Pricing

Cheap weed in Washington State after legalisation causes glut in supply

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Washington State legalised cannabis and in the first year growers rushed to market hoping to make a killing…predictably there was an over supply and prices dropped through the floor.

Have you ever been tempted to buy your dog a truckload of steaks just to see if there was a limit to how many of them they could eat at just one sitting? Well when marijuana became legal in the state of Washington, we were similarly curious about whether there was a theoretical maximum amount of pot that its residents could smoke… and now our questions have been answered.

The Associated Press, via ABC News, reports that marijuana sellers in Washington are actually suffering from large unsold surpluses of pot, as supply is now vastly greater than demand for the demon weed inside the Evergreen State.   Read more »

Revisiting Green party press releases

In 2008 the Green party issued this press release:

The Green Party is warning that today’s record breaking crude oil price of US$100 per barrel is just the first flirtation in what is going to be a long term relationship with triple digits in an ongoing trend of rising oil prices.

The price of oil reportedly surged during the first trading day in the New Year with light sweet crude rising US$4.02 to US$100 a barrel in New York.

“The era of cheap oil has been over for some time. While today’s price breaks a psychological limit, the long term trend indicates that oil may not be consistently priced this high until July or August. However, that’s very short time in planning terms and it is extremely urgent that we re-examine our budget priorities for roading, public transport and freight,” Co-Leader Jeanette Fitzsimons says.

While today’s price of US$100 did retreat soon after breaking the record, prices will never retreat back to the lows of just a few years ago.

“While there isn’t any need to panic, it is a clear signal that we should be planning for an oil constrained future. This means changing the way we get around, investing in more public transport and better urban design that supports walking and cycling. You only need to look at the major cities around the world that were built before the oil age to see that vibrant, exciting lifestyles are possible without depending on the private motor vehicle.

“If you read my latest Bill to be drawn, Climate Change (Transport Funding) Bill, you’ll see a phased programme for refocusing priorities towards more sustainable transport and reducing our reliance on fossil fuels.”

Read more »

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Perhaps David Shearer and David Parker might like to answer the questions in this letter

Seamus Hogan of Offsetting Behaviour writes an open letter to David Shearer and David Parker. It is somewhat impertinent but asks valid questions which they need to answer:

Dear David and David,

I have read with interest the policy document you released yesterday: New Zealand Power, Energising New Zealand.I wonder if you could clarify a few points for me.

  1. In the document and the associated speeches, you quote the Wolak report’s figure of $4.3b of, in your words, “super profits”. Have either of your read the report, or any of the trenchant criticisms of that report? (A bit egotistically, I can suggest work that I was involved in, herehere, and here, but there are others.)
  2. You say that “prices are rising faster than in many of our major competitor countries”, and show a graph comparing the price trend in a number of countries since 1986. Let’s leave aside the question of what is meant by “competitor country”. Is it your position that prices were correct in New Zealand in 1986? Elsewhere you say that your new agency, New Zealand Power, will set prices based on operating costs and a fair return on capital. Is it your position that prices were generating a fair return on capital in 1986?
  3. You say that the faster rate of price growth in New Zealand “undermines the competitiveness of our economy”. But one of your graphs shows that real industrial prices have remained about constant since 1986 and commercial prices have fallen. What exactly do you mean by “competitiveness”?   Read more »

Labour and Greens want Stalinist price controls on power

Labour and the Greens are committing economic sabotage in proposing Stalinist style state control of power prices.

It would be a disaster for private investors.. all those people with their savings in Contact and Trustpower shares (including Kiwisavers) would have their investment destroyed by their proposal.

Labour is promising to cut the average Kiwi power bill by up to $330 a year if elected to government.

It plans to do so by setting up a single buyer, NZ Power, to purchase all electricity generation at a fair price.

At a joint press conference Green co-leader Russel Norman outlined a similar policy, although the Greens would introduce an element of progressive pricing.  Read more »

Fatty Fares, make them pay

Finally someone has stated the obvious. Make fatties pay per kilo with airfares.

IT may only have a slim chance of succeeding, but a pay-as-you-weigh airline pricing scheme has been suggested.

Heavier passengers would pay more for their plane tickets and lighter ones less under plans put forward by a Norwegian professor.

Writing in this month’s Journal of Revenue and Pricing Management publication, Dr Bharat P Bhatta said weight and space should be taken into account when airlines price their tickets.

Dr Bhatta, of the Sogn og Fjordane University College in Norway, has put forward three proposals.  Read more »

In defence of price gouging

In the wake of Hurricane Sandy there is concern that people may be price gouging. Gov. Chris Christie has said he will come down hard on culprits caught price gouging.

During emergencies, New Jerseyans should look out for each other — not seek to take advantage of each other. The State Division of Consumer Affairs will look closely at any and all complaints about alleged price gouging. Anyone found to have violated the law will face significant penalties.

Mark J. Perry, though, schools the governor on market dynamics:

With that statement, the New Jersey governor demonstrated a fundamental lack of understanding about how markets actually work.  Sellers always try to take advantage of consumers, in the sense that they always charge “whatever the market will bear,” and this condition of a well-functioning market doesn’t change because of a natural disaster.

Just like earthquakes, hurricanes, or floods don’t change the fundamental physical laws of gravity or aerodynamics, those natural disasters also don’t change the basic laws of supply and demand.  If sellers of electric generators in New Jersey are guilty of illegal “price gouging” for charging market prices after a major disruption to the market like Hurricane Sandy, then sellers of all products at all times are guilty of “price gouging.” Sellers always charge “whatever the market will bear,” and in that sense are always trying to “gouge” and “take advantage of” buyers to the maximum extent possible.  To act any differently would be foolish and even disruptive to our economic system based on market prices.

I’m very confident that the last time Governor Christie personally sold one of his own homes, shares of stock, or cars, he sold his possessions for the highest price possible and not a penny cheaper, and in the process he did his very best as a seller to “take advantage” of the buyer.  That’s how markets function.

Rising, market-based prices following a disaster are the most effective method possible of allocating scarce resources, eliminating shortages, and attracting essential supplies to the areas that need them the most.  In fact, market-based prices are also the most effective method possible of allocating scarce resources, eliminating shortages, and attracting essential supplies to the areas that need them the most before a disaster – wind and rain don’t change that reality.  Governor Christie and others fail to recognize that the coordinating role of market prices becomes even more important following a disaster, not less important.  To prevent the price system from operating following a disaster with price gouging laws will make the situation worse, not better.  Thanks to the strict enforcement of their state’s price gouging laws, New Jerseyans should expect possible shortages of fuel, food and generators.

It’s only in the fantasy world of politics that the “anointed elected officials” think they get to be the “price deciders,” and determine if sellers are guilty of “price gouging.” In the real world of the marketplace it’s much different and much more democratic – the impersonal market forces of supply and demand become the “price deciders,” and we’re all much better off with those market-determined prices than with the artificial prices determined by politicians and bureaucrats.

 

Minimum pricing

The Telegraph

The strangest thing about all this is turkeys don’t usually vote for Christmas so why is Patsy trying to push up the price of alcohol?

In the UK minimum pricing is being fought hard and deservedly so…why should everyone be punished with high drinks prices because soaks can’t control themselves?

Scotch whisky producers are planning to protest to the European Commission over proposals to set a minimum price per unit of alcohol in the UK.

The Scotch Whisky Association (SWA), which represents drinks groups including Diageo, Chivas Brothers and Glenmorangie, will today step up its campaign against minimum pricing, which is being pursued by both the UK and Scottish governments.

Many drinks companies believe the plans are illegal, will raise prices for responsible drinkers and would do nothing to solve alcoholism.

However, in a major blow to drinks manufacturers, the health select committee has today given its backing to Downing Street’s recommendations for a minimum unit price in England and Wales.

The ruling was greeted with dismay by industry groups, which called for the addition of a “sunset clause” that would force ministers to repeal the legislation if it does not work.

Miles Beale, chief executive of the Wine and Spirit Trade Association (WSTA), said: “We regret the committee’s readiness to support minimum unit pricing when by its own admission there is a lack of evidence about the specific effects of different price levels.”

“Given that, it must make sense for the Government to apply a ‘sunset clause’ to minimum pricing,” Mr Beale added.

Andrew Cowan, director for Diageo in Great Britain, said minimum pricing “unfairly penalises all consumers”.

This should happen here

Sydney Morning Herald

Big name tech companies are coming under the microscope in Australia for their price gouging activities:

Apple and Microsoft will be among technology companies asked to explain to Parliament why Australians pay much more for music and game downloads from iTunes, for example, than overseas customers.

Federal Labor politicians are hoping the publicity generated by calling the companies to account for their pricing policies will result in prices dropping.

The Minister for Communications, Stephen Conroy, has signed off on the parliamentary inquiry, which will also consider pricing of software and other IT-related material and could have big implications for businesses.

”There is evidence to suggest that the innovative use of technology is not always matched with innovative new business models in the case of products and services distributed online,” Mr Conroy said in a letter to Sydney MP Ed Husic.

”I agree that Australian businesses and households should have access to IT software and hardware that is fairly priced relative to other jurisdictions … the global digital economy is likely to make it increasingly difficult to sustain business models that are based on a geographic carve-up of markets.”

The terms of reference for the inquiry are being finalised by Mr Conroy but it will begin later this year and be conducted by the House of Representatives standing committee on infrastructure and communications.

It is ridiculous that territorial arrangements still exist for most products, especially in the technology area. However the problem is not confined solely to that area.

Take sporting goods….You can buy a pair of Irish Setter boots from Cabelas for $119 USD, the same pair of boots here will set you back $475 USD. The problem is that the distributors and agents are marking up and then the retailers are marking up meaning that the consumer is getting tucked. Ultimately though the retailer is getting tucked because people just go an buy online.

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