Tuesday, January 29, 2008

On Government Pricing

I am in the retail business. If sales are not what I need them to be, I have a few options. I can improve the quality of my offerings, or I can lower the price. It is true that there are other things a retailer can do, but by and large, customers want low prices, good quality or a combination of the two. Or to be brief, customers want value.

It is no different when we buy a home. We factor in everything when buying a home. What is the neighborhood like? Is it safe? Are there jobs? How many square feet are there in the home? Is the roof leaking? How much are taxes? Is the yard too small? Etc...

If, after all the comparisons are made, my customer decides to shop elsewhere, I have a problem. Likewise, if after all the comparisons are made in the housing market, home buyers don't choose Racine, home sellers also have a problem. And there is a reliable measure, the census, to detirmine if home buyers are, as they say, voting with their feet. They are. Racine is losing population.

Home sellers can improve quality by painting, adding a deck, or planting flowers etc... or lower the price, or both.

What can government do? Same thing. They can try to improve quality via bike trails, train service, taxi service, school referenda, better planning, ice arenas, high speed ferries, facade grants, artist recruitment initiatives, and on and on. These things have not prevented the decline in population. Do you think they will ever lower the price?


Anonymous said...

The Great Market God has control over all sacred market forces, saith libertarian economist Milton friedman.

Nemo said...

As long as government officials believe that the main function of their job is to spend money (and then, by corollary, collect it) we will see them addressing the tax-cut side of the market at about the same time that anon (8:19 PM) makes any sense.