The Pot Calling the Kettle Black
In what must be the epitome of the pot calling the kettle black, last week the U.S. government announced that it and 15 states are suing Apple and other major book publishers for price fixing electronic books. The Justice Department is alleging that the price fixing publishers have agreed to convert the retailers who sell their e-books into agents who continue to sell their e-books but no longer have the ability to decide what retail price to charge for them. Thus, all prices are determined at the publisher level allowing the executives in those companies to collude to ensure higher profits for all to enjoy. The DOJ estimates that by adding $2, $3 or as much as $5 to the price of many New York Times bestsellers and mass market paperback titles over the last two years consumers have been ripped-off by over $100 million.
Now, on the surface this may sound shocking. You are probably thinking here is yet another example of corporate big-wigs gouging the little guy. And that is what Attorney General Eric Holder and President Obama want you to think. See, then they can ride in on white horses, file a lawsuit that will cost the defendants so much money that they settle out of court and therefore look guilty of actually doing something wrong , and save the day for average e-book buying Americans. It fits into that government as the great protector of the masses mentality.
But, the real truth is that even without knowing that publishers may have conspired to increase book prices no one was forced into buying them in the first place. Consumers make choices about what to buy every day and many if not most of the time those decisions are based on cost. If they felt the jacked-up prices of the e-books were too expensive they could have chosen not to buy them. Enough consumers making this choice would have broken the back of the conspirators and forced them either collaboratively or individually to lower prices down toward the market level (equilibrium point). Consequently, the collusion would have been destroyed through natural means and consumers would have reasserted their position of dominance in the market economy.
Additionally, it is America and consumers have other options. Instead of buying the overpriced e-books, consumers could have purchased any of the potentially millions of used books offered on Amazon for literally pennies on the dollar. To say nothing of used book stores and thrift shops which usually stock an ample selection of good reads.
Naturally, whenever the feds bring lawsuits against sellers for any kind of anti-trust or price fixing scheme, they always neglect to take into account property rights. After all, who owns the product to be sold and why is the consumer entitled to it? In the case of the most recent assault on property rights by the DOJ, the publishers own the rights to the e-books and can choose to sell them to consumers or not. If they choose to sell them they have the right to charge whatever price they wish even if they limit selection or competition through collusion. The e-books are the property of the publishers like a person’s home is their property. When selling, do homeowners not retain the right to set their own price?
In a market economy, prices are determined through interactions between buyers and sellers. If sellers venture outside of this process they run the risk of lost revenue, or mal-investment. If they arbitrarily set a price for a product that is below market expectations, that is to say the equilibrium price where the amount supplied equals the amount demanded at a given price then a shortage will result and the seller will lose revenue – the difference between the artificially low set price and the equilibrium price for each book. If the seller arbitrarily sets the price for a product above market expectations, once again the equilibrium price, a surplus will result and the seller will experience mal-investment – using capital to produce a quantity that wasn’t completely sold. Of course the seller can always lower prices toward the equilibrium price and thereby clear his inventory and this is what would ultimately happen. The fact that this did not happen in the case of Apple and its co-conspirators is proof the price fixing was not egregious enough to deter consumers from buying the e-books at the alleged inflated price. So where is the harm anyway?
At the end of the day no one is entitled to another’s property through the coercive power of government. Instead of meddling in affairs that are better handled by the free market, Uncle Sam should worry about the truly monopolistic price fixing scheme that he has been complicit in since 1913. And this is where this whole ordeal reeks of the pot calling the kettle black. Unlike the market where consumers have choices and options, through legal tender laws Americans do not have any choices or options with regards to the money they use. Since 1913, the Federal Reserve Bank with Congress’ blessing has arbitrarily fixed the price of the dollar through interest rate setting and monetary manipulations. This price fixing scheme is responsible for the dollar losing 95 percent of its value over the last 99 years. It is the price fixing scheme that affects real people’s lives through erosion of savings and higher living costs. It is the one responsible for forcing both spouses to work to make ends meet and the destruction of the middle class. So while Attorney General Eric Holder is concerned about $100 million that he alleges e-book purchasers have been ripped-off for in the last two years he really should be concerned about the trillions of dollars Americans have been ripped-off by the Federal Reserve since 1913. In other words Mr. Attorney General, “Why worry about a speck in your friend’s eye when you have a log in your own?”
Article first published as The Pot Calls the Kettle Black on Blogcritics.
Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina