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The question is, if it costs me X to make a product, and the value to you is 100X, who captures the 99X spread? I could charge 99X, you would pay it since the v
by ikeboy 11y ago
The question is, if it costs me X to make a product, and the value to you is 100X, who captures the 99X spread? I could charge 99X, you would pay it since the value is higher, and I'll capture most of it. I could charge 2X, it's still worth it to me to produce it, and you'll capture most of it. What value here is most fair? Why is one value fairer than another? The standard economic answer is "let the market decide", and that works, up to a point. If you reject that, you need a better way to decide. Let's say you have a government agency set prices: how do they choose?
You've just pushed the problem around. Saying "get rid of the free market" in only a solution if you have a concrete alternative.
- powera 11y agoI'm not saying "get rid of the free market". I'm saying that in a monopoly situation, there is no free market. And if there is no free market, claiming "the free market will work" is insanity, so we have no choice but to try something else.
- ikeboy 11y agoWhat is that something else? In a monopoly situation, the price tends towards 100X in my example, which is still less than the value provided. Even in a monopoly, nobody's paying more for a product than they receive value from it. Yes, it may still seem unfair, but what else are you proposing? Nobody should sell the product? How is that making anyone better off?
- pxndx 11y agoThe thing is, the value for these products is infinite. If people don't have them, they'll die.
- ikeboy 11y agoThe value of a human life is not infinite, at least not in health budgets. Insurance companies set a non-infinite value to decide what procedures to cover. In theory, you could calculate the exact value provided by this drug (under the QALY model).
- learc83 11y agoThe value of a human life to the individual who's life it belongs cannot be calculated in economic terms (at least for most people) because it is unbounded, i.e., there is not a price that most people will accept for their life. The economic value of a human life to society can be calculated. Under your theory a fair method to price life saving drugs doesn't exist. The person getting the drugs will effectively extract infinite value while the company will only extract a finite value.
- icebraining 11y agoThe value of a human life to the individual who's life it belongs cannot be calculated in economic terms (at least for most people) because it is unbounded, i.e., there is not a price that most people will accept for their life. Not really true, I'm afraid. People killing themselves (or allowing others to kill them) to ensure a payout to their families happens with some regularity.
- learc83 11y ago1. My qualifier "most people" covers that situation, because it is very very rare. 2. Usually this happens because they place a higher value on their children's life and well being than their own. So even in the case were someone does place a value on their own life, it's only in relation to someone else's life. The case of 2 is interesting because it shows that of the people who would accept a finite sum for their own life, very few would accept a finite sum for their chidren's life. Since paying for the child's healthcare is the responsibility of the parent in a free market, we are back to my previous point that their is no fair free market way to price life saving drugs.
- ohazi 11y ago"Letting the market decide" requires you to actually have a market. If you have a market of manufacturers that all produce a product for around X, then it doesn't matter if I value the product at 100X or 1,000,000X. I'm still going to be paying around X + epsilon. That's the entire point of having a market. You only see people asking questions about "well, who captures the extra value? what's fair?" etc when you don't have a market. When you actually have a market, then these questions cease to be relevant, because the price is already set. The problem has nothing to do with free market concepts breaking down, or disagreements about what's fair. The problem is that we've artificially prevented this market from existing. Fix that and the problem goes away.
- username223 11y agoYou're the guy who won't save the drowning child because your suit would get dirty, right? No, wait, you'd ask the kid if she would pay to have it dry-cleaned, then still refuse because you could probably get her to pay even more.
- ikeboy 11y agoWhat does that have to do with anything? Who is worse: the person who doesn't save the child, or the person who saves the child, and sends a bill later?