Latest / Words & Numbers / Episode 442: Surveillance Pricing?

Transcript

Episode 442: Surveillance Pricing? · Words & Numbers

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Hi, I'm James and I'm Anthony, and this is Words and Numbers.
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Words and Numbers is a civil original podcast.
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Learn more at civil.com. That's civl.com.
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So ants every week. Come on man, come through for
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me. What's new and exciting in your
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world this week? I don't.
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Have to do any. I don't have to do any work.
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This week one of our listeners, Christopher Schwas, wrote with a
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question. This was a really good question.
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It came in like weeks ago and I'm just now getting to it.
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Christopher says on a recent episode, you said there may come
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a time when a new currency is minted to allow us to service
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the debt. This would result in a loss of
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purchasing power. My question is how much of a
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loss, let's say retirement account held $1 million before
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the new currencies issued with the purchasing power drop to
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half a million lower, higher. That's it.
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All right, very legitimate question.
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So we're going to we're going to mint the trillion dollar coin.
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Right. And just call it good.
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So go ahead and. I think it's a fun question,
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actually. No one's ever asked me that,
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believe it or not, for as much as we've talked about this.
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So this is going to be my first stab at an answer, so do with it
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what you will. Let.
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Me give you this, let me give you this simple case first.
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The easy case is what happens if they monetize the entire debt
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and my my wife took me to task for this recently because I said
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monetize when I was talking to A to an audience and and she said
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to me afterwards, you never said what monetize is.
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It's one of these words I've said for so many well decades
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now I forget people don't know monetize means that the Federal
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Reserve just prints the money necessary to pay the thing.
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So for three. Trillion dollar coin.
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Right. Yeah, yeah, yeah.
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So there's two things you can monetize here. 1 is the debt,
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that's the total amount we owe. The other is the deficit that's
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you know on an ongoing annual basis.
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So let the simple case is the debt, we've got about $33
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trillion in debt. So if you want to monetize that,
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you're going to have to to print basically a $33 trillion coin
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that's going to increase the money supply from right now it's
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about 22 trillion, it's going to increase it to about 55
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trillion. So that's a 2.5 X on the money
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supplies becomes 2.5 times larger.
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Now there's lots of hand waving and assumptions that happen
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here, but generally speaking, over the long run, if you
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magnify the money supply by a factor of 2.5, you can expect
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prices to also rise by a factor of 2.5 S Your 1,000,000 becomes
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$400,000. So there it's one to one on
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prices. Yeah.
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You know, I mean, there's lots of footnotes to that.
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It depends on whether people alter their behavior and how the
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banks respond. But generally speaking, yeah,
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it's going to be that. So, so that's that's the simple
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answer that if you were to monetize the entire debt, you're
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talking about 60% inflation. Now here's something interesting
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that inflation's A1 shot deal because you monetize the the
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debt so prices rise by a factor of 2.5 and someone's going to
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say that's not 60% inflation, it's 200, it's 150% inflation.
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The fact of the matter is we now get into a mathematical problem
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of how you measure inflation and what kind of mathematics you do
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as you go from one to the other. Forget about all of that.
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The bottom line is if you've got 1,000,000 bucks, it becomes
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worth 400,000 in purchasing power.
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But it's a one shot deal. It happens and then it's done.
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It doesn't mean you go back to having $1,000,000 later.
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It means that you go from having $1,000,000 of purchasing power
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to $400,000 of purchasing power and then it just stays there at
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$400,000 of purchasing power. The debts paid off, everybody
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goes home. Now the harder case is actually
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the one that Christopher asked about what happens if we
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monetize the deficit. So this is not a one shot deal.
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This is on an ongoing basis. Every year we're going to print
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some money to pay off the difference between what the
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federal government borrowed and what it spent.
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Here things get a little bit more tricky, but I can give you
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a back of the envelope calculation here.
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The money supply is currently 22 trillion and it has been growing
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at about 6% a year over several decades.
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So this year that turned that's the the equivalent about 1.3
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trillion. So figure under normal
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circumstances, the money supply expanding by $1.3 trillion this
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year to pay off the deficit, just what the government's going
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to borrow this year to pay for that, we're going to need about
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$1.8 trillion. So we're going to expand the
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money supply by 1.8 trillion. That's as an 8% increase in the
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money supply. So instead of the usual 6%,
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we're going to see an 8% increase in the money supply.
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That's 2% more than usual, 2 percentage points.
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So you can figure inflation is going to be about two percentage
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points more than usual. Now here's where life gets
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really interesting. Pre COVID, inflation averaged.
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And why I say inflation. I mean the the measure the Fed
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uses, if anybody cares, it's called PCE inflation.
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PCE inflation averaged 1.5%. Add 2 percentage points to that,
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you're 3.5%, which not coincidentally is where
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inflation's running right now. So my point in all of this is,
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look, the government spends more than it has.
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You're going to pay in one of two ways.
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Either the government's going to borrow it on markets, that's
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going to drive up real interest rates, or the Fed is going to
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monetize it, that's going to drive up inflation.
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And if we're going to be running roughly almost $2 trillion
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deficits, expect that to add on an ongoing basis 2 percentage
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points to inflation. And This is why I say to anybody
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who will listen, the days of 1.5% inflation, the days of 3%
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mortgages, you're not going to see them again.
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And you're not going to see them because of this one thing the
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federal government is spending money it doesn't have.
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I I fear people heard all the words you just said and don't
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see just how dire what you just said is because we would add 2
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points to inflation this year. Yes.
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Correct. And then another two next year.
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No, no, you you would have it would be a permanent plus 2%.
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So instead of running at 1.5%, you'll be running at 3.5%.
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But. Forever.
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But there would be another deficit next year.
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That's OK. Yeah.
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And that's what that's what if you didn't have another deficit
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next year, you would go to two per.
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You go to 3.5% this year, then back down to 1.5.
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OK. So the increase in the money
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supply is the operative? Yeah, now, but you're on to
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something, which is our deficits are not going to stay at the $2
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trillion level. Words and numbers.
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That's civl.com. Use the code Words and numbers.
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That's one word for 50% off an annual subscription as long as
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they keep rising. And to anyone who would say,
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well, 2 trillion, that's about as high as it can go.
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It was, what, 10 years ago when we first crossed the 1 trillion
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mark? And even then it was a big deal,
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right? So if as long as the deficits
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keep rising, you're going to get more and more inflation.
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And my back of the envelope calculation is $1 trillion in
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deficits equals one percentage point in inflation.
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Well, that's just fantastic. I want to lighten the mood a
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little bit here, if I if I may. And was that not like, no, I
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won't talk about pornography, we don't really talk about porn all
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that much. No, we don't.
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Why is that? Well, think about it for a
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second. This is a family show.
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It doesn't matter. We're talking about it in the
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abstract. It's not like we're showing
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clips come on the every single technological innovation that
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popular that people use or I'm not military weapons or
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anything, but every single new social media ish thing, right,
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starting with film and and moving forward has printing
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press has all been driven by pornography.
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Yeah, people, people have an insatiable appetite for it.
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Everybody will tell you no, not me.
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But then there's just more of it every year.
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And, and I remember aunt when we were kids and they opened up
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those family video stores and they had that ultra secret
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backroom that only adults could go in.
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Man, I used to try to sneak a peek in there when I was little.
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What's going on? I would think.
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And then we, we got the Internet.
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You know, a lot of people in our audience don't remember a world
10:58
without it. But with the Internet
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pornography, not only free but shameless.
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You could log in in the comfort of your own home and nobody had
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to know. I mean, it's better if you lock
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the door, but nobody has to know into.
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It and, and you're, you're talking about the Internet, but
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the fact is just regular movies, television is showing stuff that
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when I was a kid would have been classified as pornography.
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Verboten as, as German friends like to say.
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But it it's that shameless part, the private and shameless part
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that I want to zero in on because there's a move afoot in
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in several states. It's already been done and the
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Europeans are doing it now and it's going to be done, I
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suspect, everywhere. Because when, when pornography
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is freely available, you have to be an idiot not to admit that
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children will be watching. Of course they will.
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Yeah. And yeah, I'm with you, James.
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In fact, it reminds me, I used to scratch my head when people
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would say things like you have to watch your watch what you
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watch your language in the classroom with college students.
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And I'm thinking there's yeah, on a regular basis, not only
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they hearing it elsewhere, they're using words that are way
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worse than what I would ever imagine using in a classroom.
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But look, I mean, anybody who has children, you have to know
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that your kids get curious at some point and they're going to
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log on and see some things that no, you're not going to want to
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talk about it there. And there's this new age check
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system that's being rolled out and you have to give up some
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personal information for your age to be checked.
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What's going to happen now? Or, or is everybody going to
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send a copy of a driver's license to every pornographic
12:56
site they want to watch? Well, let me tell you, because I
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had a conversation with somebody just yesterday who raised
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exactly this topic because here in Virginia, Virginia rolled out
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something like that. And I don't know what the
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details are, but you've got to verify your age somehow.
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To which this person said, the easy way to get around it is
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with a VPN. Yeah, you have AVPN.
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Make it look like you're logging in from South Dakota and all of
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a sudden all that goes. Away or or the Philippines, but
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you know, let let's just set that off to the side.
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There's there are technological answers to technological
13:30
measures. But but this is interesting,
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right? This is fascinating because the
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only way that you can prove your age is to send a, a copy of a
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physical thing. Now, it could be a driver's
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license. I'm, I'm not sending a driver's
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license. I'm certainly not letting a porn
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site have my credit card. Oh, there's a restriction for
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disaster. Am I going to send a copy of my
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passport? No.
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The world is changing the, the pornographic days of the
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Internet. They're not exactly numbered,
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but they're going to be very, very different.
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And and I am fascinated to see how it plays out.
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I tell you what's coming, James, and it's not going to be just
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this. They'll use it Elsewhere are
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fingerprints that you're going to have a finger and companies,
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computer companies toyed with this decades ago and it never
14:21
really caught on. But you'll have a fingerprint
14:22
reader on your computer that it'll pop up as a verify your
14:26
age and you do your fingerprint and that there's a somewhere in
14:30
the background, there's a database that verifies it.
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But you've. Got to have your fingerprint on
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file. And, and look, I, I have
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fingerprint readers on all my computers, right?
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They they just. For logging in.
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Yeah, and it wouldn't take much to you hesitate to use the word
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weaponize. It wouldn't take much to
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weaponize that somebody will surely do it.
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Maybe we shouldn't get out in front of the curve for once
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instead of just talking about it.
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But look, the reason why people gobble up as much pornography as
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they do is precisely because they can do it without stigma.
15:11
Right, right. And if there's a database
15:13
somewhere that says, Oh yeah, James Harrigan's been on this
15:17
site and this site and this site and this site, you know what's
15:20
going to happen the day I declare my candidacy for a
15:23
political office. Oh yeah.
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And a million other things so. Yeah, yeah.
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Except there's a weird sort of safety in numbers here, because
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if 99% of the population is also looking at pornography, you know
15:40
the ME is going to try to make a big deal about it.
15:42
To which you're going to say, So what?
15:45
And everybody else is going to say, well, you know what, So
15:47
what? Yeah, well, we'll have to see, I
15:49
think. I think we're a ways off of So
15:52
what, but seen as how we're asking that question, the one
15:55
that we usually end with, we should probably get started on
15:59
the thing we're going to end with.
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16:40
This is where you tell people what it is.
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You're foolish. Oh, that's right.
16:45
I didn't buy me. Oh oh God, you haven't.
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Done the foolishness all right. Oh.
16:49
Oh God yeah, no, if if we don't, I get death threats and hate
16:53
mail, so let's. Let's get to look into you.
16:56
Boom. You think I'm kidding?
16:59
Yeah, that's right. That's right.
17:01
We have for for those of you who don't know the reference, I was
17:06
it Mark Hujan Bloom. He I his first name escapes me
17:09
because he changed it. Apparently he was 1.
17:12
He went by one name online. He changed up his last name was
17:16
Hujan Boom. And this would have been Oh my
17:19
God, six years ago. We skipped over one day because
17:23
we were both tired. Whatever we skipped over the
17:25
foolishness of the week and we got hate mail from him.
17:28
So we every time we skip the foolishness or come close to it,
17:33
we blame him. That's right.
17:35
But we're going to we're going to go to the to the Garden State
17:39
for this one at the great state of New Jersey, where kind of
17:44
like every other state, they have Little League.
17:48
I know you're familiar with Little League, even though you,
17:50
I suspect you never played, but you, you grew.
17:52
Up in a town where the. Little League World Series is is
17:55
held so kind of in, in your DNA in a way.
17:59
And the New Jersey's Little League, whoever runs Little
18:02
League, has suspended a a boy, I believe he was 12, who hit a
18:10
home run that won the game. And after he hit their home run,
18:14
he flipped his bat the way the pros do and trotted around the
18:18
bases. And for flipping the bat, they
18:21
suspended him for the next game, which is the first game in the
18:26
state tournament. Oh wow.
18:29
What the hell? And it gets worse because New
18:33
Jersey Little League, if you go to their website, what do they
18:36
feature? Films of young children hitting
18:39
home runs and flipping their bats.
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Mixed messages all the way around.
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Now, flipping one's back after hitting a home run is, I think,
18:48
in the grand scheme of things, tasteless.
18:50
You ought not do it. Major leaguers do it all the
18:53
time. But you should act like you've
18:55
been there before. Hit your home, run, trot around
18:58
the bases and go to the dugout and be a hero.
19:01
You don't have to be a jerk about it, but this, this, this
19:05
boy is 12 years old. They could have just taken him
19:08
aside and taught him something right instead of and and.
19:12
Well, they have taught him something, apparently.
19:14
They haven't, they thought his parents too, who have, you know,
19:17
undertaken A lawsuit and and here we go, right here we go.
19:21
It's going to be a big stupid thing that started off as a
19:25
little stupid thing. And that, my friend, is the
19:28
foolishness of the week. So now we can finally move on to
19:32
the main topic. Tell the nice people what we've
19:34
been cooking up. What?
19:36
We've this is covered. This is your doing actually.
19:40
And I don't have the article in open in front of me, but it is a
19:44
it, it's a drive by some members of Congress.
19:49
It's 1 Congressman is a Democratic representative named
19:52
Greg Kassar. I hope I've pronounced that
19:55
correctly. And is it and in effect make
19:58
price discrimination illegal? There's a lot of unpacking to do
20:02
there. And I'll put the article in in
20:05
there. I actually have a couple
20:06
articles I think will come. We'll come across another topic
20:10
in a second as we dig into this one.
20:13
But apparently companies want to use your search history to give
20:19
you customized prices. What?
20:24
What in? God's green earth is going on.
20:26
But this is nothing new. Going back at least five years,
20:32
maybe 10 years, it was kind of, it was kind of known that if you
20:37
searched for airline tickets and then you went back later and
20:41
searched again, the prices would go up and people would say
20:44
things like go use a different browser or something.
20:47
Or better yet, use AVPN and do it from another country because
20:52
radically different results and as long as we're on airlines
20:56
first, American Airlines, now I believe Delta's doing this as
21:00
well, are charging roughly twice as much if you're travelling
21:04
alone. So if you buy 1 ticket, you pay
21:07
for the in the example in the the article given you pay
21:10
$420.00. But if you buy 2 tickets you pay
21:15
a total of like 450. And the the thought here is very
21:20
very obvious. They're going after business
21:22
travelers. Right.
21:23
There's a there is a deeply elastic demand for travel among
21:29
regular people. There is a very inelastic demand
21:33
for travel for business people. The technical and what James
21:37
just said, he used the words correctly.
21:39
Very good, James in inelastic demand means the price can go up
21:43
a lot and you're not going to buy much less of it.
21:46
You'll buy about the same amount elastic demand as the price goes
21:50
up a little bit and you back off a lot.
21:52
On the purchase, it's the difference between, it's the
21:55
difference between water and popcorn, right?
21:57
No matter what the price of water is, you're paying it if
22:00
right. If popcorn costs $100 next week,
22:03
you're going to buy chips. Right, come buy popcorn.
22:06
Right. And businessmen have no choice
22:08
but to travel. And the airlines know this.
22:11
Hey, let's charge them more. Yep.
22:14
And that doesn't really sit right with people when they find
22:19
out about it, they don't really care.
22:23
They don't really care because the businessmen, it's an expense
22:26
that their companies cover. They don't feel that heat.
22:30
So it doesn't really matter to most people.
22:32
But if you're going to look at my browser history now and
22:36
decide what I have to pay for, all kinds of things that I buy
22:43
and I'm going to have to pay more than you.
22:46
Right what the hell this is this phenomenon has a name price
22:51
discrimination, which basically boils down to charging different
22:55
prices for the same thing, right?
22:58
And they're they're all sorts of flavors of it.
23:02
Different classes on the airplane is somewhat price
23:06
discrimination. Yeah, it's not exactly the same.
23:09
A business class seat is different than the economy.
23:13
But in their core, they're the same thing.
23:15
Their seat on the plane getting you from A to B.
23:18
So it's to the same that's price discrimination.
23:21
It's the same with matinee performances or movies.
23:24
The matinee is always cheaper, but it really isn't the same
23:28
thing. Yeah, and I'm glad you say this
23:30
because most I used to teach this and students would say that
23:34
while the matinee ticket prices are cheaper, to which I
23:37
responded, no, they aren't. You know, the matinee prices are
23:41
the actual price. It's the evening prices that
23:44
have a surcharge on them. But of course.
23:46
No one's going to use those words, right?
23:48
Yeah. Yeah.
23:50
Why? Because you know, the people who
23:51
go in, who goes in the matinee, elderly people, people who you
23:56
know, probably are on fixed income.
23:58
People go in the evenings, they're on a date or they're
24:00
trying to get away from the kids.
24:02
They're look, they're willing to pay more.
24:03
It's not the same thing. It's not the same product.
24:08
It's not exactly the same product, but it's close, it's
24:11
in. It's close enough that it
24:12
qualifies as price. Discremation.
24:14
But but now we're getting into a different universe right?
24:17
Because I can buy it a 50 LB bag of salt and pay 1 price for it.
24:24
And you could go to the same place I bought it at exactly the
24:28
same time and pay a different price.
24:30
Yeah, except I'd say, James, this happens already.
24:34
Only it happens in, it happens psychologically in the other
24:38
direction. When I go and use a coupon and
24:41
you don't, it's the same bag of ice we're buying.
24:45
But I could have easily clipped the coupon if I wanted to.
24:49
You could have, yeah. Some somehow it just reads
24:52
different to me, but we can both log into Amazon at exactly the
24:57
same 2nd and I don't know if Amazon is pulling this shit yet,
25:02
so I'm just using it as an example.
25:04
We could log in at exactly the same second, want to buy exactly
25:08
the same bottle of olive oil and I could pay twice as much as you
25:13
that that doesn't sit well with me at all.
25:16
And I can't quite get, I can't quite get my finger on why,
25:20
right, Because I'm free not to buy it.
25:24
It's not, it's not like there's some notice come down from
25:29
heaven that tells me today's the big day for for olive oil.
25:32
Nonetheless, if I know that they're charging other people
25:36
much less than they're charging me, that just doesn't seem right
25:40
at all. Now from the other side, I'm
25:43
more than happy to say businesses should be able to do
25:45
whatever they want. And you know, if enough people
25:47
get agitated with this, they won't do it.
25:50
And and this came up with surge pricing at Wendy's just
25:53
recently. You might recall we covered this
25:56
few months back where during the the rush hour, the the afternoon
26:01
lunch hour, when everybody's just waiting in a big long line,
26:05
when he's just going to charge you more.
26:07
And if you come later, they'll charge you less.
26:09
And boy, people raised a holy stink about that.
26:13
And you see how fast Wendy's backed off.
26:15
So I don't think this is going very far, but it's interesting
26:19
that it keeps coming up. Well, I, I think I would argue
26:24
it keeps coming up because price discrimination covers a whole
26:28
gamut of things, many of which, if you think it through, you
26:35
don't want the price discrimination to go away.
26:37
And you're end up almost like with the same kind of argument
26:40
that you have with free speech. Look, you know, if you're going
26:44
to, if you're going to start controlling speech, you're going
26:46
to knock off the table a lot of things you don't want to knock
26:49
off the table in exchange for knocking off the few that you
26:52
do. And so you just say blanket,
26:53
we're going to leave speech alone.
26:55
I think so too with prices. To make this really clear on the
26:58
speech angle, we've decided that expression and speech are
27:02
functionally the same thing. So if I say the F word to you,
27:08
or if I raise my middle finger in salute to you, we know that
27:11
those are both. They both share the nature of
27:14
speech. OK, if we decide to, oh, I don't
27:20
know, outlaw pornography, given where we started today, why not
27:24
go back to it for a second? And they they tried this Once
27:26
Upon a time with this thing called the Communications
27:29
Decency Act. I believe it was in the Clinton
27:31
years. They wanted to regulate online
27:34
pornography. And the Supreme Court said, no,
27:37
probably not. Let's go back home and think
27:41
about something else. But what if they were able with
27:46
a wave of a hand to say, OK, no more porn?
27:51
Well, a lot of people would be happy about that and a lot of
27:53
people would be unhappy about it.
27:55
But the big winner would be the government, because now they
27:58
could look at the next thing and say, oh, yeah, and by the way,
28:02
none of this either. And by the way, none of this
28:05
either. And by the time you're done with
28:07
it, free speech is like Swiss cheese there.
28:10
There isn't really any anything there anymore.
28:12
So give give me some good examples of why I should pay
28:19
more for something than you. If it's the same thing that
28:22
we're buying from the same store at the same time, well.
28:26
See, it's the when you freeze it like that, it becomes harder,
28:31
because where price discrimination becomes valuable
28:36
is when there are subtle differences.
28:38
But the subtle differences matter.
28:41
Case in point, you talked about Wendy's.
28:43
I think we first talked about this when there was a shooting
28:47
in some big city in Australia. In Australia, Yep.
28:51
In Uber, prices shot through the roof through the surge pricing.
28:55
And again, you have every time something like this happens, you
28:58
got politicians coming out saying we're going to outlaw
29:01
surge pricing, to which we said no, surge pricing was doing
29:05
exactly what it's supposed to do, which is it made you tend to
29:10
only see it from the perspective of, well, now to get an Uber
29:13
cost me 50 bucks when before it would have cost me 10.
29:16
But you're missing the point that because the price is 50,
29:20
all manner of people who don't desperately need an Uber right
29:24
then will not, will not get an Uber.
29:27
They'll wait. And that makes the Uber's
29:29
available for the people who really need them.
29:31
And you know, I'm full, full in favor of of surge pricing,
29:36
especially in times of strife and disaster, especially then,
29:42
right? What So?
29:43
OK I I don't think that answers my.
29:46
Question your and your question is you're looking for a.
29:49
Why I should pay more for the same thing at the same time at
29:52
the same place? Let me say differently, is there
29:55
any reason why someone should pay less for the same product at
30:01
the same time in the same place? You know, I've always been a
30:04
little irked, frankly, when that happens.
30:07
And the, the, the thing that irked me the most was the senior
30:11
discount. Well, OK, you want to get old
30:14
people to come in when they wouldn't if you're a business.
30:17
But I was young and I didn't have any money at all because
30:21
when you're young, you're the most broke you're ever going to
30:23
be. Why wasn't there a junior
30:27
discount? All right, so I, I was pretty
30:31
peeved by the whole thing, truth be told, and everything.
30:34
I like it. I was angry when young ladies
30:38
got car insurance at 110th, the price that I did as a young man.
30:44
Right. Right.
30:45
Then these are sex just. Bugged the hell out of me.
30:47
Yeah, except that that's there's a good argument there that
30:51
that's no you've broken your rule of the same product to the
30:54
same time and place because by the numbers, males are greater
30:59
risks to ensure it's still the same problem when it comes to
31:01
cars it's. Well, no, it's different.
31:04
Yeah, but that's, but that's the thing, you can't separate the
31:07
product from the purchaser. It's the purchaser who's being
31:09
insured. So would it be OK then if we
31:13
charge black people twice as much?
31:14
All I'm saying is by the numbers.
31:17
Exactly right off on that one. Well, yeah, you know, I mean,
31:20
there's things that there's things that we have said are
31:23
beyond the pale. You may not do this regardless
31:27
of the reason. Yeah, I think that's right.
31:30
I think I think that was kind of an unfair shot to take, but I
31:34
had to. Take, let me go back to your
31:35
example, because when I used to teach price discrimination, I
31:38
would have fun. I would ask the students, name
31:40
me one huge purchase that you make that for which there is
31:47
there's not just price discrimination, but extreme
31:50
price discrimination. And it's fun to just watch the
31:53
students scratch their heads. They have no idea.
31:55
Tuition, college tuition, right. When you fill out that financial
32:01
aid form, what you think you're doing is showing the college how
32:05
poor you are so that they give you financial aid.
32:08
What you're really doing is showing the college to the
32:10
penny, how much you can afford to pay and they Jack up the
32:14
tuition. I shouldn't say they Jack up
32:15
because that's not, that's not what, that's not the way it.
32:20
How should I say this? That is what they're doing, but
32:21
that's not what they say they're doing.
32:23
It's an extraction device. Right, what they do.
32:26
They're figuring out how to get every last penny out of every
32:29
last student. They they name a huge price tag,
32:34
$60,000 a year. That's not the tuition, that's
32:37
an, that's an overinflated by, usually by a factor of 2 price
32:41
tag. And they name such a high price
32:44
precisely so that when you fill out financial aid, they can
32:48
magically come up with scholarships and say we're not
32:52
going to charge you 60, we're going to charge you 40.
32:55
Well really what happened is the cost of the tuition is 30 and
32:59
they just charge you an extra $10,000 because you told them
33:02
you could afford it. Yeah, and and who?
33:07
Let's leave it at that. I don't want to, I don't want to
33:09
get all agitated about college finances anymore.
33:13
Look, that's I think the great example.
33:17
And it it, it does anger people, but not down to their marrow for
33:22
some reason, like it would if we were talking about thumbtacks or
33:26
sugar. Yeah, let me let me give you a
33:30
more mundane example that that annoy people, I think in the
33:34
wrong direction. I used to fly Southwest and
33:36
Southwest had their their tagline is your second bag flies
33:40
for free, which they took that away and now they're charging
33:44
for the second bag, which everybody's all up in the air
33:47
about, you know, just as well. It's like they're they're
33:50
raising their prices. I was, I was all upset when they
33:54
had that rule that the second bag flies for free because
33:58
nothing happens for free. What's happening is Southwest is
34:02
letting other people take a second bag on and pushing the
34:05
extra price on to me who only takes one bag on the plane.
34:10
So I would they're forcing me to subsidize everybody else.
34:13
Now with this, you having to pay for the second bag, I don't have
34:16
to subsidize other people, but what's really happened is it's
34:20
price discrimination. I I don't think you can make a
34:25
clear and obvious case for price distinction given same time,
34:33
same place, same product. I don't think you can do it.
34:36
I don't think. There's a moral you say I can't
34:38
defend it. I don't think you can make a
34:40
moral case in favor of that. You could.
34:43
Have the college tuition's a good one.
34:45
Yeah, I don't think you can defend it.
34:47
That's indefensible. That's a terrible.
34:49
Thing all right well, let. Let me, it's like, fine, look,
34:52
I'll give you another example that I also think is a terrible
34:55
thing. You might pay more for the same
34:57
car than I will time place product all the same.
35:02
And we all know that car salesman are sleazy.
35:06
We all know that, right? That's why Saturn did so well
35:11
for a while, because the price was the price.
35:15
They put it on the window and you either pay it or or don't.
35:19
And you know who the You know the biggest winner was on
35:21
Saturns? Women, right?
35:25
Women don't. Women don't like to negotiate
35:27
for cars, nor are they any good at it as a group.
35:31
Yeah. And boy, did they buy Saturns.
35:35
Now it just so happens that the Saturns weren't all that good,
35:39
and in the end nobody wanted them for that reason.
35:41
But boy, the business model was really good.
35:45
I would love not to have to do 3 months worth of research and
35:50
then three weeks worth of arguing with somebody to buy a
35:53
car. All right, let let me turn the
35:56
whole scenario around because you started off with this
36:01
example of you get on Amazon and Amazon charges you one price and
36:05
I get on by the same thing. They charge me a different price
36:08
and that doesn't sit well with you.
36:10
How is that different from, instead of you, me interacting
36:15
with Amazon, It's you alone and you go on Amazon's website, Then
36:20
you go on Walmart's website and you see the same product at a
36:25
lower price on Walmart's website.
36:27
So you buy that. How have you not?
36:30
I have a choice. You have a choice with the
36:32
Amazon as well. Don't buy the things.
36:34
The choice is don't buy it. The the choice in your second
36:37
example is buy it for this amount or this amount.
36:40
Right. And that's exactly what Amazon's
36:42
doing, is say I can sell it to him for this amount and the
36:44
other guy for the other amount. And see that that just stinks to
36:49
high heaven. But see.
36:51
My claim here is that psychologically we get really
36:56
mad when it's done to us, but we think it's our right to do it to
37:00
companies. No, I, I don't think.
37:01
I think, I think that is incorrect.
37:05
I think these declare companies declare the price and you can
37:09
shop around and if another company has a better price, you
37:12
can buy it there. That's fine.
37:15
The company doesn't owe you anything.
37:20
OK, but why doesn't that argument apply when Amazon's
37:22
trying to charge you $5 more than me?
37:26
Because I think they do owe you fundamental fairness and
37:29
pricing, which means everybody pays the same price and, and
37:34
take it a step further. And how are they going to find
37:36
out who should pay more? By scanning your search history.
37:40
Yeah. That was got to be disturbing,
37:42
got to be kidding me. And I would say the following,
37:48
James, because I think, I think fundamentally we may end up just
37:51
disagreeing here. This might be one of the first
37:53
times we've ever had a disagreement all the way down.
37:56
Yeah. Let me suggest that if indeed
37:59
this is the problem that you claimed it is, the markets will
38:03
fix it and the markets will fix it.
38:06
And we've seen an example. We have an example.
38:08
Back couple of decades, Walmart became popular in part when it
38:14
started advertising, quote everyday low price.
38:18
Up to that point, retailers would charge higher prices
38:22
sometimes, lower prices other times.
38:25
And they would have sales and you know, you go in and
38:28
everything's bought out, so you have to go back tomorrow.
38:30
But then the price is higher tomorrow, whatever it is.
38:32
And Walmart said we're not going to burden you with any of that.
38:35
We're going to have one price that applies all the time.
38:38
And people liked it so much they bought from Walmart instead of
38:42
Sears. And now Sears is gone.
38:44
I claim if you are right indeed, that this is this is really a
38:48
hassle and people are not going to stand for it, then there's a
38:51
profit opportunity for a company to come along and do effectively
38:54
the same thing and say we do not price discriminate.
38:56
In fact, we'll show you whatever evidence you want.
38:59
Buy from them or buy from us. If you buy from us, you're
39:01
guaranteed a fair price. I'm I'm pretty sure that this is
39:06
so irksome to people that it will disappear before it even
39:10
shows up in any real way. I'm I'm pissed off, I have to
39:15
say, with the airline's behavior, but I'm always pissed
39:19
off with airline behavior, right?
39:21
That every single thing airlines do just seems to rub me the
39:26
wrong way. And yet I have to travel to do
39:29
the things I do to make a living.
39:30
So ain't got no choice, tough Nuggets, what can you do?
39:35
Let me ask you a question. Suppose suppose I'm looking to
39:40
sell a house. I've got a house.
39:42
I'm, I'm and the, the Realtors are pretty good about keeping
39:46
the buyers and the sellers apart from each other.
39:49
But suppose, you know, for whatever reason, maybe I've got
39:52
a webcam in the house or maybe the realtor tells me, I find out
39:55
that the people who just looked at the house couple a come in,
39:59
they drive up in a Mercedes. They're well dressed.
40:02
All of this and this other couple that comes up B, they
40:06
come up in a station wagon, not so much, you know, clearly
40:10
lower, lesser income than the first couple.
40:13
And up until that point, I the house wasn't selling.
40:15
I was thinking about dropping the price.
40:17
And I see the people with the Mercedes well dressed.
40:19
And I think now let's just hang on, let's ask the higher price.
40:24
I think most people wouldn't have a problem with that.
40:27
And yet that's exactly the price discrimination that we're
40:31
getting all been out of shape about.
40:32
I, I think there are differences.
40:35
I think in, in the end, you, you've got a point there and
40:38
it's a good one, but there's something a little different
40:42
about buying a big ticket item like a house.
40:46
You could make the same case if you want to go buy an island,
40:48
right? And something that costs a lot
40:51
of money that you may buy once or twice or three times in a
40:55
lifetime. Probably different rules are
40:58
going to apply and you know, different rules are going to
41:00
apply with the house because you have to deal with an
41:02
intermediary to buy or sell it. And not only that, there are
41:06
other intermediaries after the real estate agent that you also
41:09
have to deal with. So, OK, this is a big
41:12
complicated mess of a thing. I'm just talking about buying a,
41:16
a, a, Well, how about a can of hair gel, right?
41:21
Something I, I desperately need and buy all the time.
41:26
Why the hell should it cost more for me to buy it than you?
41:30
Yeah, it's. Just a basic product, right?
41:33
This would be like walking down the aisle at a supermarket and
41:37
there being one price for James for everything and one price for
41:41
Ant for everything. Come on.
41:42
That's just that's obviously nonsense.
41:45
I don't want to belabor this, but it I keep coming back to it
41:50
sounds like you like it in one situation and you don't like it
41:54
in the other. I I don't think so.
41:57
Look, I have to think that through.
41:59
I'm I'm not sure I'm right, but I, I don't think I'm wrong,
42:04
obviously, but but it does, it does bear some more thought.
42:07
I would I would ask you to give it the same amount of thought.
42:10
Absolutely. In fact, let's let's do this.
42:12
Let's assume for the sake of argument that you're absolutely
42:14
correct. This is, this is a bad thing
42:16
that shouldn't be happening. And someone's going to point to
42:19
it and say, aha, there's a failure of of markets, markets
42:22
to which yet to which we'd respond, no, markets aren't
42:25
perfect. No, that's right.
42:28
The benefit to markets is they're self correcting
42:31
mechanisms and if enough people don't like this they'll be a
42:35
profit incentive for the market to cut it out.
42:37
Yeah, and we don't have to worry.
42:39
We don't have to worry about Representative Greg Kassar
42:42
getting himself, getting himself involved with this.
42:45
No what this This could take care of itself real fast.
42:48
Yeah, What you do have to be worried about is someone like
42:52
that getting involved it at a point after the market has
42:56
already taken care of it, and then they introduce new problems
42:59
that didn't exist before. That's right.
43:01
And where where do people think market failures occur?
43:06
Pharmaceuticals, medical stuff, generally automobiles, right
43:14
Education, education, all the things that government has its
43:18
fingers in most deeply right. The the the problems in those
43:25
markets, they're not even really markets, right?
43:28
They're. Yeah, they're not market
43:30
failures, they're government failures.
43:31
There's government failures in markets and the short lesson is
43:35
government ought not be in many markets.
43:38
I think maybe a few. I talked with Max Borders today
43:42
and I, I said, well, you know, I don't think we want markets in
43:45
children. I don't think we want markets in
43:47
fissionable material. I'm OK with government
43:51
intervention in markets under very limited circumstances, but
43:57
education you can give me. A break.
43:59
But if they should be the last, government should be the last
44:02
resort, not the first. Not the first.
44:04
So I'm I'm interested to see how this plays out.
44:07
I don't know which of the two of us are right on the merits of
44:12
the argument, and I'm willing to listen to the hate mail that
44:14
comes, but I am utterly certain that many more people will agree
44:20
with me, right or wrong, and and that will have the final say on
44:26
whether this nonsense moves forward or not.
44:29
Yeah, yeah. And my gut reaction is it's not
44:32
going to move forward. I think I think are going to see
44:34
this as intrusion on their. Privacy.
44:37
I think that's right, but it's just enough of a story to rise
44:42
past the level of the foolishness of the week, right?
44:44
This is. A little more or taking this
44:46
seriously? It's a little more important
44:48
than that, right? We are taking it seriously.
44:50
So in the end, I think we've kind of already answered the So
44:53
what question. Yeah, I I think that the So what
44:57
here is leave the market alone, let it figure this out, give it
45:02
a little because. Time, because it's capable and
45:06
willing, right, If we can, if we can ascribe characteristics to
45:11
markets, those are two that I would always ascribe.
45:15
Yeah. Let me throw in one more.
45:17
It's it's flexible. You can have a situation where
45:21
the market is determined. This thing will use price
45:24
discrimination as an example is a problem and the market weeds
45:28
it out through competition. Businesses come to the fore that
45:31
pledge they won't do this sort of thing, and they supplant the
45:34
other businesses that we're doing it.
45:35
And there may come a time in the future where all of a sudden for
45:38
some other reason, maybe price discrimination becomes a good
45:41
idea and the market will move to that.
45:44
That is not something you see government doing.
45:46
When government decides that X is wrong and goes through all
45:50
the process of enacting and enforcing the law, it's going to
45:53
be a century or more before you ever get that law undone, if
45:57
that. Yep, and I as an example, please
46:00
try to remember when marijuana was illegal.
46:03
Yes, yes. And, and the backflips and
46:07
cartwheels people had to go through to get a very harmless
46:11
thing to the market. There's this safety which you
46:14
can't do it. Despite the fact that we had,
46:17
over the decades, destroyed millions of lives through the
46:21
law, way worse than they ever would have been destroyed
46:24
through marijuana. And we destroyed what we didn't.
46:27
But many lives were destroyed. I'll use the passive voice here
46:32
by alcohol, right? Why was that OK, but not the
46:35
other end? And you see the obvious
46:37
arguments here. But you know, we we had a
46:39
president of the United States said that he smoked a joint, but
46:42
not really, right? You've got to be kidding me.
46:47
It wasn't until Barack Obama that anybody admitted to having
46:50
smoked weed. That's how long it took.
46:53
So. And and now no one would think
46:55
twice about it. Yeah, that's right.
46:57
I don't care. I never cared, but I really
46:59
don't Care now. My my children, when they were
47:04
just like 910-1112, we were having dinner one night.
47:07
They said, what would you do if you found marijuana in my room?
47:12
My oldest asked me and I said, oh, I don't know.
47:15
I got enough of my own, I don't need yours.
47:17
And they all just looked at me and it never came up again.
47:20
Yeah, because all of a sudden it wasn't cool.
47:24
That's right. It's just not a big deal.
47:25
If you don't make a big deal out of something, maybe it's not a
47:27
big deal. But I I'm interested to see
47:31
where this comes right, how this comes crashing on down.
47:35
And we should get back to it in, in a, in a bit, maybe six
47:38
months, a year and see if anything at all has come of it.
47:44
And you know, maybe ask the question, is it already
47:46
happening right now without our knowledge?
47:49
Yeah, we might get different prices on Amazon every day for
47:52
every product. I don't know.
47:54
How could I possibly know? Anyway, I got nothing more to
47:58
say You. Well, yes, you want to remind
48:01
our listeners? Well yeah, I didn't have
48:04
anything more to say about the main topic, but as as is always
48:09
the case, I I will remind everybody to be nice to each
48:13
other, especially in in these specific times where people have
48:17
become so hard headed and obnoxious towards one another.
48:22
That you know. Maybe take a deep breath, take a
48:24
step back, rethink what you think is important and and just
48:28
be a little nicer. It's not that hard.
48:30
You can do it. I myself have done it.
48:32
So not enough I know. Get words and numbers on
48:37
civil.com and on Civil's TV and mobile apps.
48:41
Regular episodes are free. Sign up for an annual membership
48:45
to support our show and for access to member exclusive
48:49
content. But a little bit more will be
48:51
nice. I'm going to violate my own rule
48:55
and just tell you to shut up but and also call you an idiot.
48:59
Now now I. Feel better but but.
49:03
Please do as I say, not as I do. I'll catch you next weekend.
49:07
See you next week, James.