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Budgets/Taxes · Economics · Featured · Liberty · Regulation

Why We Need Minimum Price Laws Today

going-out-of-businessThere is a serious problem in America today; the epidemic of poverty prices.

Across the country, American business owners are being forced by market conditions to sell goods at prices too low to maintain profitability, resulting in over 40,000 bankruptcies last year. Unfortunately, greedy customers continue to force businesses to accept these prices despite experiencing some of the highest living standards in history. It’s time that the government do something to save businesses by instituting minimum price laws which force customers to pay a fair minimum price for cheap products. We need higher prices now!

Of course not all prices should be raised by law. Rather, only prices in industries struggling to survive should be supported. For instance, 70% of restaurants go bankrupt over a ten year period, so the government should institute minimum price laws on most types of food to help these businesses stay open. Legally mandating sustainable airline and car prices would also be effective to combat the historic bankruptcies in these sectors.

Creating minimum price laws are not only about making people wealthier, but they are also about justice. We are all aware of the unfair disparity between consumer and business gains which can come along with the purchase of a cheap product. Over the past fifty years, US per capita income has increased by 1,624%, while prices have only increased by 737%; therefore, consumers have benefited at a much greater rate than businesses from economic growth.

The problem is that modern consumers are selfish. These “all for me” customers spend hours looking for ways to trim a few hundred bucks off the price of a new car while auto-makers struggle to emerge from bankruptcies. There are literally entire websites and forums dedicated to figuring out how best to exploit the business. Consumer price gouging is now so popular that companies are forced to compete with each other to offer the lowest prices possible. This triggers a race to the bottom which further lowers prices and cripples companies.

Minimum price laws are also good for the economy. Businesses not only employ people, but also increase the aggregate supply of goods in the market, thereby helping boost the American economy. But with our current laws, the government continues to allow prices to fall, and therefore causes more businesses to shut down and further weaken the economy as fewer goods are produced for consumption. This downward spiral of poverty is the last thing we need in a struggling economy.

The economic benefits of minimum price laws don’t stop there. Government welfare usage is at an all-time high in the US, while our national debt is similarly perilous. By keeping prices high, and therefore more businesses open, the government can reduce the number of people on welfare and keep tax revenues up due to higher corporate, personal, and sales tax receipts. With these effects, hopefully conservatives can get on board with this common sense policy.

Free market ideologues might say that raising prices would hurt consumers by making it too expensive to buy the products. But these claims don’t empirically pan out. In reality, when companies charge higher prices, they tend to make better products, and therefore don’t lose money from marginal loses in the customer base. Furthermore, when prices aren’t constantly falling, companies don’t have to worry about menu costs, thereby cutting their operating costs and further increasing profitability.

The solution is simple. We need the government to step in when the market fails, and the market is currently failing our businesses by allowing prices to fall. Only by legally mandating a minimum price level on certain goods can we ensure that the American business is not trampled under the feet of the greedy American consumer.

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— Matt Faherty

Matt Faherty is a government relations intern at The Heartland Institute. Faherty is a senior history major at the University of Chicago who focuses on the American Gilded Age (post-Civil War to WWI) and modern economic history. He is president of UofC's College Libertarian Club, as well as a Campus Coordinator for Students for Liberty in charge of overseeing the development of campus liberty organizations in parts of Chicago. In 2012, Faherty was awarded the Koch Summer Fellowship by the Institute for Humane Studies which placed him with the non-profit watchdog Tax Payers for Common Sense. He is a former blogger for The Motley Fool.

  • Matt Faherty

    For full disclosure, the article is meant to be a satire.

    • SovereignMary

      I hope this is satire … because this is nuts! Supporting “government price fixing?” Shades of FDR! And, this is coming from the Heartland Institute? If the people are not
      purchasing what you produce or grow then produce or grow something else!

      • Ryan McMickle

        And if your employer is not paying you what you want or what you think you are worth, go work somewhere else!

    • Marty Galyean

      Brilliant use of satire, Mr. Faherty. Love it. The only problem I see is that if folks can’t see through the min. wage obfuscation they are just as likely to take on faith the rebranded reasoning behind min. prices and push their critters to pass a law. Scary but true. 8^O

  • http://www.heartland.org/ The Heartland Institute

    We’ve lost a Twitter follower (@Dianne93101) over what is obviously satire.

    “U guys disappoint me- government CREATED the problem and now we’re going to ask for their help?? I’m #Unfollowing now”

    Oh, well. Still … come back, Dianne93101!

  • J August

    My suspicions were warranted. LOL. Nice “Onion”-type article.

  • J August

    This was too funny. An “Onion” type article. Nice going!

  • Matt Faherty

    Except that Prices are going to businesses, which produce, thus helping consumers, whereas a wage increase would cause less hiring and production, because businesses would watch their costs. Higher prices help consumers.

  • Matt Faherty

    Workers already have money, which is what makes them capable of buying products, and staying alive. The first thing workers cuts when they lose income, year to year? Spending money, or expenditure on business products. They don’t change how much they pay for their products (unless they actually care for the businesses they patronize) because spending even 20 cents more on something will lower their savings next year. Real businesses on real budgets will cut employment in areas they can afford, so it does no good to raise wages.

    Raising prices, however, is an incentive to produce better products (???????). After all, where are all of the best products made? The very same places which charge the highest prices! Why do you think 5 star restaurants serve better food than MacDonald’s? Because 5 star restaurants charge higher prices.

    • Billy

      Oh yeah, let’s just keep widening the income gap by by increasing the prices of our products and lowering the wages of our employees, So, not only will we have an over-abundance of goods, but the people that produce them will not be able to afford them.

      • David

        And so the real goal is revealed: equalizing incomes. Wow. What a shock.

        • Billy

          David, I don’t want to equalize incomes, I want companies to have the decency to pay hard workers with better pay than they currently do. If you go to work at walmart and work hard each day, you get payed the same as a half-ass worker in the same position and after your year evaluation you get the same terrible 40 cent raise and have the same fear of being laid off or taken off of full-time employment because the greedy bastards don’t want to have you covered under benefits. Wage rates are normative, they don’t naturally increase, nor do the conditions get better via invisible hands. We need to incentivize employees to pay livable wages and to provide safe working conditions. That doesn’t mean we need to use Socially liberal tactics, nor does it mean we need to intervene in the free market with regulations, but it does mean that we need to seriously evaluate and act upon our ethics. What we buy, how we buy, who we buy from and who we are employed for is very critical to starving out bad business practices. However, most people do not have that much say in the latter.

          • Matt Faherty

            Billy, I want the same thing you do, you just aren’t realizing where else your principles can apply.

            I want customers to have the decency to pay hard working companies better than they currently do. If Wal-Mart’s executives work hard each day, the business gets paid the same half-ass prices as any other competitive business does. When Wal-Mart wants to raise its prices to get what it deserves for working so hard, it can’t because the greedy bastard consumers switch to Target. Prices are normative (???), they don’t naturally increases, nor do the businesses conditions get better via invisible hands. We need to incentivize consumers to pay sustainable prices and to treat companies respectfully. This means we need to counter consumer greed as much as possible, or at very least from an ethical stand point.

          • Billy

            OK, you are just taking what I’m saying and attempting to apply it to your conclusions either to show that you believe my argument to be invalid or to mock my argument ad hominem via satire. Your premises, however, ar not true. Free markets force prices down for the consumer, so Businesses can compete amongst each other for the consumers. They also must compete for the better workers. Your whole satirical article and every response you have so sheepishly responded with is equivocating wage controls with naturally high wages. Are economic conservatives become stupid? How the heck do you expect any libertarian leaning candidate to compete with any democrat candidate when their rhetoric has become “wage controls, price controls, and government intervention in healthcare is bad, therefore high wages, low prices, and having affordable healthcare must be bad”? This way of thinking is so not what people like hayek, von mises, and rothbard had in mind. Your neo-liberal, social Darwinism birthed out of Rand and Friedman is destructive to the libertarian message. Get a grip on the neo-classical modern scholars like Tomasi, and just stop ruining the Libertarian movement!

          • Keith Boruta

            Billy,

            A free market system, as you know, is based solely on voluntary exchange. I.E. it has to make sense for both parties, otherwise neither party takes part in the voluntary exchange. Of course workers think they need to get paid more (of course I do), and business owners are always looking for the cheapest ways to do business to make themselves more competitive, including labor costs. It seems its not that you disagree with the principle of voluntary exchange (would you want to be forced to hire employees at twice what you felt was a fair wage?) for setting wages, but that we should use YOUR standards for voluntary exchange. You think good Walmart employees are not fairly compensated, but because you don’t think their system of raises is a good indicator of performance and value. Again, it’s not that you disagree with the principle of a market based raise system, its that you want everyone else to use YOUR standards for this principle. Fundamentally, you believe that people’s decisions with their own resources (aka a business’ revenue) is not as good as yours, and that your wisdom should be forcefully imparted on to their decision making because if we don’t force them to use your wisdom (which they don’t have), then they will continue to make the poor (unethical, dumb…etc.) decision to underpay their workers, or not properly reward the “good” ones (citing your Walmart good worker versus the “half-ass” worker). The issue is, what if you are wrong? And if you are so right, if your standards are so self evident as being superior that they need to be forced on some of us, what does that make the rest of us? The only way your system works, is if there are people that are fundamentally just better than others. That we are not all created equal, endowed by our creator with inalienable rights. Your belief system at the core comes down to you believe your decisions are so clearly better than others, that we must force others to make those decisions with their own resources, for society, yours and our own good.

          • Billy

            People are selfish and will always inherently be so, they will always put others after themselves and their kin. It’s nature, and only reason and having sound principles will solve that, practicing a coherent ethics. They are not self-evident, because Self leads me to believe I am right and everyone else is in the wrong, and when you are a business owner that employs thousands of people this idea that you are right and all your bottom workers are wrong can have more irreparable damage. The biggest issue with our system now is minimum wage laws, which allow places like walmart to just put in place a cookie cutter wage rate and raise rate which doesn’t foster harder workers to stay with the company, this isn’t just my opinion, look at their annual turnover rate. However, if we eliminate wage rates and all other sorts of regulations, I guarantee you would see some companies drop their wages to almost unlivable rates, because those conditions of rewarding hard workers and giving people with more eperience more pay, are not normative and must be press by some force, whether it is the consumer or the government. I think incentivizing the business owner to give certain wages is a much better strategy then forcing them to give all around higher minimums. But I also believe in Ethics and Justice, and don’t just believe in harsh natural conditions were people die because they can’t afford to eat on their wages and have to work 14 hour jobs in unregulated facilities that cause cancer. I think there is a fine line between being a sensible free market advocate that takes in to account other people as more than just capital (as individuals) and being a free market advocate that doesn’t care of the working conditions as long as they have freedom, because that last idea is dangerous and insane and is being pushed by people like the Kochs and the Banking cartels so they can royally screw over the lower and middle class.

          • jr023

            sound like the union shop i worked for we had a couple of lazy co workers and we got the same raise at the contract then the union raised the dues

  • texan59

    Ask 1000 liberals why people have a business. I’ll bet that less than 10 could answer correctly that they start a business to make a profit. Most will say to provide jobs, benefits, or whatever. These are the same people who espouse raising corporate taxes, minimum wage and everything else. They have no idea about the workings of the organization they work for. How taxes work, or anything else does either. I’ve had numerous “discussions” with my lib friends and I cannot believe they truly are as stupid as they seem, but maybe I’m wrong.

  • Kenneth James Abbott

    Delete this post before Paul Krugman sees it!

  • Marty Galyean

    What day is today? Was I in a coma and just wake up on April 1st? Dang, you guys scared the crap out of me. I figured Al-Jazeera had bought out Heartland as part of their agreement with Al Gore or something.

  • Jim Kennedy

    Genius! It only could have been better if it was titled “A Modest proposal” now that would be swift!

  • sean_parnell

    The sad thing is the number of people who will read this and not understand that it’s satire.

  • Fred Emmer

    Matt,

    You are brilliant! Thank you so much for this analysis.

    – Fred

  • emsinmd

    Pls tell me this is sarcasm gone awry.

  • http://dana.nutter.net/ Dana Nutter

    Very well said. Linked from my site.