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In your example, the cheap retailers are subsidizing the price of the quality products with the ill-gotten gains from selling the crap products to less-informed

• edanm 8y ago
  > The completely free market does not work in practice, because people are not rational, perfectly informed actors. They make non-optimal choices and tend to not learn from them, and they're easily swayed by advertising. I mean, I agree with being being irrational, but I'm not sure that that's the reason that free markets don't work. If you're comparing to government intervention, then you're also comparing to people, after all, and even worse, to people who often make a less-informed decision, because: 1. They're not as personally aware of all the relevant info, since they are removed from the situation. 2. They often care less in general because it doesn't affect them. 3. They often make decisions that tend to stick around long after they are no longer relevant - but unlike biased humans who often don't learn from their mistakes, these actors' mistakes are written into law and can't be changed. 4. They often have different motivations than the irrational people they are supposedly helping. (Of course, 4 is often the whole point - we as a society have different desires than individual people, and we sometimes want to enshrine those things, even at their expense.) The only way you're doing better than individual actors is if you're assuming the people creating the laws/regulations are better informed/better educated/smarter or for some other reason can make better decisions (which obviously is sometimes true, but sometimes not). The main places where "government" provides value, in my opinion, are where there are market failures, or where collective action gives a lot of benefit. And of course, that's assuming a lot of basics are met, like strong rule of law, police force, etc (these could themselves be thought of as collective action).
  • pdonis 8y ago
    > The main places where "government" provides value, in my opinion, are where there are market failures, or where collective action gives a lot of benefit. Unfortunately, even in cases where there is a lot of theoretical benefit to collective action, government intervention rarely, if ever, realizes that benefit--for exactly the reasons #1 through #4 that you give. I like to use in this context a paraphrase of the old joke about regular expressions: Some people, whenever they see a problem, think "We'll just get the government to fix it." Now they have two problems.
• AnthonyMouse 8y ago
  > In your example, the cheap retailers are subsidizing the price of the quality products with the ill-gotten gains from selling the crap products to less-informed customers. Those customers unwittingly waste their money, so that others can buy slightly cheaper products. Not so. If a retailer is selling garbage, some people may buy it, but those people will promptly figure that out, stop buying those brands and leave them bad reviews. And the retailer has incentives not to carry bad products even if they don't accept returns because getting burned doesn't make for repeat customers. The cost in forcing returns is that it requires you to buy insurance you may not need, which costs money even if all of the products are functional because people return things for reasons other than defects and the retailer will command a risk premium. If someone buys the wrong product, it costs the retailer money to have to process the original transaction, then the refund, then restock the product at a lower price because it's open box. Someone who knows they won't need to return the product doesn't need that insurance, but you're forcing them to pay a premium to cover it anyway. Forcing the retailer to accept returns also makes it riskier for them to accept new suppliers into their stores. If the supplier starts providing low quality merchandise, the retailer has to eat the cost of the 10,000 items it has in stock, plus the value of wasted shelf space, plus the cost of processing all the returns -- so they stop buying from upstart suppliers, even if the new supplier would have provided good quality products. Which harms competition and allows the incumbent suppliers to charge higher prices. > Prices haven't gone up. There has been inflation rather than deflation, consumer products that used to be 16 ounces are now 10, the percentage share of value that goes to business investors rather than employees or customers (i.e. wealth inequality) has increased, by what metric have prices not gone up?
  • KozmoNau7 8y ago
    >"Not so. If a retailer is selling garbage, some people may buy it, but those people will promptly figure that out, stop buying those brands and leave them bad reviews. And the retailer has incentives not to carry bad products even if they don't accept returns because getting burned doesn't make for repeat customers." Yes, but only those people, there is no shortage of new customers to fleece. Online reviews can (and are) bought and sold, even the supposedly trustworthy review sites such as Trustpilot have been caught manipulating scores, and in some cases (Yelp) hiding reviews until the business in question ponies up for a "partner agreement". The whole point of a mandatory return period is for consumer protection. A product should be fit for purpose and not break shortly after being taken into use. A warranty period of 6 months to a year ensures that products are fit for purpose. It also discourages the production and sale of disposable junk products, which is a better use of resources and more environmentally sound.