Price theory in 2020

How many people know that price theory is supposed to be a nice pure way financial markets to arrive at the right price. T he laws of supply and demand have never been more tested.

At one end of the extreme is the minimal food miles associated with farmers markets and local crafts while at the other end of the extreme is Amazon and the fulfillment houses where prices can be regularly 500% of the normal RRP.

There are as ever reasons for these disparaties and as economic modellers scramble to put the green effect into local produce and the lazy internet/ease of purchase into the latter, finding a homogeneous rule for all is clearly turning this distribution into a tri-hump camel.

Leaving markets alone to evolve as a pricing mechanism has for a while been under pressure. 

Arbitration in the markets is a key aspect of Capitalism. The more Arbitragers, the purer the market and price transparency, so the theory goes. In 2020 we see entrepreneurs by the bucket load take the opportunity to trade goods using the eBay, Amazon, etc marketing and fulfillment infrastructure.

I've long talked about Capitalism being Marketingism. The irony is it's not been rebranded. 

During the 50's cars lasted for ever and had no reason to be replaced. During the  70's, it was plastics boom time and with it the highly disposable age began. The make do and mend generation were slowly being replaced by the rebranded Willy Lomans in another piece of iconic irony, the 70's were the birth of the salesmen.

Since then every board room talks marketing with prospective numbers, and very few talked quality. Style over substance and everything could be explained away if you had a good narrative, oh and an audience with the IQ of a fencepost.

The growth of financial markets and arbitrage is well documented. Liberals in the financial markets during the 1980's started the process and in the UK we had the mass sell off. Just as China saw the melting of the wok's we saw the sale of Council houses, waters, electricity, telecoms, aerospace, railways, you name it. The bumper crop of cash that came in from these sales along with all the north sea oil revenues would've made you think the 1980's were a boom time, yet not for everyone, in fact not for many at all. This came at a time when University fees were charged to students and grants became a thing of the past. BUPA and other private medical providers appeared throughout the land. 

So by 1990 there was a huge war chest? Alas no. 

If you're Norwegian you must laugh. They had similar north sea oil reserves and they have a huge pot of cash even now.

As the 1990 rolled towards 2000 there was a gentle stroll towards the internet and all the benefits we'd get. What we hadn't bargained on was how controlled we'd be by a mobile phone. 

Within months of the new millennium the benefits could be seen on and with social media. A new opiate for the masses. 

The markets kept there head down with Arbitrage getting sidetracked by more sophisticated leveraging, often confused with pyramid selling. Leveraging is even more advanced.

See the Big Short if you need a wee reminder for the 21st century examples of how leveraging is so effective, for a time. The beauty of leveraging is you only need it to work for a short period while you get your cash out and the audit trail is spread amongst everyone. 

The gambling industry was targeted by many Arbitragers taking advantage of price discrepancies and they're actively chased out of the market, as the bookmakers fully recognise that arbitrage is not good for they're markets. The point of most suppliers is that they don't want a pure market and clearly while economic theory has evolved those applying the laws have not kept up. They don't need to as they have other fish to fry. Recent examples include the hysterical MEP who questioned a professor of Economics over her experience.

He clearly demonstrated his own inimitable style over substance.

So back to global companies and fulfillment where do we go from here.

What price is a pack of 3 Cadbury cream eggs or Dean's shortbread?

If you're on Amazon probably £5 - ,£6 and if you're in poundies £1.

Clearly if you're any kind of retailer you should be able to lower the price on Amazon but against that background do you really want that marketplace to develop.

Free delivery for prime customers mean the lazy lunch in the office instead of going to buy the biscuits will save time and for small purchased who cares as "time is money" and delivery is free.

This discussion will roll on but I for one will continue to walk the Camino having mad thoughts and buy local!