You may recall
a while ago that I invited readers to submit any questions they might have to j.knight423@btinternet.com and I would publish some of them in some Ask The Philosophical Muser articles.
I have finally
got round to putting some of them together (which was easy as there have only
been six or seven thus far), as well as
extrapolating some questions/comments/queries I've stored from my time on
debating forums.
The questions that
appear henceforward in the Ask The
Philosophical Muser articles are a heady mix of actual reader questions, varying
enquires and feedback that have come my way on social media, and some
semi-factual/semi-fictional elaborations where I've taken segments of actual
discussions I recall over the years and turned them into fun questions and
answers for this Blog. I promise I have taken no liberties that depart from
actual questions people have in some way been curious about either in written
or spoken conversations.
For the first
one, a reader probed me with a very intelligent question that I'd not really
thought about in quite this way before. I'm not quoting him verbatim, but the
gist of what he asks is this:
Q)
If governments are bad when they provide an unnecessary filter between provider
and consumer, then why aren't many shops bad when they provide an unnecessary
filter between wholesaler and consumer?
A) It's one of those great questions
because the logic is pretty robust, it's just that the information needs a little tweak. By which I mean, yes, at face value the logic suggests
that any middle men (or middle women, of course) between provider and consumer are going to cream off a
share of the value for themselves, because if I want to buy £3000 worth of envelopes
from a paper mill via the middle man involvement of a stationery company
like Espo, then by the time Espo have taken their cut, I will be paying
something closer to £3200 or £3300 for the same product.
But what you don't always get to see about
middle men is that they bring to the transaction certain specialities in
which they have the comparative advantage, and through which they actually make
your transaction with the manufacturer/wholesaler more financially beneficial.
To see why, imagine a baker who is also a
pretty good driver with good knowledge of the city in which he bakes. If he
wanted to provide a service where he delivered pizzas and cakes around the
city, it would obviously not pay him to make the goods and deliver them
himself, even if he is a slightly better driver and navigator than the person
he hires to do his deliveries.
The reason being; it is more economically
efficient for the baker to pay someone else to do the deliveries because what
he'd gain in forgone wage costs he'd lose two or threefold in lost opportunity
for baking. Suppose in terms of gross profit our baker can make £50 worth of
baked good per hour (revenue minus cost of ingredients) and pay someone else
£10 per hour to deliver the goods. The baker's profit goes down to £40 per hour,
but if the baker spent 3 hours a day doing his own deliveries it would cost him
£120 of baking profit to save just £30 of delivery costs.
Similarly, shops are good for consumers
and providers alike, because even though the shops have to take their cut as middle
men, they have the comparative advantage in things like market research and
sourcing information on behalf of consumers. In fact, one can go so far as to
say that the fact that the wholesaler chooses the services of retailers shows
that the presence of retailers reduce costs by performing actions that would
otherwise have to be performed by the wholesalers and the consumers.
As ever, any
questions for this Blog can be sent to me and may become part of the series,
consistent with the four
golden rules:
* Please don't ask me to do homework,
coursework or an assignment for you. No reader or blogger is interested in that.
* Before asking something, please check the
*Labels* section on the right side-bar, as that topic may well have been
covered before on here.
* There's no point asking a question about
facts or information that you'd be better off typing in Google.
* Please keep your question short. You have a
better chance of getting an answer if your question would comfortably fit on a
post-it note.
