Low prices, by Markets or Governments?
With so much of debate on private firms and the kind of prices they charge, for the goods they hawk, two important issues have been missed out completely. By those do-gooders who advocate lower prices, and want government to intervene to set lower prices.
One, everyone 's looking for a higher price (read better profits) for whatever it is they sell. And at the price they sell, if there's a buyer, its downright stupid to drop the going price. Picture this. You buy a car at a price of five lakh rupees, use it for a few years, and now want to sell it. There's a buyer who's ready to trade for it at a price of rupees 2 lakhs, and you say, No. You tell him, all you want is a lakh and fifty thousand. Now, how many of you will do that? And if you did it, shouldn't a head examination be in order?
You see, as private individuals we too hawk our wares at the highest price possible. Why then shouldn't business firms do the same?
Two, government intervention that the do-gooders seek in setting lower prices, is in the first place responsible for prevailing higher prices. The government does this by ensuring that whatever is being hawked, is in scarcity. If the government were to allow for more players to hawk that very same ware, guess what happens to prices? In fact, this artificial scarcity that government encourages is so people in power benefit. For I bet you, the people who hawk wares at steep prices, are in all probability, in cahoots with governmental agencies. Its this nexus that ensures supply levels are kept low, prices high.
The answer to low prices doesn't lie in forcible low pricing through governmental intervention. Instead it lies in the inherent corrective nature of capitalist markets. Remove all roadblocks, including the government, and let private initiatives flourish. Markets will soon be flush with goods of varied sizes and prices.
Consumers across income strata benefit.