James Frank Solís

20 March 2007

3:16 PM

Here’s something I’ve been researching on and off since January…

In 1982 you could purchase a VCR for $800.0. In today’s dollars, accounting for inflation, that same VCR should cost about $1625.00 (utilizing S. Morgan Friedman’s inflation calculator). What’s interesting is that a VCR should have cost about $1488.00 in 1982, not $800.00. Why do I say that? Because in 1964 it was estimated that a VCR for marketing to private homes would cost $500.00. Accounting for inflation, and all other things remaining equal, that $500.00 in 1964 would be equal to $1488.00 in 1982.

But not only did that 1964 $500.00 VCR not cost $1488.00 in 1982, but that 1982 $800.00 VCR does not cost $1625.00 today. And, what’s even more, you can get a good quality DVD player today, which involves much more technology than a VCR, for less than $100.00.

Similar things can be said of the pocket calculator. In fact, most things we now purchase readily were once priced so high as to have been luxuries: the automobile; the radio; the television; the washing machine; the dishwasher. But the prices eventually reached a low enough level for these items to become everyday. Why? Because the people who made them had to market them, and in order to do so they had to make them affordable. No one with a product to sell is acting wisely if he prices that item so as to limit it’s marketability.

There are exceptions, of course, but these exceptions are companies who, for reasons I don’t understand, want only a particular clientele and so price their products precisely so that they will be purchased only by the type of people they want to do business with. In other words they want the prestige of being able to say only the wealthy can afford their products. But when you think about what these products are they are things one would buy only with ‘discretionary’ money. Take clothing, for example. When I was in high school everyone just had to have a particular kind of shirt which could only be purchased, if memory serves, at one of the higher priced department stores. There was no way (despite the temptation) that I was paying $30 for a shirt made of the same material which I could get for $15 elsewhere. And frankly I didn’t see the point in spending that $15 when I could get comfortable shirts (usually T-shirts) for less than $10. Even today my typical attire is a pair of Levi’s and a T-shirt. (One of the reasons my daughter knick-named me The Deviant Scholar.) I don’t understand fashion, except insofar as I understand the desire of others to be able to afford what others cannot. Since just about everyone can afford clothing, the distinction must be the ability to afford designer clothing. A name may be worth a lot, but until recently a name was accompanied by some sort of reputation of character, not stitchery. But I digress.

When it comes to health care and pharmaceuticals, prices do not seem to follow the pattern of decreasing over time.

Why?

I reject the notion, offered mostly by the Left, that it’s simply greed. Why? Because those who are engaged in healthcare and pharmaceuticals are no more greedy than those who manufacture and sell VCRs and DVD players.

Labels: Business, Culture, Economics, Life, Society

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