Wednesday, July 29, 2009

A Social Function of the Wealthy

A recent post of mine over on the Blog at Mises.org:









A Social Function of the Wealthy

Jim Fedako



Since I loathe shopping, I tend to stay out of stores. So it should not be a shock to learn that, as I browsed a computer store this past weekend, I was surprised to find big-box computer monitors missing from the shelves. Instead of those once-ubiquitous monsters, I found an amazing selection of flat screen monitors of all types and shapes.

And to think, not too long ago, flat screen monitors were quite expensive -- well beyond my penny-pitching ways. Now those monitors are a deal, really.

So today I read where the flat screen TV is being replaced by the ultrathin. Of course, the current price for the ultrathin is well beyond my ouch point. Nevertheless, many folks will buy this gotta-have item, setting in motion the free market process that quickly drives prices lower over time.

I fully expect my next TV to be a reasonably priced ultrathin (of course, if you know me, you know that my next TV purchase will likely be many years from now).

"Gagnon expects ultrathin models to be at a premium for another year or two, while manufacturers wring as much as possible from customers who are wealthy, early adopters of gadgets or especially design-conscious."

Yes. Wring from the wealthy and later provide for the masses. What a wonderful system, this free market.

1 comment:

Paul said...

The marketing folks call this "riding the demand curve." Apple Computer is particular good at it.

My firm does a fair amount of business with Chinese manufacturers. At one point when we were discussing having some proprietary hardware designed and manufactured, we started talking about intellectual property rights and patents. They weren't interested. Seems that in most of Asia, the notion of protecting one's market with patents is - well - foreign.

Their approach is to guard their secrets fiercely, yet assume that it won't be long until your new idea is copied, reverse-engineered, or outright stolen. So you had been be prepared to get it out to market quickly, suck up all the demand you can while there's still a premium to be had, the be the low-cost producer from there on out. Your pay-back period has to be very short.

That is unless you can drive your competitors out of the market. No anti-trust protections either.

Interesting system the Chinese have - supposedly Communist, but with competitive private ownership in some sectors (notably electronics), and a near absence of government regulation. Not really sure what we have anymore...