What it is worth

We should be daily on guard against our instinctive presumption that what we asked to pay for something equates in anyway to what it is worth. By the time the seller has added on his profit, made allowance for stocking space and expected rate of turnover, the distributor has taken off his slice for double handling, storage waiting for and then transporting, and, assuming there are no middlemen taking a slice before handing on, the prime producer has to cover the advertising, product packaging, verification of standards met, recoup his product design, plant rightoff and premises, insurance against adverse events, stocking levels only then do we get to the nitty gritty, the payroll to produce and the purchase and stocking of the raw materials;finally we get close to the 'value' of the product.

We expect an intimate relationship between what we pay for something and it what it costs in terms of labour and raw materials, yet what is costs actually is ethereal. A figure derived from gut or more probably prior experience of what degree of ancillary costs can be born by the expected market, and still sell and still make a profit. It has a lot closer relationship to the vagaries of house selling, what does the market bear or expect for this size house in this location. Pricing is not hard wired to actual costs but is pitched at market expectations and precedences. 

This divorce from the actual cost of things is not just about the products we buy, but as I have explored previously in Government Savings, it is also true of the cost of how we choose to manage and administer ourselves. The 'cost' of government is not a balance sheet figure derived from what it takes to run or administer a set of procedures but reflects a historic norm. This is what has been relied on in the past to produce this end result and that with these adjustments this what it costs us now.

We got here for a sliding progression of perfectly reasonable and at the time right and fully justifiable choices. Right here and now being required to pay what others expect is their due and entitlement just does not seem right. Clearly we cannot go back to barter. Can you imagine the furore at the Supermarket as we all came in with our trade goods to exchange for our weekly shop. Equally we just cannot make and keep contact with the worldwide spread of sources and suppliers to individually barter an exchange for all those everyday items we now so desperately depend. Yet we have to get back to making some connection to what it actually costs, for something, as against what the marketplace thiks it can get away with.

I take heart from EBay. There is a model here, the dutch auction, products are offered at an optimum price then, depending on stock levels, degrees of demand and closeness to spoiling date, the price decreases until the consumers decides that it is worth it. Services might operate in an inverse way, with the rate for the service increasing until some provider snaps it up. Quality is the bug bear, we know only too well how the supermarkets dumb down the specification until it is a pale shadow of its former, introductory, self. With the growth of consumer feedback and instant consumer vitriol when things are wrong, maybe there is is this growing tool that will keep suppliers and providers sharp on their toes. Maybe, just maybe they can claim back from the domineering supermarkets, accountability for the what they provide. That would be the dawn of a new age.