cost and price

I’m pretty close to my brother, who majored in economics in school. We talk about all sorts of things, and naturally his bent toward the economic perspective has induced some secondary incandescence in my own thinking.

So here’s a thought. I think that (as an example) if I own a burger joint I should be allowed to charge someone more for a burger if I don’t like them, or for any other reason. I propose that this action not only should be legal, but can also be a moral decision, ultimately God-glorifying.

Modern buyers seem to think that they should always pay the same monetary price as anyone else. Americans are miffed in mexico that they pay more if they can’t speak Spanish  I-phone owners are enraged that the price comes down and they have already paid a higher price. The price of gas goes up, and there is hue and cry about price gouging. Such equality is even enforced (in some cases) under “Non-discrimination” laws. Everyone complains about rising prices, and the feeling behind the words is “there should be a law…”

Reality is that discrimination in moderation is not only beneficial but necessary. Price must reflect cost. This is the fundamental axiom of economics (which I just made up). The presence of varying costs makes it reasonable to charge different prices across a variety of circumstances. It may be more hassle to sell to one person than another (maybe mexicans don’t speak english very well), and the price should be allowed to reflect this. Temporal variation (prices changing over time) seems to be a well-accepted trait of price, but it differs very little from other varieties.

There are social costs too (which I also just made up). If you want to go around your house playing a tuba at midnight it costs your neighbors something, even if you are really good. These costs don’t come out of their pocketbook, but they exist nonetheless. Perhaps “induced discomfort” sums it up. Things like innovation and abnormal behavior incur social costs. Of course, when you evoke cost from society, then society should be able to “charge” you some extra price. Undue inquiry, derision, and castigation are common examples of social price.

Now, there seems to be the feeling that a cost of one kind should not incur a price of another kind (Yeah, I’m pretty much making up this whole thing aren’t I?). For example, the social cost of doing business with a really annoying person should never increase the monetary price of that person’s goods and services. But I ask you, why should this be the case? Is it kinder to let the pushy customer continue pushing everyone around, rather than punish him and hope that he decides being pushy isn’t worth the extra five bucks for his french fries? Is it really being thoughtful of everyone to keep a friend’s thefts a secret? Wouldn’t it be better to shame them in hopes that the social cost isn’t worth the extra five bucks they saved on french fries? (as a side note, stealing french fries sounds painful)

And, since “Love does no harm to a neighbor” and thus is the fulfillment of the law, then as long as discriminatory increase (or decrease for that matter) in price is meant, not to harm, but to instruct, then it is within the bounds of moral action. I realize this opens the doors for widespread economic expression of bigotry, but who really believes that this doesn’t happen already? An economic expression of opinion would perhaps ameliorate the social price incurred.

So, there you have it. A few (mostly made up) thoughts. Perhaps if someone actually knows something about economics they could correct me. Of course, correcting someone else’s work has a whole set of costs associated with it. I wonder what the price will be?

Edit: Turns out, the price is that you get ignored. Still valid thoughts though, I’m glad I wrote them down!