For once I would like to discuss a big issue.

The effect of the ideology of political parties upon the outcomes on the
man on the street in today's Australia.

Massive changes made by the Liberal Party during the Howard years
to the Trade Practices Act, have changed the way we view profit.

For example , "the notion of a quantifiable fair profit or fair margin ", no longer exists.
Profit margins were monitored by the Gov't (prior to the Howard years),
and this instrument was an effective anti-inflationary tool.

Today I visited a lock smith who charged me $6 to cut a key,
Last time I visited this same locksmith he charged me $30 to cut 2 similar keys.
This is legal now because the notion of margin is discretionary for the business operator.

Extending this principal to the big end of town, and we see petrol prices
fluctuating up to 18 cents litre in a day without any really adequate explanation.
There is no connection between cost and the pump price. The same petrol available
out the outlet, with or without transport, goes up and down in price.

Extend the same principle to the even bigger end of town, privatised essential services like
gas, electricity, water, tele-communications, transport, and then you should understand
more about why your billing is rising at 10 times the inflation rate, instead merely complaining about it.

The Trade Practices Act implemented by the Howard Govt allows margins to be discretionary for business operators
without any checks or balances, so the primary question for a business operator,
is now "how much profit do I want" not "how much profit is appropriate".

The price you pay for the same item, now depends entirely on where you are
buying it, at that time. cont..

As a consumer, this outcome makes me feel as though my Gov't is not looking after me
by ensuring that I'm getting a fair deal when I'm spending my money, and feel somewhat at the mercy of the individual business operator when doing so.

There are many sides to this discussion, but my point is, that this notion of market forces being "the be all, to end all solution,
and the basis for this ideology stuff is wrong; the truth is that market forces have little effect upon the the outcomes of most people.

It's the heavy weights who make their own decisions in our economy based upon their own perceived needs, and it's all packaged neatly by the media as being "for the greater good" which is of course the furthest thing from the truth.

Never mind all that now, it's all legal business practice.

Well there is an answer to your question it is called a super profits tax. You see one could panic and demand that this will destroy investment, cost jobs and be simply another great big tax, but the mining industry has already shown that this is rubbish. since the agreement profits are up, investment is steady with only a few dodgy projects shelved and now BHP want a carbon price set, they even hinted that a carbon tax would be ok.
If you set the profits tax at a reasonable cut in rate and give companies concessions for R&D, exploration, capital investment and employee bonuses (conditional that they are paid to workers not management) there is no reason a more moderate attitude wouldn't develop toward over profiteering.
Of course you would have to overcome an opposition that smelled an open door and a multi billion dollar industry intent on changing a government. We live in a democracy remember, the winner is the one that can fool/buy the population the best.

thinker2 I agree. There is a growing concern that governments no longer really represent the people. I am sure many politicians think they do but have an inability to see beyond the usual pressures and mainstream mantras of business interests etc.

This corporatisation environment and growing greed makes it difficult for small business too. The tendency for the rush for obscene profits often make it difficult for the small trader to compete, when the costs to his business are greater than what he can charge for product. Governments have further burdened small business with collecting taxes on their behalf.

Corporates continue the spin about profits and obligations to shareholders but their behaviour implies the shareholders are more a burden except when recruiting money. Shareholders can even be dispossessed of their shares through compulsory acquisitions and even their votes are not given sufficient weighting and often ignored. The people (CEOs and the like) who are meant to represent their interests are in it for themsleves often draining the companies through mismanagement and personal gain. A lot of wealth is funny money wealth and not productive.

The simple values of a "little bit for me and a little bit for him" like good old Con the Fruiterer have gone but I think the values are returning - there comes a saturation point.

thinker2
How do you distinguish between the fair price and the market price in any given transaction?

It seems we believe that a business operator can determine that, (the margin I mean) without any assistance at all,
although theoretically his sales are supposed to reflect his pricing in a competitive environment Jefferson.

The problem I have for example with this mindset is, "what if I am dealing with a business that is working a profit formulae
and their current existing situation requires that they make more GP from me than was the case with the previous customer"?.
Just because their business model requires this, or thats what they want at this time.

And I totally agree Pelican that small business operators are the most affected by margin manipulation at the big end of town
and petrol station operators would be worst affected, expected to be complicit in sleight of hand marketing.

Changes to the TP act could re-introduce the notion of ethics based upon a model of profits as a serviceable percentage of cost.

I cannot see how this could not be negotiated to a satisfactory position for all parties including the consumer.

I'm totally in favour of an RSPT nairbe and couldn't agree more.

The principal of a recognised "recommended retail price" could be restored.

Jefferson,

"How do you distinguish between the fair price and the market price in any given transaction?"

There have been two major theories of value over the last few hundred years. First there was the 'labour theory of value', which tells us that a product is worth what it costs to produce and supply. Karl Marx is the most famous exponent of this theory. Then there is the 'marginal utility' approach, which basically tells us that a product is worth whatever we will pay for it.

The former will be more useful for understanding cooperative processes within the economy, the latter will be more useful in understanding competitive processes.

Unfortunately our society is heavily focused on competition at the moment at the expense of cooperation. A balance between the two would be more appropriate.

continued...

Ideally then, there would be a strong cooperative aspect to the economy, through which most products/services would be available. This would set a base rate for prices, setting a benchmark against which competitively sold items could be measured.

This base price for things would tend to remain stable over time, and would therefore also prevent inflation.

Gilbert
So according to the labour theory of value, if I spend a week making a cake, that means the cake is worth, let’s say, average weekly earnings at, what, $780? Doesn’t sound right.

What makes you think that governmental decision-making would provide more of a balance between competitive and co-operative processes, given that governments are themselves the result of a competition process, namely elections?

“…a strong cooperative aspect to the economy, through which most products/services would be available. This would set a base rate for prices, setting a benchmark against which competitively sold items could be measured.”

So the government would set prices? Based on the labour theory of value? Isn’t that just socialism by a different name?

What is the answer to this question please: how would government distinguish between the market price, and the fair price, in any given transaction?

A whole lot of barking, thinker 2, but not a lot of care in tree selection.

Let's start with this:

>>As a consumer, this outcome makes me feel as though my Gov't is not looking after me by ensuring that I'm getting a fair deal when I'm spending my money<<

My first thought: should this actually be a concern of the government?

It is obvious that you believe that it should be, so let's accept that as a baseline for the time being, and move along...

>>...the truth is that market forces have little effect upon the the outcomes of most people.<<

Oh, but they do. They most definitely do.

Think about your petrol price example for a moment.

It is pretty well known - at least, it is where I live - that if you fill your tank on a Wednesday, as opposed to a Saturday, you save up to $5. Regular as clockwork. More, if the weekend is also a public holiday.

This is the result of market forces in action.

What happened last year, when petrol stations came under scrutiny? Suddenly, you'd find that your favourite pump had run out... on the Wednesday. And was miraculously full again by Saturday.

This is also the result of market forces in action. Supply, and demand. Economics 101.

The consumer is in full control: cheaper petrol on a Wednesday, or more expensive petrol on Saturday.

Your "solution", by the way, simply won't work. History is against you, I'm afraid.

>>Changes to the TP act could re-introduce the notion of ethics based upon a model of profits as a serviceable percentage of cost<<

Centralized management of prices has always, inevitably, led to waste and unnecessary additional expense, for all concerned.

Who decides the "ethical" price? Does it take into account, for example, geographical differences? Or that the garage pays more for weekend staff? Or socio-economic factors - Mosman vs Redfern.

If they set the price too high, the consumer becomes permanently ripped-off. If they set it too low, fewer sellers will be in the market, and the product would become scarce.

Jefferson,

"So the government would set prices? Based on the labour theory of value? Isn’t that just socialism by a different name?"

I am not an advocate of socialism. I think that generally speaking, socialism can be understood as being too far oriented toward cooperation in the same way that capitalism can be understood as leaning too far toward competition.

The cooperative processes that I am talking about can involve large scale production by large, government run enterprizes. They may also involve small, community run enterprizes. I am very much an advocate of relatively high levels of decentralization within society, both in relation to political power and economic infrastructure.

If various products/services were being provided at cost via these diverse cooperative processes, this would provide the price benchmark that I am talking about.

Thinker 2, I want the name of your lock smith: $6, cool!

Obviously the people advocating a fair price aren’t able to define it.

If the definition of what is fair, is that no-one should be able to charge more than what it cost him to produce the product, then why would anyone produce anything? Isn’t anyone entitled to any benefit from any action? Cost cannot be the measure of fairness.

Talk of "fair" prices is reminiscent of the dispute in the church over usury. Usury - lending money at interest - was considered a sin. So churchmen and scholars tried for hundreds and hundreds of years to define the difference between the market price and "the just price". They tried every cockamamie scheme under the sun to try to come up with what was the just price. But they all failed and the attempt to ban usury collapsed.

The theory of just price was refuted because there is no objective way to decide what is the just price. People’s views of what is fair are subjective. There are as many opinions on what is a fair price as there are people. Everyone wants more for his own product or services, and to pay less for others’.

Cyclone Larry devastated banana plantations, so the price of bananas went up. Were the new prices “just”? Well how could anyone ever know, other than by seeing whether people were willing to buy and sell at that price? How could someone without knowledge of all the specific circumstances and values of the parties, imposing a price based on irrelevant facts, arrive at a “fairer” result?

Prices are always only ever what a specific person agrees to pay for specific goods from a specific seller at a specific time and date. Neither the purchasing power of money, nor the quality of the goods, nor people’s circumstances, nor their subjective purposes, nor their relative values are stable, so there is no reason why prices should be stable.

What is agreed is the fair price, and what is forcibly imposed is not a fair price.

GH: presumably the gulags were just an excess of co-operativeness?

@Thinker2, it’s an interesting problem, and though I disliked what Howard did and stood for, not all of the blame can be placed upon him. Keating deregulated banking AND business, the theory being, that business may be allowed to self-regulate.

Realistically, business views pricing in this manner…how much will the market bare?

It’s not a case of, what is a fair profit? The reasons for this are many, but going back to the 80’s, it can be well said that it basically started there through deregulation. What a lot of people don’t realize about deregulation, is how it freed the banks, insurance and finance companies to list on the stock exchanges, thus changing their focus from client orientation, to stock-holder orientation.

For those old enough, the stock market was never mentioned on the nightly news prior to around 1980, other than on news items whereby something dramatic had occurred. Since about 1980, there have been nightly reports on the news, and through the early 80’s, the only news was, that it was rising. So, ordinary people that traditionally never invested in the stock market, now slowly became interested, and in particular, retirees. The stock market facilitated this new business by creating smaller bundles to purchase, for in those days, you couldn’t become involved for less than a spare ten grand or more. Now you can start dabbling for a few hundred dollars.

This focus upon the stock market then made most companies that were listed, become even more focussed upon their stock-holders, not on their clients and business, who now in a backhanded manner were treated as the fodder that fed the stockholders. Thus the increased need to create more profits in order to pander to stockholders enabling the share prices to look attractive, and not just for the company to turn a profit.

TBC...

The banks, insurance companies and finance companies have also listed and are competing with each other on share prices, not product prices. The price is basically the same for a mortgage, they just bundle the fees differently to appear different and look cheaper, but in most, you find that there are trade-offs, and the products are basically the same…the interest rate might be cheaper, but the fees are higher, and the like. That’s not to say that you can’t actually find one institution cheaper than another, but it’s a hard look that needs to be made to achieve this.

I worked in the insurance game in the 1980’s, and we were told to sell the variable rates, not the capital guaranteed rates, and a few years earlier, the banks had already dropped fixed mortgage rates for the variable rates….because it was easier. It meant less responsibility upon the organisation to be responsible for changes in rates, and could always blame the “market”. Now instead of having to make conservative long term investments to guarantee rates, they just threw a lot of the money into the stock market, and it dictated the rates. That in turn placed a rather large increase of funds into the market, and all companies then were competing to show good share prices, to gain access to that extra money. And for a good share price, you require good profits.

Now we get to Howard, who facilitated the rationalizing of business to enable better efficiencies for even better profits by the way he destabilized the workforce and sealed the fate of the unions by the use of contracts, part-time and casual staff. That combined with political correctness has put the workforce in fear of saying anything against management, as contracts don’t have to be renewed, which nullifies “unfair dismissal”, and it takes away union membership and strength, while making the workforce in fear of saying or doing the wrong thing for it’s easier to lose a job, than to find one….and I got this mortgage to pay, that’s increasing every three months.

TBC...

Some of the by-product of this has been the volatility of mortgage rates, and the introduction of fiscal policy using mortgage rates to “control spending”. What utter BS!! You can do that by increasing taxes on goods, particularly foreign goods, or encourage savings. But no, they do it by adding monies to the coffers of the banks, because they regulate themselves now, they are not regulated by government, and so in a subtle way, regulate government fiscal policy.

Another scenario regarding costs of services Thinker 2 that I was recently informed about.

Call out fees differ greatly between tradespeople, the particular services and from, say, electrician to electrician.

The elderly living on their own, with no-one to oversee payments for services, are being continually conned in both cities and towns, without knowing it!

Paying a $150 - $200 call out fee in addition to a heater re-wiring or small part [located in a tradesperson's van] costing a pensioner $600+ with ten minutes spent on the entire labour is theft.

I am hearing these stories frequently; a common occurrence of tradespeople charging an exorbitant call out fee figure, and over charging the most vulnerable people, in order for them to have heating for the cold months.