Price of goods will not go down because the business makes money. Feel free to give examples to show otherwise.
The thing is, all businesses would have their profit margins increased. If one company lowered prices, they would outsell their competition (because consumers would 'vote with their feet' and go tot the place with the best deal). Unless you want to postulate a massive conspiracy within every possible industry, competition would not allow companies to pocket the difference.
Originally posted by Symmetric Chaos
Which raises the question: why wouldn't they do that?
"Why wouldn't they do that?" Why wouldn't competing entities, all vying for their own best interest work to help each other?
Well, for starters, the company that undersells its competition is going to do very well for itself, at least until its competitors follow suit. Also, (I think) current anti-trust/monopoly laws would prevent this sort of behavior. Frankly, it defies credulity that every business in any field could be coerced into such a conspiracy- the possibility of easy money (by having lower prices) would mean that a near monopoly would be necessary to achieve the sort of conspiracy you suggest.
Originally posted by Red Nemesis
"Why wouldn't they do that?" Why wouldn't competing entities, all vying for their own best interest work to help each other?Well, for starters, the company that undersells its competition is going to do very well for itself, at least until its competitors follow suit. Also, (I think) current anti-trust/monopoly laws would prevent this sort of behavior. Frankly, it defies credulity that every business in any field could be coerced into such a conspiracy- the possibility of easy money (by having lower prices) would mean that a near monopoly would be necessary to achieve the sort of conspiracy you suggest.
Except that you've been describing free-market economics which requires that the majority of people are perfectly rational, highly intelligent and greedy. The business owners (who are perfectly rational, highly intelligent and greedy) would thus take the most rational course of action in order to make the most money and conspire, thus eliminating the annoying little competition aspect. If people are not rational, intelligent and greedy then the system you're describing wouldn't work in the first place because there are all sorts of human flaws for them to exploit in order to make money.
Originally posted by Symmetric Chaos
Except that you've been describing free-market economics which requires that the majority of people are perfectly rational, highly intelligent and greedy. The business owners (who are perfectly rational, highly intelligent and greedy) would thus take the most rational course of action in order to make the most money and conspire, thus eliminating the annoying little competition aspect. If people are not rational, intelligent and greedy then the system you're describing wouldn't work in the first place because there are all sorts of human flaws for them to exploit in order to make money.
Free market theory does not mean no regulations, a fact many opponents of free market systems seem to fail to grasp.
The business owners (who are perfectly rational, highly intelligent and greedy) would thus take the most rational course of action in order to make the most money and conspire, thus eliminating the annoying little competition aspect.
Except that no greedy person would take a reduction in pay (by conspiring) instead of making as much money as possible (by continuing sound business practices) simply for the sake of maximizing someone else's profits. It doesn't make any sense for someone to give up the chance to undersell (and outperform) a competitor by helping that competitor. It isn't in any company's best interests to conspire, because a single nonparticipant wrecks the system entirely. Anyway, Occam's razor tears your conspiracy to shreds. Which is more likely:
Conflicting interests working together...
-or-
Businesses optimizing their own potential?
The simplest explanation (without the herding cats-esque herculean feat of forming a monopoly) is that the free-market system of competition would continue working the way it should.
EDIT: Fixed 'Occam's Razor' spelling
Originally posted by Bardock42
Free market theory does not mean no regulations, a fact many opponents of free market systems seem to fail to grasp.
But you're anarchist . . . you want no regulation anyway . . .
Originally posted by Red Nemesis
Except that no greedy person would take a reduction in pay (by conspiring) instead of making as much money as possible (by continuing sound business practices) simply for the sake of maximizing [b]someone else's profits. It doesn't make any sense for someone to give up the chance to undersell (and outperform) a competitor by helping that competitor. It isn't in any company's best interests to conspire, because a single nonparticipant wrecks the system entirely. Anyway, Ockham's razor tears your conspiracy to shreds. Which is more likely:
Conflicting interests working together...
-or-
Businesses optimizing their own potential?The simplest explanation (without the herding cats-esque herculean feat of forming a monopoly) is that the free-market system of competition would continue working the way it should. [/B]
Actually Occam's Razor would be that most people are not rational and brilliant and greedy and thus the system doesn't work in the first place. If we assume that the system does work for some reason then we must assume that they will try to maximize profits which does mean working together, short term loss for long term gain is what a logical person would do, what an intelligent person would see and what a greedy person would want.
Originally posted by Symmetric Chaos
Actually Occam's Razor would be that most people are not rational and brilliant and greedy and thus the system doesn't work in the first place.
Originally posted by Symmetric Chaos
If we assume that the system does work for some reason then we must assume that they will try to maximize profits which does mean working together, short term loss for long term gain is what a logical person would do, what an intelligent person would see and what a greedy person would want.
Except that the profit to be made by screwing one's competitors over (by underselling them) outweighs any 'non-competition pact' that might be made. The push of competition leads to the maximization of profits. Removing that competition not only endangers the consumer (which is what government is in place to protect) but in the long run diminishes production (by blunting the imperative of comparative advantage to specialize in the most efficient way of money making).
Originally posted by Red Nemesis
As far as I know, capitalism doesn't require anyone to be brilliant, or even fully rational. Consumers definitely don't always make rational decisions, and it works even though the average American (capitalist consumer) is almost unbearably dim. All that capitalism really requires is that businesses/individuals work to maximize profit. You are trying to force it into a utopian model that simply does not fit the discussion.
Technically the 100% fallacy. You'd be shocked by the number of people who think that their personal system of economics/philosophy would create a utopia though. I kinda jumped to the conclusion that you were part of that group.
Originally posted by Red Nemesis
Except that the profit to be made by screwing one's competitors over (by underselling them) outweighs any 'non-competition pact' that might be made. The push of competition leads to the maximization of profits. Removing that competition not only endangers the consumer (which is what government is in place to protect) but in the long run diminishes production (by blunting the imperative of comparative advantage to specialize in the most efficient way of money making).
Competition drives prices down. Selling products for less reduces profits. Monopoly (even by tacit agreement) is always superior to competition from the company's stand point.
But yes I take your point about the government preventing it, as long as there is something other than magic keeping monopolies from forming free market systems works pretty well.
Originally posted by Red Nemesis
The thing is, all businesses would have their profit margins increased. If one company lowered prices, they would outsell their competition (because consumers would 'vote with their feet' and go tot the place with the best deal). Unless you want to postulate a massive conspiracy within every possible industry, [b]competition would not allow companies to pocket the difference. [/B]
But why wouldn't everyone just keep the price within a certain range i.e. fast food?
Businesses want to make the most profit possible but workers want to maximize what they make also.
You are really short changing the workers.
I discussed this with a (probable) econ major and she suggested that even if companies were in collusion, such a system wouldn't last because one company would see the potential to stab the others in the back. The lure of the profits to be gained from underselling (and outselling) their competitors would outweigh the known benefits of the monopoly. She cited game-theory as a reason that companies are continually reexamining their policies.
Originally posted by Red Nemesis
I discussed this with a (probable) econ major and she suggested that even if companies were in collusion, such a system wouldn't last because one company would see the potential to stab the others in the back. The lure of the profits to be gained from underselling (and outselling) their competitors would outweigh the known benefits of the monopoly. She cited game-theory as a reason that companies are continually reexamining their policies.
By wouldn't last, she means that they would simply try to outduel each other in terms of making profit (through production costs, sales , marketing, etc.) but they certainly wouldn't raise wages of employees.
you guys are working under the assumption that the Sherman antitrust act and the RICO act are actually enforced with any kind of regularity anymore. If they were, the economy wouldn't be in so much trouble and all the corporate criminals would have most of their net worth stripped due to reparations and would be spending the next 30 years rotting in prison where they belong.