I took economics in college. But I've also been in the real world long enough to realize that what sounds good in theory is not always applied in fact. Markets aren't perfectly competitive. Economic elasticity is not as easy to compute as it is in the lab. Information does not flow equally to all parties in the market. And there are factors that impact demand more than just supply and cost. And corporations, surprisingly enough, don't value their customers and their workers more than their shareholders. So if given a choice between catering to one and screwing the other two, the corporations will choose that in a heartbeat. Virtually all the savings companies realize under Cain's plan will go to the company and its shareholders. As it should. That doesn't make it wrong, that's just the way it is.
“I’ve also been in the real world long enough to realize that what sounds good in theory is not always applied in fact”
Yeah, yeah, yeah. Theory vs. reality. Can’t be too reductive. The human heart is more complicated than we can ever imagine. In which case I guess neither you nor I should ever make economic predictions whatsoever, and rather study the mating habits of wasps, or something.
Look, there’s a reason the phrase “caeteris paribus” exists. Though economics is not a science, and its laws are tentative at best. But there are regularities, and even though we can’t predict what will happen in every particular case, we can deal with heaps. If I’m not certain that the price of Twinkies at the local grocery store will go down when 9-9-9 takes effect, all things being equal, I would be willing to bet prices in general for the U.S. consumer will decrease. You wanna bet otherwise? Okay, there’s a sucker born every minute.
“Economic elasticity is not as easy to compute as it is in the lab.”
Who’s computing? I’m saying in general, caeteris paribus, lowering the cost of production will lower the price of goods. Knowing what we know about competition, in a (relatively) free market, when it suddenly costs less to bring something to market, sellers will charge less.
“Information does not flow equally to all parties in the market”
No, but we’re not talking about a subtle shift in demand of urban hipsters for ironic clothing. We’re talking about a major change in national tax law, which all but Rip Van Winkle would notice. And how do we transmit information in a modern economy despite our hopeless ignorance, anyway? Prices. So even if producers don’t read the news, and have their heads up their asses, they’d notice the cost of business went down.
Why are we even talking about this? You go on to assume businesses eat up the reduced cost in profits, so obviously it’s not an information problem, as they know.
“corporations, surprisingly enough, don’t value their customers and their workers more than their shareholders”
Funnily enough, though, “their customers” are not theirs. They belong to whomever they want to buy from. Shareholders, nor workers neither, don’t benefit if nothing’s being sold. There’s no definite limit to how long a business can persist in charging above market prices. But eventually some other guy, with his own shareholders, will swoop in and steal customers. Happens all the time. No doubt there was a Whale Oil King who thought he was doing a good turn for his shareholders before Rockefeller and Standard Oil swooped in and charged less.
Unless that business is a monopoly, in which case they don’t have to worry whatsoever about what they charge. Is that what we’re talking about? Because that’s another argument altogether.
“given a choice between catering to one and screwing the other two, the corporations will choose that in a heartbeat”
If they do, and get away with it (i.e. stay in business), then that is by definition the market price. It wouldn’t be a matter of “screwing” or exploitation, any more than it is a matter of the customers “screwing” the businesses into charging less under 9-9-9 in my formulation. However, I must ask, if they can charge the same when the cost of production goes down out of favor for shareholders and contempt for customers, that begs the question of why they weren’t charging more in the first place, before the new tax.
Are prices a matter of caprice, and nothing more than the whims of producers/sellers? In general, I mean, and not dependent on localized and temporary aberrations. Maybe, but then I better reconsider my worldview and become a socialist.
“Virtually all the savings companies realize under Cain’s plan will go to the company and its shareholders.”
How do you know? Or, since you’re wrong, how do you think you know? By which I mean to ask, what, in your mind, is to stop someone from jumping in and stealing those companies’ profits? Or perhaps I should ask, why, when price fixing schemes throughout history routinely fail, will busniesses suddenly decide not to compete with eachother?
“As it should. That doesn’t make it wrong, that’s just the way it is.”
It shouldn’t be that way. That is wrong. The appeal of the free market is that it’s the most efficient economic system of which we know. If it isn’t, and businesses charging above market prices is “just the way it is,” we’ve got to find a new way.