Without capitalism, you might still be standing in line at Blockbuster
My wife and I recently saw a movie at a nearby theatre. I wasn’t surprised by the ticket prices. I expected them to be high. But what I saw at the concession stand was somewhat shocking.
Yes, the prices were out of this world, but the shock came at the size of everything.
There was no shrinkflation at this theatre! The popcorn came in a gigantic bucket and the soft drink cups were nearly the size of the popcorn buckets. And the price, of course, was about double what I anticipated.
In short, not only did it cost a lot of money, but also the serving sizes were way too large. Is it any wonder that we have an obesity problem in America?
Many like to criticize capitalism. But it’s competition that produces the best consumer products and services. In our current environment, with its inflation and shortage of reliable workers, it’s difficult to maintain a profitable business.
Movie theatres, for example, obviously need good films to attract customers. But admissions aren’t a theatre’s primary source of revenue. The concessions are.
For companies to succeed, they must deliver a reliable product or service at a reasonable price. If they overcharge, they can be accused of being greedy. If they try to maintain the cost by shrinking the packaging, they’re guilty of shrinkflation.
Consumers constantly complain that things are too expensive. But how can an employer deal with higher wages and increased material costs and still deliver a reasonably priced product? Ultimately, it’s the free markets and consumers who determine what’s reasonable.
We often hear that prescription prices are too high. Obviously everyone should have easy access, especially to critically needed drugs. But how does a company have the incentive to innovate and find new cures if their upside for revenue is capped? Capitalism might not be perfect, but without it our technology and innovation wouldn’t be anywhere near what it is today. So, how does all of this relate to your personal finances? Well, consider that competition and advancing technology have actually brought some prices down over the years. Today you can buy a high-tech television for less than a stateof-the-art calculator cost not that long ago.
Getting back to the movies. There was a time when that meant a trip to Blockbuster to rent a VHS for a couple days. Now, most people stream at home. Almost everyone is familiar with the various streaming services. But when Blockbuster was king and looked infallible, you could have bought a start-up company called Netflix.
Congratulations if you had the foresight to do so. Blockbuster declined to buy in because they didn’t see a future in streaming. This is but one of many examples where innovation and competition helped bring consumers a product that was more convenient and appropriately priced.
As consumers, we have to watch our spending very carefully. What we buy, and how much we pay, to a certain degree determines the success or failure of products and services in the marketplace.
Having Uncle Sam set prices is not the long-term solution. Eventually, free markets set the price. In the world of economics, everyone doesn’t get a trophy. There are winners and there are losers. And the consumers ultimately determine the winners.
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