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Politics : Foreign Affairs Discussion Group -- Ignore unavailable to you. Want to Upgrade?

To: c.hinton who wrote (230559)	5/10/2007 4:08:38 AM
From: Maurice Winn	Respond to of 281500

It's not a matter of bias. It's a matter of correct or not: < That you were a salesman for big oil hardly attests to you being unbiased.> True, that doesn't mean I'm either unbiased OR correct. But it certainly isn't rigorous proof that I'm not. Of course you are right: <Following your logic price rigging never occures in capitalism. > The first thing most people do is conspire to extract more money from people. Not many people see business life as a happiness creation mechanism with feedback loops creating happy reality for customers and sellers. Mostly people see money as something to grab, extract, swindle and generally get by hook or by crook. They don't see money as something they get as a voluntary consequence of creating identity for other people. They seem money transactions as zero sum games in which the opposition must lose. Globalstar is my favourite example of false ideas on value creation and happiness production which of course also leads to loss of money and poor results [and bankruptcy in that case]. People just love a good cartel, guild, price-ring, and other mechanisms to avoid doing a good job and getting more money for doing less. They'll get governments to put up barriers to competition. They'll do all sorts of things. But they don't actually decide the price. All they decide is how much of what they're selling they will sell. For example, sticking with REALLY BIG OIL, namely Saudi Arabia, Venezuela and co. They formed OPEC with the specific intention of doing price and production fixing. It sounds like a great idea to extract money from SUV drivers and others. Get them over a barrel so to speak. So they decide to cut production. Sure enough, there's less of the stuff around and suddenly the buyers start bidding it up. It's not that OPEC put the price up. They put the production down. Which is quite a different thing. But even that doesn't work for them because the correct production rate is a bit like price = it finds it's own level. What they achieve by cutting low cost oil production is that competing producers such as North Sea, Alaska, Russia, who have higher production costs, decide it's economic to increase production, which they set about doing. The end result is that prices go up a bit, and those who cut their production get less money than they would have done if they'd just produced in a free market. SUV drivers downshift to hybrid vehicles and insulate their houses. After a while, OPEC decides they are not doing too well, with sales and profits down, so they start producing more, which pushes prices down a bit, and squeezes competitors and gets people to buy more. The proof is in the thinking. I have sat in price fixing meetings, so I know they occur. But they don't actually decide the price. The price fixing meeting was really one to agree on what was the right market price to maximize profits. We could have just doubled the price, but that would have meant people would have canceled contracts and avoided buying. So yes, pedantically, the price which was written in the price book was the price which we agreed, but that price was adjusted up or down after a while if it didn't look like the right level. One of the companies didn't participate in the meeting because they were American and could have been prosecuted for price-fixing. In Texaco Canada Ltd, management emphasized NOT to even be seen in the same room as competitors for fear of being accused of price-fixing. So yes, in a way, businesses do set the prices. Globalstar for example set the price at $3 a minute [or thereabouts]. But they didn't manage to make many people at all buy at that price. But the millions of people who Globalstar thought would be customers stayed away in droves. The price has now come down to what the customers considered was the right price [more or less but too late to avoid more financial damage to Globalstar]. All the price fixing in the world between Globalstar and Iridium won't make the hordes of subscribers sign up. Customers set the price, not suppliers. Customers who agreed to buy at $3 were setting it at that level [there were very few of them]. The rest set the price much lower and didn't buy and there was nothing Globalstar could do about it, even if they got the government on their side, other than lower prices to what potential subscribers consider is the right level. Mqurice