Economic illiteracy

Of the blogs I read, I enjoy one from a blogger called Coyote in Arizona who periodically fisks journalists for being innumerate, with a very poor understanding of economics. One of his posts from last year took the local media to task for not questioning the dubious economic benefits of a publicly funded new sports stadium.

I’m with him 100% actually. And because the author is a local business owner, rather than a “trained” journalist, I forgive him his usually pretty ropey spelling.

You don’t have to look far to find generally economically illiterate copy. Though as it happens I’m going to dip back in the Daily Mail’s archives to look at a piece it did on the immorality of eBay in December 2006. In it, Lorraine Fisher, who clearly sidestepped the basics of the supply and demand curve, argues that speculators buying up scarce Nintendo Wii computer games consoles in the run-up to Christmas push the price on by selling them on eBay.

It sold out days after it launched on December 8. And yet it’s readily available on eBay – at nearly double the price. In fact, yesterday nearly 2,000 Wiis were available on the site. The Wii is so sought-after that many of those who pre-ordered it were left disappointed because Nintendo did not manufacture enough to meet demand. Just over 100,000 consoles were put on sale in Britain – yet just under 1,000 are being sold every day on eBay.

So, pretty clear then – there is a shortage, and scarcity drives prices up. But no. The writer quotes one of the so-called eBay profiteers, who says:

“I do feel a bit guilty about doing it because if nobody did things like this there would be plenty left in stores for people to buy at reasonable prices.”

Hmm – but surely if there is a shortage, what will happen is that the shops will sell out quickly at the recommended retail price, leaving empty shelves for the latecomer shoppers. Stick eBay in the middle and what happens is that your advantage stops being getting to the shop early and becomes paying the market price – which happens to be inflated by scarcity. It really depends on your definition of fairness.

Typically, the journalist doesn’t take issue with this at all. Then, blissfully ignorant of the irony, she ends the piece by crowing at the misfortune of the eBay entrepreneurs who have judged the market wrongly and bought up goods that turned out not to be the must-buy they thought.

Similarly, the £29.99 Dr Who Cyberman voice changer was also tipped to be a big hit – and it is. But the manufacturers made enough to ensure that just days before Christmas stores still had plenty on the shelves. And the eBay entrepreneurs have been lucky to get £12.50 for theirs.

Which of course means that consumers who hadn’t rushed to the shops early to buy the toy at full price were also lucky – they got a steep discount. Ah markets – you’ve got to love them.

So what’s her problem? It makes me wonder what the author really wants – fixed prices and government control of shopping outlets to make sure no one is profiteering? They tried that in Zimbabwe I believe…

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2 Comments

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2 responses to “Economic illiteracy

  1. Pingback: Ebay » Economic illiteracy

    • freelanceunbound

      Interesting – an essentially spam comment by a robot, but not trying to sell Viagra. Visit the eBay tootblog and you’ll wonder what on earth it’s for. Set up to boost eBay in some way? Doesn’t look sophisticated enough for eBay itself – and I’ve no idea who else would benefit. Maybe it’s an online experiment…

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