Two things caught my eye in today’s Denver Post:
One, a front page headline about how area libraries are in financial bind, and how they are ignoring “millions of dollars in tantalizing revenue” by not going after past-due fines.
I have a free market solution: run the libraries like a credit card company. When someone has an overdue book, don’t just charge a small fine. Charge a large fine – $25-$50. When the big fines go unpaid, impose even more fines on the fines. Charge 29% interest. When politicians complain that you are abusing their constituents, bribe them. And then send out the dogs – the collection agencies. They will set up repayment schedules that will assure a nice revenue stream for the libraries. What started out as a pittance ends up as a very large financial obligation.
Let the moneychangers show you how to run a temple.
The other article was an op-ed by the mayors of Boulder, Golden, Superior, and a Boulder County Commissioner, “A better highway, not a new toll road.” Toll roads are the private market’s answer to the problem of paying for roads – those who use them pay for them. It makes sense until one realizes that the benefits of good infrastructure are so widespread that its various elements ought too be a public burden … taxes.
There is a lot of economic activity going on the the foothills of Denver/Golden/Boulder, and the area is served by a hodgepodge of linked arteries in various stages of development. A toll road through the area would naturally force drivers to seek alternative routes. So the people who are proposing the toll road want to lower speed limits on alternative routes to ‘encourage’ drivers to use their toll road. In addition, they figure that many people will move over to Highway 93, an alternative route, increasing road wear and congestion there. They offer no remedy for that problem.
That’s private market logic in a nutshell: Force people to use your product and pay your freight, and refuse to pay for externalities.
Which reminds me of another adventure in free markets – there is a toll road between Denver and Denver International Airport, a very nice road and usually uncrowded because there is a non-toll alternative. In order to speed things up a bit, the managers of the road went to electronic enforcement of the tolls. They take your picture at various points, and send you a bill. It is a great idea.
However, there is a problem with rental cars, common on an airport route. The toll road people send a bill to the rental car agencies, who should simply pass it on to their customers.
Enter the free market – the rental car agencies saw a pivot point for a new revenue stream, and decided to impose additional fees on customers who used toll roads – usually in the area of $8.95 a day in addition to the tolls. Further, for those customers who don’t read the fine print, who don’t agree to the $8.95 fee and then use toll roads, are fined as much as $25 a day in addition to the tolls. So now a $100 car rental deal costs people $250-$300. Care to complain? They sort of have you by the balls, which is where any sociopathic business person strives and plots, day and night, to grab us.
Real competition would mean that one company would see the light, and treat tolls as a mere pass-through cost. But what we learn is that there are not so many rental car agencies as appears – there are but two or three and they go by many names. These two or three companies naturally revert to monopoly behavior, and have all agreed to go by the same rules and not undercut or underprice one another.
It is a microcosm of the the vaunted “free market”. Companies hate competition, and buy each other up to avoid it. Then they masquerade as competitors, fix prices, and agree to play by the same rules.
Which reminds me of another adventure. The American market for cell phones is in a primitive state compared to other countries. The companies that operate here all have the same business plan – they want a revenue stream and therefore demand that you use a phone they supply without any innovations by outsiders. They tie these phones to two-year contracts. It is just like Internet service, where the U.S. is behind the rest of the world because large companies are more interested in divvying up the market to protect revenue streams rather than innovate.
I was thinking about an IPhone, but found that the monthly cost was too high and allotment of monthly minutes too small – $69.99 is the advertised price, but there is also a $30 “data” charge, meaning they want $100 a month to rent their phone. That is their business plan – they want $100 a month from you, and no matter how you slice it, if you want their product, it is $100 per month.
I looked at a new product offered through Verizon called the “Droid” – basically an IPhone with a manual keyboard. Verizon advertised the product for $149.99 with a two year contract, and $59.99 per month for usage. I looked through the website for a data charge, and it was not there. This, I thought, is a viable alternative to the IPhone – we could have one portable phone/internet device for the same price that we currently pay for two cell phones.
We went to the Verizon store yesterday, and here is what we learned: The phone costs $259.99 with a two year contract, and the monthly charge is $69.99, and there is a $30 data charge. The monthly cost is ……. $100. Just like Apple. Same product, same price. “Competition” is fiction as companies hire various ad agencies to differentiate their identical products in the minds of users.
Anyway, when we left Verizon, we had turned off one of our cell phones. We are now $25 per month richer.
Thus endeth today’s lesson in the wonders of the free market.