Richard Jernigan -> RE: José Ramirez III for sale jewel... (Nov. 25 2012 4:51:53)
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Your sense of the word "regulation" is precisely what I was addressing in the post you quote. As an engineer I have designed, analyzed and diagnosed many self-regulating systems. I used the household thermostat as a familiar example. No self respecting "wonderfully self-regulating system" would exhibit the disastrously chaotic behavior that large scale markets have throughout the course of their history. In your example of Ramirez guitar dealers, the market determines your profit margin, not the price. The minimum price is set by Ramirez and your cost of doing business. I love my '67 Ramirez 1a blanca, but I would never buy a current top of the line Ramirez flamenca. In my opinion better guitars are available at a cheaper price. I love my '73 Romanillos spruce/Indian, but I wouldn't buy a new one from Liam. The price of mine is high because it's a collector's item. As good or better guitars are available at a cheaper price. In neither case does the "free market" get the guitar buyer the best bang for his buck in musical utility. Of course, it may be argued that the market sets the price that Ramirez, Conde and Romanillos can charge, taking into account both their value as musical instruments, and whatever value the buyer may perceive from the name. People in most countries are fairly free to spend their money as they like, once they have paid their taxes and other obligations. But I am quite dubious of the claim that the "free market" gets the buyer the best value for his money. But of course the claim of "best value" is a tautology if you define the value of an item as its market price. Permit me to tell a little story of confusion over price and value. A Marshallese friend bought a little boat from an American, promising to make monthly payments. A difficulty he faced was cultural. He had a good job, but he never had any cash. Strong cultural values dictated that on payday he should cash his check and give the money to his wife, who distributed most of it to a large and largely unemployed extended family. She kept the rest for household expenses. My friend thought the extended family would see the utility of the boat, which he freely shared, and would agree to him keeping the cash to make the payments. Not so. Since my friend controlled the use of the boat, they saw it as a personal possession, and begrudged him the money. Marshallese society is matrilineal, but not matriarchal. Land and titles of nobility are inherited in the female line. The sale of land is extremely rare. But men exercise considerable political power. As far as I could puzzle it out in my 18 1/2 years in the Marshall Islands, family finances were managed by consensus of the bwij, the set of mature sisters, grandmothers and aunts who were the nucleus of the extended family. My friend thought he had found a solution, but not so. The seller repossessed the boat. My friend asked me, "Jernigan, why did John H. take my boat back?" "The story I heard was that you were not making the payments." "Then I want my lobsters back!" My friend had put an otherwise unemployed cousin to work using the boat to catch lobsters, which he gave to John H. every month in lieu of money. The lobsters were probably worth twice the monthly payments due, but lobsters were so rare there was no trade in them, and there was no established market price for them. No doubt John H. did not fancy himself as a lobster dealer. But he and his family happily ate them, a rare delicacy. "Why did John H. take my boat, when I gave him lobsters every month?" I mulled it over a bit. "I suppose, my friend, it was because there was no place in John H.'s checkbook to write down 'lobsters'." The lobsters were definitely valuable, but they had no established market price, due to their rarity. Tuna, wahoo, mahi-mahi and ranibow runner were plentiful and went for fairly well established prices, though a lot were 'given away' by American sport fishermen. However, if you received fish when your friends caught more than they could eat, you had better return the favor or get cut off. Value and market price are not the same thing in my book. Flamenco guitarists don't make as much money as successful concert pianists, but I like some flamenco guitarists better than I like some successful concert pianists. Don't get me wrong. I'm not against setting the price of things via the market. It appears to me to be better than any other scheme that's been tried. But I am extremely dubious of claims that any existing market is either free of external regulation, efficient, or in any other sense wondefully virtuous. I make these remarks based on a lifetime as an engineer, responsible for many competitive bids and proposals, as a director of an employee owned company, and as the owner of my own business for several years--a moderately successful career in a market economy. RNJ
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