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I read here and elsewhere concern about profits. It seems people are concerned about the profits made by car dealers, health insurance companies, drug companies, health care providers, mutual funds, etc.
On the other hand, we seem unconcerned over profits made by professional sports teams, concert producers, casinos, gaming companies, celebrities, etc. This group provides very little real value to us.
The first group provides goods and services we need or want.
Is that the difference? If we must spend our money on necessities, we care how much people make from us.
If we spend money on pleasurable things we don’t give the profits made from us a second thought.
No deep research, just an observation. We care little about the profit margin for Apple at about 26% but scream loudly at health insurance companies where profit margins are about 5% or less.
We humans are an interesting lot.
A common cry here in Australia is that our supermarkets are price gouging. The fact is their net profit margins are 2-3%. So even if our large supermarket chains started to operate as not-for-profits, your $200 grocery bill might come down to $194. Yet the price gouging belief persists.
I heard on the news yesterday that Instacart is being investigated for using AI powered algorithms to set different prices for the same grocery items across its platform. Price variations reaching up to 23% for identical products purchased at the same store and time. Interesting ‘perspective’ on those profits.
See this NYT article.
It’s not curious at all. There is a vast difference between non-essential purchases and essential or at least semi-essential purchases.
Consumers are right to be vigilant about the latter because they don’t have the choice or limited choice. Imagine if utilities could act as price makers….
So $10.00 isn’t always $10.00? Couldn’t not being vigilant about non essentials mean less money for essentials – like a prescription?
How about getting a car serviced at the dealership? We all have ways to be price insensitive.
If you choose to live your live that way have at it. In the real world people tend not to think about that spendy dinner out until they know they’ve got the bills covered that month.
Do you think that is real world thinking? It certainly should be, but credit card use indicates otherwise.
I don’t make any purchase unless I know in advance where the money is coming from.
Interestingly as I was writing this an ad popped up on the page for some kind of tickets and saying I could use their 3,6 or 12 month payment plan.
Whoopee
So just another platform for you to punch down on less fortunate people with less perfect behaviours?
Do consider, it being the season and all, if you could start a thread that doesn’t include criticism of sections of the population less perfect than you.
So, your view of people’s spending habits in the real world is correct and my view is not?
You see the norm as living within one’s means? I think the evidence is pretty clear that is not the case.
You see living P to P as the reality of only spending on necessities?
I’m not punching down anyone. Where do you get that?
Your original post was a seeming criticism of something that you’ve now learnt is basic societal economics. And rather than acknowledge that your base position was underinformed you’ve pivoted to one of your old saws of people you disapprove of don’t live within their means. That’s punching down.
My real world is that the people who really live paycheck to paycheck on a subsistence level know exactly what are essentials (and within that what the priority is). Unfortunately for some that may include substances. What they don’t have is Taylor Swift or Lakers tickets.
The fact that a large number of people with means have allowed their own lifestyle bloat to take them to effectively month by month financing is an output of easy credit and the inflated consumer society that enables your stockholdings to sit so pretty. I’d say that’s a separate matter. I’m rather grateful for them even if they make it difficult for me to attend gigs or whatever.
People who live on a subsistence level are separate from any people I referenced. They are essentially to poor. And I know and it is obvious there is no money for anything beyond subsistence.
Those folks are not the majority of those claiming to live P to P and who are significantly above subsistence level and who, by changing spending habits and priorities, could improve their position. I only need look in my family and among friends to see examples.
If you’re concerned about family of friends what do you think of your examples of spending $150 on a basic lunch or $92,000 pa on private college tuition?
What should also be obvious is that people vary greatly in their ability to resist the temptation to run up credit card debt just as people vary greatly in their ability to control their weight. Unfortunately, unlike the GLP-1 agonists the inhibit hunger, we can’t expect the development of drugs that inhibit impulse purchases.
parkslope,
I had a very well paid friend, guessing on his role in the firm, who was always complaining about how high his credit cards interest rates were.
He didn’t seem able to resist the temptation to buy things.
Okay, but what does that mean to the rest of society?
It suggests that we need to focus more on approaches that take into account the inability of so many people to manage their finances. Opting-out employee plans instead of opting-in plans is just one example of such an approach.
I strongly support the notion that people shouldn’t be bailed out when they get in financial trouble. However, I also believe that some empathy is in order and that a positive approach to helping people deal with their problems has a better chance of succeeding than simply ranting about how irresponsible they are. Simply blaming someone for their financial problems is clearly ineffective and most likely counterproductive.
I am not among the “we”. I feel pro sports is being ruined by the outrageous salaries. Now it is even happening in college sports. Fans are now subject to ridiculous prices for parking, concessions and the like.
I have issues with some other pricing, especially medical and drugs. But we just need to deal with those as best we can. Many of those are not optional, but entertainment is.
I’ve skipped many a concert due to outrageous prices and Ticketmaster fees, and it makes me plenty mad. I don’t skip doctor appointments and tend not to get worked up over the cost after insurance. Regarding Apple, my only purchase deemed worthy of their profit is an iPad.
The profits made on necessary items like medical insurance, cars, and food have always been more emotive than the corresponding profits and prices for discretionary spending like concerts and vacation travel. It was a topic covered during my business and finance degree during the 80s. If I recall correctly, the name of the module was along the lines of “The Fairness of Necessity vs. the Premium of Pleasure”
Apparently the phenomenon is quite real. I also found this.
In economics, necessities have inelastic demand (people buy regardless of price), enabling higher relative profits without losing customers—but this amplifies resentment when prices rise. Luxuries have elastic demand, so profits rely on desire, not need.
Overall, this double standard prioritizes equity for essentials: Society tolerates (even celebrates) profits on “wants” but scrutinizes them on “needs” to prevent exploitation of the vulnerable.
Price elasticity also depends on the competitive environment and the availability of alternative products. That is why many essential food products we buy at grocery stores have low profit margins while the inelasticity of tickets to Taylor Swift concerts results in high profit margins.
I feel, in your US context, this is one of the many issues you all face with healthcare: the “premium of pleasure vs. the fairness of necessity”. This is because healthcare is the ultimate necessity, literally a matter of life and death, yet it is managed through a for-profit business model better designed for the “pleasure” or “choice” economy.
Correct.
Mark, A very astute observation from across the pond!