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Which Price Is Right?

June 16, 2009


One thing that has really started to annoy me over the last few years is people complaining how much things cost when they have no idea what they’re talking about.

The most obvious example is people who complain about the apparently excessive costs of air travel—in particularly the ones who complain about the fact that it now costs $10 to $15 to check your bags at some airlines. Have you taken a look at airline profits? Actually, you can’t look at airline profits, because they don’t exist.

By contrast, I feel like the money I pay out to State Farm for my auto and life insurance is pretty cheap. But I’m probably being reamed, given the excessive profits they made last year.

Our subjective feelings about what price is right are usually wrong.

Last weekend I went to see a band play at a coffee shop. I paid a cover that I thought was exhorbitant—$7—and bought a 12oz can of soda that cost me a ridiculous $1.65. I thought these costs were absurd. However, as my anger was rearing its ugly head I stopped to think about this:

wages of workers + building overhead + cost to hire band + losses due to stagnant sales when bands are not playing

I’m not just paying to see the band for an hour show, I’m also helping to pay for the owner to keep that building maintained when the band is not playing. Patrons can’t have one without the other. The cost of overhead alone probably keeps the owner’s profits near 0%. Taking this into account, I think it might have been reasonable for me to pay $5 for that can of soda.

What’s the alternative? “I shouldn’t have to pay more than fifty cents for this soda—if you have to pay that guy behind the counter $1.00/hour to bring your prices down, then do it!”

Don’t forget:

low prices=labor exploitation

One Comment leave one →
  1. June 18, 2009 7:18 pm

    Hear, hear. I recently worked for an online book seller. We’d frequently get complaints about the prices of books and particularly shipping costs. “It doesn’t cost that much for postage!” I’d have to remind customers that they weren’t just paying for postage. Their “shipping and handling” fees paid for the packaging (one of those “Jiffy” envelopes averages thirty cents, and a box can be a dollar or more–popcorn and bubble wrap are extra) and salaries of the employee(s) who printed, picked, double-checked and packaged the order, overhead for the company, and related costs. (Sadly health insurance for the employees didn’t factor into that–we didn’t have any.)

    Needless to say after working there I no longer whine about shipping and handling costs. I know very well why they are seemingly so outrageous.

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