10 ms·

Companies don't make money out of thin air. In general, if something costs the company money they will pass those costs onto the consumer (or cease to exist).

by Tharre 9y ago

Companies don't make money out of thin air. In general, if something costs the company money they will pass those costs onto the consumer (or cease to exist). If your regulation costs more than it saves consumers, then it'll need extraordinary justification, i.e. all of the costs are carried by only few consumers.

adjkant 9y ago
They are welcome to reduce cash back given on their credit cards or other means of increasing profits. Something tells me that the banks and credit card companies will do just fine here with the additional cost of the audit. It's a tiny fraction of their budget, and should absolutely be done, even if it costs double what it saves consumers, as that money is much more valuable to the consumers and the companies can still very much exist, pay employees, and even make a nice profit, despite losing money by auditing regularly to comply with a regulation.
- mrgordon 9y ago
  Yep and if they reduce cashback then more people will get a superior cashback card from someone else leaving Citi worse off
  - adjkant 9y ago
    As mentioned by others, all of these companies have to spend on this regulation it seems, so it should be an even playing field.
- conanbatt 9y ago
  > It's a tiny fraction of their budget, and should absolutely be done, even if it costs double what it saves consumers This is mind boggling. Its the equivalent to arguing in favor of burning assets. Why would you make people work on things that reduce value?
  - adjkant 9y ago
    To ensure people are charged what they should be? I'm mind boggled that people are so centered on the business that they can't fathom a reason for anything beyond profit or other purely economic factors. To take this to ridiculousness, we wouldn't stop chasing murderers if we found out that it cost more to chase them than clean up the bodies after. It's because we care about murder beyond its net economic value. And no, I don't care about the specifics of "oh maybe people being more scared of getting murdered will decrease GDP". My point here is that this is a clear case where value is brought beyond economic value. Regulations are often too in this category, though obviously a bit less than law enforcement.
    - conanbatt 9y ago
      > To ensure people are charged what they should be? I'm mind boggled that people are so centered on the business that they can't fathom a reason for anything beyond profit or other purely economic factors. If you pay more than you would have, you wouldn't be paying what you have to, you are paying more. Its like putting an inspector on a bus to check tickets, but he gets the money from all the bus tickets collected. Missing the forest for the righteousness. > To take this to ridiculousness, we wouldn't stop chasing murderers if we found out that it cost more to chase them than clean up the bodies after. It's because we care about murder beyond its net economic value. And no, I don't care about the specifics of "oh maybe people being more scared of getting murdered will decrease GDP". My point here is that this is a clear case where value is brought beyond economic value. Regulations are often too in this category, though obviously a bit less than law enforcement. The comparison to murder would be for the state to kill everyone suspected of a crime so crime murders go really down.
chillwaves 9y ago
Wouldn't the pressures of the market also dictate the price? The market may dictate they reduce profit or other incentives over increasing the cost of their product.
mrgordon 9y ago
Nope there is competition so Citi can’t just increase interest rates across the board and add a bunch of new fees. The shareholders will take most of the loss. If Citi tries to increase prices, Amex and Chase will laugh and scoop up their customers. Very few people are “stuck” with Citi
- conanbatt 9y ago
  If all the banks have the same regulation, then there is no elasticity. Taxes that affect every supplier the same typically fall on the consumer.
twothamendment 9y ago
It is true that money doesn't come out of thin air, but it doesn't always get passed on. I worked at a place that had some billing issues. It wasn't cheap to correct, but it was the correct thing to do. Where did the money come from? Out of the next few months of profits. Things were tight, but customers were happy. If there were regulations forcing an expensive audit, I'm sure we would have built that into the cost of business and passed it on - but not the results of our mistakes.
- darawk 9y ago
  That's different, though. That's a one-time cost. One time costs don't necessarily get passed on, but ongoing costs do, otherwise the company will simply go out of business.
  - wavefunction 9y ago
    I guess a company shouldn't regularly defraud its customers beyond its ability to pay if it wants to stay in business. Seems simple enough.
tachyoff 9y ago
> ...if something costs the company money they will pass those costs onto the consumer... They don’t have to do that, though.

by Tharre 9y ago

adjkant 9y ago

They are welcome to reduce cash back given on their credit cards or other means of increasing profits. Something tells me that the banks and credit card companies will do just fine here with the additional cost of the audit. It's a tiny fraction of their budget, and should absolutely be done, even if it costs double what it saves consumers, as that money is much more valuable to the consumers and the companies can still very much exist, pay employees, and even make a nice profit, despite losing money by auditing regularly to comply with a regulation.

mrgordon 9y ago
Yep and if they reduce cashback then more people will get a superior cashback card from someone else leaving Citi worse off
- adjkant 9y ago
  As mentioned by others, all of these companies have to spend on this regulation it seems, so it should be an even playing field.
conanbatt 9y ago
> It's a tiny fraction of their budget, and should absolutely be done, even if it costs double what it saves consumers This is mind boggling. Its the equivalent to arguing in favor of burning assets. Why would you make people work on things that reduce value?
- adjkant 9y ago
  To ensure people are charged what they should be? I'm mind boggled that people are so centered on the business that they can't fathom a reason for anything beyond profit or other purely economic factors. To take this to ridiculousness, we wouldn't stop chasing murderers if we found out that it cost more to chase them than clean up the bodies after. It's because we care about murder beyond its net economic value. And no, I don't care about the specifics of "oh maybe people being more scared of getting murdered will decrease GDP". My point here is that this is a clear case where value is brought beyond economic value. Regulations are often too in this category, though obviously a bit less than law enforcement.
  - conanbatt 9y ago
    > To ensure people are charged what they should be? I'm mind boggled that people are so centered on the business that they can't fathom a reason for anything beyond profit or other purely economic factors. If you pay more than you would have, you wouldn't be paying what you have to, you are paying more. Its like putting an inspector on a bus to check tickets, but he gets the money from all the bus tickets collected. Missing the forest for the righteousness. > To take this to ridiculousness, we wouldn't stop chasing murderers if we found out that it cost more to chase them than clean up the bodies after. It's because we care about murder beyond its net economic value. And no, I don't care about the specifics of "oh maybe people being more scared of getting murdered will decrease GDP". My point here is that this is a clear case where value is brought beyond economic value. Regulations are often too in this category, though obviously a bit less than law enforcement. The comparison to murder would be for the state to kill everyone suspected of a crime so crime murders go really down.

chillwaves 9y ago

Wouldn't the pressures of the market also dictate the price? The market may dictate they reduce profit or other incentives over increasing the cost of their product.

mrgordon 9y ago

Nope there is competition so Citi can’t just increase interest rates across the board and add a bunch of new fees. The shareholders will take most of the loss. If Citi tries to increase prices, Amex and Chase will laugh and scoop up their customers. Very few people are “stuck” with Citi

conanbatt 9y ago
If all the banks have the same regulation, then there is no elasticity. Taxes that affect every supplier the same typically fall on the consumer.

twothamendment 9y ago

It is true that money doesn't come out of thin air, but it doesn't always get passed on. I worked at a place that had some billing issues. It wasn't cheap to correct, but it was the correct thing to do. Where did the money come from? Out of the next few months of profits. Things were tight, but customers were happy. If there were regulations forcing an expensive audit, I'm sure we would have built that into the cost of business and passed it on - but not the results of our mistakes.

darawk 9y ago
That's different, though. That's a one-time cost. One time costs don't necessarily get passed on, but ongoing costs do, otherwise the company will simply go out of business.
- wavefunction 9y ago
  I guess a company shouldn't regularly defraud its customers beyond its ability to pay if it wants to stay in business. Seems simple enough.

tachyoff 9y ago

> ...if something costs the company money they will pass those costs onto the consumer... They don’t have to do that, though.