Wednesday, November 09, 2005

Aren't the Girl Scouts price-gouging?

[Updated 7:34 p.m. EST, and then 9:06 p.m. EST]

The Girl Scouts were hawking their cookies yesterday in my workplace's lobby, which probably netted them a killing. I bought a box, and it was indeed pleasant this afternoon to accompany my customary Earl Grey with a few shortbread cookies. Sometimes it's the simple comforts that make life most enjoyable.

The Senate has commenced investigations into oil companies' alleged price gouging. Why isn't the Senate also investigating the Girl Scouts? They were charging $3.50 for a small box of cookies that even grocery stores wouldn't sell for more than a couple of dollars. And the shortbread wasn't even that good.

Could it perhaps have something to do with the voluntary nature of my transaction with the Girl Scouts? I didn't have to buy the cookies; I could have sought other substitutes at a cheaper price. I think they did very well in our building, but I'm sure a lot of people elected not to buy their cookies. Buying or declining was purely our choice.

In the same way, filling up my gas tank this weekend was also purely voluntary. I accepted the price and had the perfect freedom to decline. But am I not forced to get gasoline to use my car at all, the Senators might argue? No, I'm hardly "forced" in the true sense of the word, for I did not have to buy a car that relies on any derivative of fossil fuels.

The Girl Scouts sell their cookies as a fund-raiser, but oil companies -- and in fact any business -- are doing the same thing. Any profit-seeking firm wants to earn more money than its expenses so that it can continue and expand its activities. Update: I should add that the Girl Scouts were acting like a perfect retail business, not just as arbitrageurs, but Kirznerian entrepreneurs that anticipated a market condition and calculated the risks thereof. If it was not "unfair" of them to demand a price that people are willing to pay, then how is it "unfair" for oil companies to do the same?

If you don't like what the Girl Scouts are doing, or you think their admittedly mediocre cookies aren't worth the price, you are free not to do business with them. If you don't like the prices of gasoline, of milk, or ribeye steak, you have the freedom not to buy them. As Walter Williams said, "Only an unreasonable person would pay unreasonable prices."

Perhaps I should keep my mouth shut, lest some Senator decide we need price controls on Girl Scout cookies, to make them "more affordable for everyone."

Update #2: I realized that the Girl Scouts really price gouge. Oil companies might be making a windfall now, but nowhere near what state and federal governments get via gasoline taxes. The Girl Scouts, however, were not charging sales tax, meaning they were keeping all the profit. In terms of a percentage of the wholesale price, they're making much more than oil companies, and certainly more than gas stations (who make just a couple of cents per gallon).


Anonymous Anonymous said...

Comparing Girl Scouts a national organization to global oil corporations is a stretch.
Some people are 'forced' to buy gas.
Forced being in the context of loosing their job, education, and dearly prized recreation.
Immediately stopping government global subsidies will be far more productive then Senate investigations.

Wednesday, November 09, 2005 7:47:00 PM  
Blogger Perry Eidelbus said...

But how is anyone "forced" to buy gas? Do oil companies put guns to their heads? No, you are "forced" only in that you want to improve your standard of living. You have the alternative, the freedom, to life self-sufficiently.

People have other alternatives to get to work and school. They can sometimes take public transportation, or they can move to where they can take public transportation. They can find a job closer to home that they can walk, bicycle or rollerblade to. Wayne, a regular reader here and at Jackie Passey's blog, bicycles 45 minutes each way to his workplace.

Improving one's standard of living typically involves trading -- a form of interdependency -- with others. And if you don't like the terms someone else requires, and that the other person knows you are able to pay, you are free to decline. This applies to Girl Scout cookies, your local grocer, and oil companies.

You are always free to live your life in increasing degrees of autarky, which will mean being less wealthy than you could have been. Part of that wealth includes the ability to enjoy certain activities that do not involve "work" per se. And you can still get to parks, lakes and like, without use of a car -- it's just that driving makes it feasible for you to engage in that recreation.

If the cost of gasoline makes it no longer worthwhile to drive to certain locations for recreation, then people won't drive. They may not go at all. And we are seeing this right now: people are cutting back on their trips, carpooling, and/or buying more fuel efficient cars.

Wednesday, November 09, 2005 8:36:00 PM  
Blogger Mike said...

I saw the Senate hearings on the news headlines today...wondered what your take on them would be.

Good post.

Oh, and not sure if you saw, but the Times had an, um, "interesting" editorial up trying to make the point that a windfall tax, would, coupled with a few other initiatives, reduce our dependence on oil with little to no adverse effect.

Wednesday, November 09, 2005 8:50:00 PM  
Blogger Perry Eidelbus said...

Unlike certain Senators, I'm too busy performing useful, productive work for the economy. I didn't watch the hearings and have only seen a couple of headlines. Of course, they're all in the "Oil execs defend record profits" vein.

I've written a couple of entries on why energy independence is not necessarily a good thing, and how this proposed tax will actually hurt American consumers. The tax revenues collected will be used to subsidize less-efficient energy sources that cost us more money per watt (meaning we might as well just burn dollar bills to heat our homes).

Wednesday, November 09, 2005 9:31:00 PM  
Blogger Josh said...

You know, the price of oranges went up substantially after Hurricane Wilma perhaps we should institute a windfall profits tax on orange growers.

Wednesday, November 09, 2005 11:10:00 PM  
Blogger Windypundit said...

According to the most recent statement I could find, the Girl Scouts' endowment fund has just over $100 million invested in common stocks and mutual funds. I can't find details, but it's a good bet that some of that is invested in oil companies.

Why do all those Senators hate the Girls Scouts?

Thursday, November 10, 2005 4:19:00 AM  
Blogger Perry Eidelbus said...

Great points, guys.

Hitting oil companies in the pocketbooks will hurt a lot of smaller investors who just happen to own shares in their companies. And you're most likely right, WP: if any of that $100 million is like a typical portfolio arrangement, there's bound to be some in energy stocks.

Similarly, punishing oil companies will punish working class people too. With their profits taxed away, oil companies will hire fewer people and issue fewer (and reduced) pay raises for the rest. These jobs, more often than not, will be lower-echelon, and the companies will try to squeeze a little more productivity out of the existing base. It's easier to do that with lower-grade workers than top management, especially with the greater supply of lower-grade workers that makes them compete with each other for the same wage, rather than a company competing with others for a few workers (which is what happens at the top). So what the "tax the oil companies" members of Congress will do is hurt the working class people they claim to want to help.

Thursday, November 10, 2005 4:53:00 PM  
Blogger TKC said...

Price gouging in the art world?

Of course not. Somebody just saw fit to pay that much for it.

Thursday, November 10, 2005 5:56:00 PM  
Blogger Adam said...

Hi, I found your post via the Liberty Belles, and think you've done a good job of presenting a particular viewpoint.

I think you've clarified the issue by pointing out that the justice of this situation depends upon our ability to choose not to buy gas.

You wrote:

You are always free to live your life in increasing degrees of autarky

I basically agree with you, and expanded on this topic on my own blog. However, I think it's worth considering how much the government limits our ability to be self-sufficient.

If you read some of Kevin Carson's Mutualist Blog, you can find numerous examples of how the government limits our ability to be self-sufficient. The picture really comes together when we consider who controls the government--it's people just like the oil execs and the owners those companies.

Wednesday, November 16, 2005 11:03:00 PM  
Blogger Perry Eidelbus said...

I posted the following on LB's blog:

"The capitalists, the enterprisers, and the farmers are instrumental in the conduct of economic affairs. They are at the helm and steer the ship. But they are not free to shape its course. They are not supreme, they are steersmen only, bound to obey unconditionally the captain's orders. The captain is the consumer."

So wrote Ludwig von Mises in "Profit Management". You describe dependency as one-sided when it's actually two-sided: that's the very nature of trade.

You have so many more options today than you realize, including homemade biodiesel fuel. If you wanted, you could contract with Midwestern corn farmers to buy their ethanol. My entry here explains why you don't use the other options, and why gasoline is still the best option for most people: even with the higher costs now, which are genuinely caused by supply interruptions (especially at the refinery stage), gasoline is cheaper than alternate fuels.

Oil company power? Utter nonsense. The only power they have over consumers is that which the state grants them, either by granting monopoly powers or by modern charter.

The "critics" you speak of are economically illiterate politicians who pander to the public's unfounded fears of price gouging. Real economists know precisely what I'm talking about -- and I know that because they're the ones who taught me.

Thursday, November 17, 2005 1:42:00 AM  
Blogger George said...

I feel like I've gone back in time. I was looking for how many times and the last time the Senate investigated oil companies for "gouging" (for a post) and it was only a couple of months ago. How much money have they wasted on these investigations over the past 30 plus years? Great post and comments.

Wednesday, April 26, 2006 11:05:00 PM  

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