Feb 25, 2011 by Lee Hart

The BS of economics

Not sure where you might be buying gas this morning, but
fuel prices in Calgary, yesterday, jumped to $1.12 to $1.14 per litre depending
where you shop. That’s a nine or 10 cents per litre hike.

I know there is a conflict happening in Libya, and I
understand the importance of that. Along with having a terrible sense of
fashion, I believe Col. Gadhafi has run a brutal and oppressive regime for 40
years that needs to be replaced and I wish the protestors well on their
mission.

But, back here at home, I think the oppressive regime we
live with is this BS economics called the law of supply and demand.

I’m sure every economics major will laugh at me, but too
often industry trots out this “law” as just being a fact of life, it is
inescapable. In fact they seem to elevate it beyond a man-made rule, to some
divine declaration — God has so ordered!

I know that Libya is a major player in the oil industry, but
you can’t tell me that whatever degree of unrest they’ve had there for the past
week, has had one millisecond of impact on the quality or production cost of
fuel that is in holding tanks in the Mohawk gas station that is five minutes
from my house. And yet the price of fuel jumped 10 cents.

I do believe in free enterprise, everyone should be paid
fairly for goods and services, etcetera, but increasingly I see with any little
wobble in the status quo there is an immediate reaction to raise prices.

Fuel is one example, but it happens with many goods and
services. As soon as there is a frost in Brazil, retailers are changing the
price of coffee on the shelf. The odd time in my life I’ve bought something and
a retailer says this is existing stock worth X amount, but the new stock will be more expensive.

And I can more or less understand that. But what I don’t get
is the instant price hike on existing supplies that haven’t changed one iota in
quality or consistently that increase in value over night just because there
may be a shortage or interruption in supply down the road. Call it the law of supply
and demand, but to me it’s just gouging.

I know farmers live with this reality. There isn’t one grain
or livestock producer out there that doesn’t know that as soon as the price of
wheat or canola or beef or pork goes up, the next shoe to drop is an increase
in the price of fertilizer, herbicides, feed, antibiotics and every other
input. Yes, it is the law of supply and demand that increases the value of
commodity the farmer is producing, but so often that increase is just bringing
them to some measure of profit, after prolonged periods of trying to conduct
business with negative or break-even margins. It’s like the moment they see
daylight, in comes this overwhelming cloud of higher input prices and it is all
defended by the law of supply and demand — God ordered these price increases.

I see few if any input suppliers going through these really
lean, break-even margin periods. They may go through periods when they don’t
make as much profit this quarter over last, but there is always a profit.

I’m not sure where this rant is headed. Maybe it is time for
farmers and urban consumers to grab their cell phone cameras and social media
tool kits and head to the corporate offices, and university economics
departments and demand a re-write of the law of supply and demand to include
somewhere in the text the words “fair, reasonable and justified”.

The learned ones can call it a Law of Supply and Demand, and
consider that a defense, but to me it is all too often just a dressed up
euphemism for good old fashion, common, garden variety “greed”.

-30-

Lee
Hart is a field editor for Grainews in Calgary, Contact him at 403-592-1964 or
by email at
[email protected]

 

 

 

 

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Lee Hart

Lee Hart


Lee Hart is a long-time farm writer, and honorary member of the Alberta Institute of Agrologists, with many observations on the agriculture industry, who never hesitates to admit he is wrong (should that ever happen.)


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