments provide assistance to businesses..

No way can we think of our economy as one based on a competitive market.

If you liked this post your are invited to comment, press the like button and/or click  one of the share buttons. If you disagree you are invited to say why in a comment.  While I like the idea of sharing this platform, my personality is such that I don’t reply to many comments.

Poverty

In exploring the world beyond the view from my study window (a large, lush green yard surrounded by tall trees and the mountain beyond the river valley) I came across a discussion of reasons for giving money to the poor.

I believe we have a collective responsibility to ensure that everyone has the opportunity to experience the same standard of living as everybody else.   This should apply to all the people of the  world.

This does not mean that everyone should have to take that opportunity. If a person chooses to do something else that is okay whether it be a life of poverty and medication in a cave or a life ruined by  drinking.

I also believe that full employment is not a realistic goal.  Nor is full employment desirable if it means working for the sake of working when there are other things people could do if they wanted. Nor is full employment desirable if it means using up scare resources or destroying the environment.

I also believe subsides should be given to consumers rather than producers.

And I believe that we as individuals should be able to make our own decisions according to our own values.

Therefore we should deal with poverty and/or ensuring everyone has the opportunity with some sort of universal income scheme.  Milton Friedman proposed a negative income tax.  I take the concept further and suggest an income scheme combined with a new way of creating money in the form of universal subsistence payments.

In either case the income scheme would replace all subsidies to producers and all other income support to individuals.

This approach would require some heavy-duty changes in our ways of thinking and behaving.  Many people would find it difficult to get their minds around these changes.  However, considering the current economic crisis and all the threats it may be that we need drastic changes.

Agricultural pollution

This week’s Economist has an article on agricultural nutrient pollution in the Mississippi River.

The economics way to deal with agricultural pollution presents us with a dilemma.   The changes required are so radical the screaming from those affected would generate enough hot air to destroy the world from global warming.

I believe the price of any item should include the full costs of producing the item.  This way we can make purchasing decisions according to our own values.  This applies to food as well as everything else.

Therefore the costs of agricultural pollution should be paid by the producers and passed on to consumers.

In some cases it may be difficult to calculate the costs of pollution but we could start by eliminating all subsidies which would probably reduce a lot of pollution.  In any case subsidies should be given to consumers rather than producers.

If we had to pay the full costs of producing food, there would probably be some major changes in our eating habits to healthier foods and more home gardens.

Individual choice for calories and water.

Here are two approaches to trying to influence people’s behavior for health or environmental reasons.

The first is a move to require some restaurants to state on menus the calories in each item.

This is in keeping with the perfect competition approach.  Give consumers as much information as possible and let them make their own decisions according to their values.

If a person wants to eat a high calorie meal they should have the right to do so.  The important thing is that they are able to know what they are doing and that they should be prepared to take the consequences whatever they are.

The second concerns a move to ban bottled water.  It is good to see that the colleges mentioned have so for resisted calls for an outright ban and are trying to provide alternatives.

Once again consumers should have the option to make their own decisions according to their values and circumstances.

Perhaps we could  deal with this by requiring water bottlers to include on the label a statement something like: “Some people are concerned about the environmental impact of water sold in plastic bottles.  In many cases tap water is at least as pure as bottled water.”

Unfortunately there are too many people who think they should have to right to force their version of the truth onto everyone.

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