Jewish World Review Oct 18, 2011 / 20 Tishrei, 5772
By Tom Purcell
http://www.JewishWorldReview.com | All anybody needs to know about economics is alive and well on Craigslist.
An Internet version of the bargain sheets printed in most every town, Craigslist brings together bargain-hunters and people hoping to sell their stuff for as much as possible.
I've been browsing Craigslist a lot lately for bargains on construction materials, furniture and other household goods for a house I've been renovating.
Boy, is it a ripe source of entertainment.
See, commerce and trading are what humans do -- the basis of wealth creation and civilization.
Somebody with something to sell is eager to find somebody willing to buy. The seller and buyer work out a price, make an exchange and everybody is happy.
A certain purity and honesty arises from most of these transactions that cannot be escaped.
Something is worth only what somebody is willing to pay for it. And as millions of transactions take place daily -- and sellers try to fetch as much as possible while buyers try to spend as little as possible -- a natural market price evolves.
Consider: I've been casually looking for a nice, used leather couch for a furnished condo that I rent out.
Well, some people think that the leather couch they paid $1,700 for new, two years ago, can still fetch $1,500 now.
They're fooling themselves.
The unfortunate truth is that their couch is worth only what somebody else is willing to pay for it. And nobody's willing to pay anything near $1,500, because other people are selling similar couches for far less.
See, other people may be moving, or maybe just got divorced. Or maybe they're rich and got a new living room set. Whatever the motive, some people just want to unload their couches.
And their actions cause prices in the whole used leather couch market to go way down -- which is why that 2-year-old $1,700 couch is probably worth about $200.
Those are the breaks, as the saying goes, in reality.
The upside is that reality in the marketplace provides stability. People become confident that when they buy something, they're getting fair value. Such confidence is the mother's milk of robust commerce.
America used to work this way, pretty much.
Didn't we become astronomically wealthy and powerful in a very short time because individuals mined, harvested, invented and built lots of things others wanted to buy?
We innovated faster, better cheaper ways to make things. We produced massive gains in efficiency and productivity.
Sure, there were always some bad apples, and government regulations have their place, but our massive growth occurred because of limited government meddling.
Well, now there is a sense among bargain-hunters, used-couch sellers and other average Joes that the fix is in -- that the federal government is picking losers and winners rather than letting the honesty of the marketplace reward good products and services as it roots out bad ones.
Millions in government stimulus money was lent to politically favored "green" technology companies. Several are going bust and we taxpayers are stuck with the bill.
Meanwhile, average Joes are unable to get loans to buy homes or start businesses because of stringent new finance-industry regulations -- which do nothing to bailed-out mortgage giants Fannie Mae and Freddie Mac, whose fingerprints are all over our housing collapse.
If we want real economic recovery, we have to take the "crony" out of capitalism and get back to the simple, honest commerce evident at Craigslist every day.
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© 2011, Tom Purcell