Friday, December 09, 2005

Commerce Commission Guilty of Real Collusion

Whenever businesses agree to set the same prices for their identical products, politicians call that collusion. Politicians exploit people’s fear of collusion to accuse businesses of some imaginary power to set market prices. Why do I call it imaginary?

If I agreed with a competitor to set the same prices for our identical products, he and I are attempting to collude to set market prices. Our scheme would work if our costs were the same and they stayed that way. But that is hardly ever the case.

As soon as I can lower my costs, I realize that I can make more profit by selling more than my competitor sells by lowering the price of my product. Therefore, the profit motive entices both my competitor and I to break the collusion when the opportunity arises.

The Commerce Commission, on the other hand, with the power of government sets the price for all bus and taxi fares. Instead of righteously convicting the Commerce Commission or the ASG of collusion, they are praised for smart government planning.

When businesses collude, the people see such action as wrong and immoral. When the government colludes for businesses, the people see this as smart, clever and the right thing to do. When businesses collude, the profit motive entices conspirators to break the collusion. When the government colludes for businesses, nothing but a rare and responsible vote can break up the government cartel.

Bus and taxi drivers may like the idea that their competition can’t undercut their own individual prices. They may feel some sense of security with that mindset. However, that security comes at a cost. When expenses for items like gas go up, bus and taxi operators can’t charge a higher price to pay for them. If a bus driver knows he can attract more customers by installing air conditioners but can’t charge a higher price to pay for it, then there are no air conditioned buses. Moreover, if a bus driver lowers his costs and wants to pass it on to consumers in the form of lower prices, he can not, lest he be convicted of unfair competition.

Bus and taxi drivers and riders, and the people should vote for the abolishment of the Commerce Commission, price caps and price floors. They have no place in a free and moral market.


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