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Jewish World Review Feb. 8, 1999 /22 Shevat, 5759
Thomas Sowell
Economic fallacies in the media: Part II
(JWR) --- (http://www.jewishworldreview.com) Economic fallacies are so widespread in the media that even advertisements
are based on them. Post Office ads, for example, constantly claim that its
two-day Priority Mail service is cheaper than the two-day delivery services
of Federal Express or UPS.
The only problem with this claim is that almost all Federal Express or UPS
two-day packages actually get delivered in two days, while little more than
one-third of the long-distance Priority Mail arrives in two days. In other
words, these ads are comparing apples and oranges.
Many things that seem to be the same are in fact quite different -- and
have different prices as a result. For example, there have been many media
stories "exposing" the fact that passengers going to the same places in the
same airplane may pay radically different prices.
One obvious reason is that passengers in different parts of the plane have
seats with different levels of comfort and receive different levels of
service. But, even when passengers are seated side by side in the same part
of the plane, what they bought when they purchased their tickets might be
quite different.
One passenger, who had to be at a particular place at a particular time,
bought a guaranteed reservation, while another passenger going on a pleasure
trip could afford a standby ticket that would provide a seat if there
happened to be one available when the plane was ready to take off. Again,
these are apples and oranges, and comparing their prices as if they were the
same thing is just spreading confusion.
Some camera buffs feel ripped off when they see a camera that they bought
at a camera store selling for less at a discount house. But, again, physical
similarity can conceal major differences is what was actually bought.
A customer who bought a camera at a discount house in California was
disappointed when his local camera store was less than enthusiastic about
helping him with problems he was having understanding how to use it.
"Let him go back to the discount house for advice," one camera store man
said to another after the customer had left.
One reason discount houses can sell cameras for less is that the people who
sell them may not know very much about them -- perhaps no more than the
order number used to get them from the storeroom. It costs more to hire
knowledgeable people and that cost is passed on in the price.
Even though any given piece of photographic equipment may cost more at a
professional camera store than at a discount, you can actually save money
shopping there if you buy just what you need for your purposes.
A given
manufacturer may sell different models of his camera for $200, $300, or
$400. If you get advice from a knowledgeable photographic expert, you may
find that the $300 camera is just right for what you want to do. But, at the
discount house, you may end up buying the $400 model -- which is still not a
bargain, even if you get it for $380 at a discount.
What the customer is really buying is a combination of a physical product
and associated knowledge. If you have a lot of photographic expertise
yourself, then you can buy what you want at a discount house and rely on
your own knowledge. Or you may buy a camera or other product that is so
simple that you don't need a lot of knowledge to figure it out.
Whatever the choice, the point here is that there are reasons for different
prices for what appear to be the same thing. People in the media often
overlook that fact and start to emote without knowing what they are talking
about.
With quality, as with price, things that look the same are not always the
same in reality. A given manufacturer may sell his product under his own
label at one price and under another label at another price. Sometimes the
manufacturer provides services for the product selling under his own brand
name but not for the product sold by some store under the store's brand
name.
Manufacturers of the very expensive Linhof camera go cherry-picking among
the lenses produced by various lens makers, buying only the ones that meet
Linhof's higher standards. When the customer is charged more for the "same"
type and brand of lens when it is on a Linhof camera, there is a reason.
There are reasons for all sorts of apparent economic anomalies. But the
media are seldom as interested in those reasons as they are in
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