By David Grace (Amazon Page — David Grace Website)

Near where I live in the SF Bay Area a Whole Foods, Trader Joe’s, Safeway, Walmart and an upscale independent market are all within about a mile of each other.

I decided to compare prices of a bit more than twenty standard items across the five stores. I could have chosen twenty or even forty additional items, but I don’t know if that would have materially improved the results and it certainly would have doubled or tripled the time and effort involved.

I tried to exercise common sense in making this study.

In this post I’m trying to give a general overview of prices. I can’t guarantee that there aren’t errors in the numbers I recorded. Use them as a guideline, not as a scientific fact. Also, prices change all the time.

My Focus On The Fundamentals

The prices for basics — Milk, Bread, Coffee, Beef, Potatoes, Onions, Flour & Fruit tell the story. Adding together the prices for these items for each store we get the following totals — — — %age Of Safeway Cost

Trader Joe’s: — — — — -$23.99…………54%………186% Safeway Higher %age

Walmart: — — — — — — $27.05……..…60.5%…….165% Safeway Higher %age

Whole Foods: — — — — $34.54………..77%……….129% Safeway Higher %age

Independent Market: $39.99…………90%……….112% Safeway Higher %age

Safeway: — — — — — — -$44.65

What I Did — Not All Stores Sold All Items

This survey is based on my checking the items at one of each brand of store. Inventory will, of course, differ between different stores of the same brand.

The fact that this Safeway did not sell organic yellow onions or offer a house brand of kettle chips doesn’t mean that some other Safeway might stock those items.

Trader Joe’s and Whole Foods had house brands of jam but did not sell Smuckers strawberry jam while the independent market sold Smuckers but did not stock a house-brand strawberry jam.

Every market sold bananas and milk, though Walmart and Whole Foods sold milk by the half gallon so I divided their prices by 2 to get the quart price.

Trader Joe’s, the independent market, and Whole Foods did not sell Ball Park hot dogs while the independent market had them but did not have a house brand of hot dogs.

Whole foods only had two varieties of house-brand condensed soup, neither of which were tomato. Nevertheless I used the Whole Foods condensed soup price in the “generic tomato” condensed-soup category.

I used the price per pound of the cheapest French Roast coffee beans available in each store irrespective of brand.

I divided the price for some items, e.g. coffee beans, by the quantity to get a per-ounce or a per pound price.

I ignored any short-term sale prices and instead used the everyday prices for each item.

In most cases I rounded the price to the next cent. For example, the Walmart coffee beans were $.608/ounce which I rounded to $.61/ounce.

Ketchup turned out to be about 10½ cents or 12½ cents per ounce so I left the third digit in the chart for those items.

Brand Substitution

If the store did not have a particular brand, for example Oroweat hot dog buns, but it did have another major name brand, for example Ball Park hot dog buns, I used the Ball Park price in the table for that store.

A Note About Safeway’s Pricing Strategy

Safeway consistently had either the highest or second highest prices, but it offered many special sale prices.

I did not use sale prices because they might be gone tomorrow, and the purpose here is to give people a general idea of the overall, general, everyday pricing differences for ALL shoppers between the store brands.

Digital Sale Prices At Safeway

Safeway tags many items with a cheaper “Member Price” and often below that with an even cheaper “Digital Discount Price.”

Safeway club-card shoppers get the “Member Price” but they do NOT get the even cheaper “Digital Discount Price” unless they first log in to the Safeway website, find the sale item there, then click on it to add it to their Safeway Club card account.

So, unless you

• (1) made a careful shopping list in advance, then visited the Safeway website and clicked on the sale offers for items on your list in order to add those lower sale prices to your club card, OR
• (2) kept the Safeway website open on your phone as you shopped and every time you found one of the “digital discount” items you wanted to buy you then located it on Safeway’s web page and then tapped it’s icon on your phone to add that discounted price to your Club Card

at checkout Safeway is going to charge you the regular price or the Member Price but not the posted digital discount price that the tag at the shelf might have seemed to promise you.

None of the other grocery stores limited access to any sale prices to only those shoppers who first manually selected each shelf-marked sale item on the store’s website.

A benefit to Safeway to this marketing strategy is that the quantity of digitally discounted items actually sold at the very attractive lower price will be far less than the would be the case if the discount was available to all shoppers or at least to all Club Card shoppers, thus having the sale tags on the shelf make the prices seem lower while not actually having to sell as many units at that lower price.

You can decide for yourself if you think that Safeway’s digital sale-price mechanism is an honest marketing tactic.

Some Observations About Brand Items

Heinz Ketchup

The independent market had the highest price, $.31/oz followed by Safeway at $.30/oz.

Walmart’s price was $.124/oz for Heinz ketchup which means that if you purchased Heinz ketchup at Safeway you paid 242% more for it than you would have paid it had bought it at Walmart.

If you purchased Safeway’s house-brand ketchup instead of Walmart’s house-brand ketchup, you paid a 250% higher price per ounce.

Note that Safeway’s house-brand ketchup was also 192% more expensive per ounce (almost twice as much) as Trader Joe’s.

Campbell’s Soup

At Safeway, Campbell’s soup was 143% more expensive that if purchased at Walmart.

Smucker’s Jam

Smucker’s Strawberry jam was 145% more expensive at Safeway than at Walmart.

Produce, Dairy, Meat

Bananas at Safeway were 183% more expensive than at Walmart and 430% more expensive than bananas purchased at Trader Joe’s.

Yellow potatoes were 293% more expensive at Safeway than at Walmart and 315% more expensive at Safeway than at Trader Joe’s.

Hamburger was 139% more expensive at Safeway than at Walmart and 169% more expensive at Safeway than at Trader Joe’s.

Chuck roast was about 190% more expensive at Safeway than at Walmart and 200% more expensive at Safeway than at Trader Joe’s.

Milk was 135% more expensive at Safeway than at Walmart and 112% more expensive than milk purchased at Trader Joe’s.

Some Overall Comparisons

I added the total regular prices (not sale prices) for all the items that Safeway and each of other stores both offered.

Safeway vs. Walmart On All In Common Items

Safeway: $86.57 Walmart: $57.76

On these in-common items Safeway was about 150% more expensive in its everyday prices than Walmart. 165% more on the basic items.

If you spent $100 on these groceries at Walmart they could cost you about $150 at Safeway.

Safeway vs. Trader Joe’s On All In Common Items

I did the same thing with Safeway vs. Trader Joe’s. Note that there are far fewer in-common products that both markets sell.

Safeway: $62.31 Trader Joe’s: $39.28

On these products that both chains sell, Safeway is about 159% more expensive than Trader Joe’s for those in common items and 186% more on the basic items.

$100 worth of these groceries at Trader Joe’s could cost you about $159 at Safeway.

Safeway vs. Whole Foods On All In Common Items

I did the same thing with Safeway vs. Whole Foods. Note that there are fewer products that both markets sell.

Safeway: $65.79 Whole Foods: $59.20

On these products that both chains sell, Safeway is about 111% more expensive than Whole Foods and 129% more on the basic items.

$100 worth of these groceries purchased at Whole Foods could cost you about $111 at Safeway.

Safeway vs. the upscale independent market On All In Common Items

Safeway: $77.79 Independent Market: $75.08

On the products both stores sell, Safeway is about three and a half percent more expensive than the upscale independent market, a difference that is so small that a slight variation in the shopping list combined with Safeway’s sale coupons could give you a better price at Safeway.

Using Coupons To Spend Less

Please note that someone who very carefully shops at Safeway and only buys on-sale items and who spends the time and effort to access the on-line coupons on the Safeway website will be able to materially reduce their cost of groceries over the amounts in the table below, PROVIDED that the shopper is willing to forego purchasing items that are not on sale.

If you need Campbell’s soup or Heinz ketchup or ground beef or yellow potatoes or whole milk or any of the thousands of products that Safeway has NOT put on sale the day you shop, then you may well pay more if you shop at Safeway than at Walmart or Trader Joe’s.

I didn’t perform this comparison at my local Grocery Outlet, but I suspect that its prices would be similar to Walmart or Trader Joe’s.

Some General Thoughts

In Northern California, Safeway commands over 21% of the grocery market and Walmart holds a bit over 8%.

Safeway is certainly able to take advantage of the economies of scale and obtain the lowest available prices on bulk purchases of national brands like Campbell’s soup, Smucker’s jam, Heinz ketchup and the like.

One wonders why a can of Campbell’s soup is 143% is more expensive at Safeway and a jar of Smucker’s jam is 125% more expensive at Safeway and a pound yellow potatoes is 293% more expensive at Safeway than at Walmart.

My opinion is that Safeway is able to charge higher prices because of

• greater geographical coverage (more stores closer to more people),
• the shopping experience (Walmart is often crowded),
• lazy shoppers who don’t pay attention to prices,
• more major brands at Safeway than Trader Joe’s or Grocery Outlet, and
• established consumer habits, people are just used to going to the Safeway near their home.

More smaller Safeway stores could also mean more overhead costs for Safeway than for Walmart with only one huge store that sells other products whose profit can contribute to covering the store’s overhead.

But that overhead issue does not explain how Trader Joe’s (and I suspect Grocery Outlet), which also have a large number of smaller stores, are able to profitably price their products materially cheaper than Safeway.

Nor does it explain why Safeway was

• the second most expensive store for milk,
• tied for most expensive for bananas,
• most expensive for potatoes,
• most expensive for onions,
• second most expensive for coffee beans,
• tied for most expensive for hamburger,
• most expensive for chuck roast,
• second most expensive for sandwich bread,
• tied for most expensive for lemons and
• in the middle for flour.

— David Grace (Amazon Page — David Grace Website)

If you would like to know about David Grace’s new, always free, columns, click this LINK and then fill in your email address. When a new David Grace column is published, Medium (not David Grace!) will send you the new column as an email.

CLICK HERE to see some topic lists (Racism, Humorous Short Stories, etc.) and links in each topic list to some of my favorite columns on that topic.

To see a searchable list of all David Grace’s columns in chronological order, CLICK HERE

To see a list of all of David Grace’s columns sorted by topic/subject matter, CLICK HERE

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Grocery Prices Compared: Walmart, Great; Safeway, Terrible; Whole Foods Near the Bottom was originally published in David Grace Columns Organized By Topic on Medium, where people are continuing the conversation by highlighting and responding to this story.

By David Grace (Amazon Page — David Grace Website)

My Failure To Get Some People To Choose The Lesser Evil

In 2024 I talked myself blue in the face trying to convince people who admitted to me that it would be a disaster if Donald Trump was elected to vote for Harris as the lesser of two evils.

I got answers from them along the lines:

— “She’s such an empty suit I just can’t make myself vote for her.”

— “But you know that it will either be her or Trump, right?”

— “Of course.”

— “And you know that Trump would be twice as bad for America as Harris, right?”

— “Absolutely, he’s a threat to the country.”

— “So why aren’t you going to vote for Harris in order to avoid the chance that we’ll get Trump?”

— “Ummm, well, I just don’t like her either.”

OK, we aren’t seeing much logic here, but let’s face it, most humans act from emotion, not logic. So, what’s the emotional process that’s at work here?

Psychological Studies RE: ‘Lesser Of Two Evils’ Situations

There have been several psychological studies on this issue which have identified several reasons why people refuse to choose the lesser of two evils.

• 1) The “Dirty Hands” Syndrome

If faced with a large immoral choice with terrible consequences and a smaller immoral one with a smaller bad consequence, some people will refuse to choose the less serious option because they believe that they would feel morally responsible, guilty, for inflicting the harm associated with the lesser bad choice.

→ Psychologists have studied this in the so-called “Trolley Problem.”

Subjects are told that a runaway trolley is heading toward five people and that it will surely kill all of them.

The subject is told that s/he is a switch-person who can pull a lever which will divert the trolley to a side track and kill only one person, or s/he can do nothing and all five people will certainly die.

Some subjects refuse to throw the switch (choose the lesser of two evils) because they think they would be less morally responsible (feel less guilt) for the harm caused by not acting (letting the 5 die) and would feel more morally responsible (more guilt) for doing something that caused one person to die.

• 2) “Others Will Blame Me”

A slightly different reason for refusing to choose the lesser evil is the fear of what other people will think of them if they throw the switch.

These subjects feel that others will blame them if they cause a smaller harm by acting (throwing the switch) but those others will not blame them as much if the greater harm happens (five people die) because they did nothing.

They feel that inaction that allows a terrible result does not make them look as guilty/immoral to others as their doing something that causes a bad but less damaging result.

• 3) Refusing To Act Is A Protest

Some people refuse to pick the lesser of two evils because they consider their refusal to act as a protest against the bad situation they have found themselves in without any fault of their own.

They think, “I didn’t cause this situation. I have nothing to do with it. If I act then I am ratifying the situation. I refuse to get involved with it one way or the other. Whatever bad things happen are not on me.”

In their minds, letting the greater evil (five deaths) occur through their inaction is not “on them” because the bad situation (the runaway trolley) was not of their making.

When faced with tough moral trade-offs, these people default to doing nothing because they think that doing nothing frees them from any moral association with the bad situation which they did not create.

The Crucial Element In How The “Do Nothing” People Think

The core idea in the minds of the people who do nothing is the belief that there is an ethical difference between actively causing harm by doing something that causes injury versus passively allowing harm to happen by doing nothing.

— If I throw the switch, I am responsible for someone dying.

— If I do nothing then whatever bad things happen are not my responsibility.

— Action = Moral Responsibility and Guilt

— Inaction = No Moral Responsibility and No Guilt

It’s Not Logic, It’s Emotion

When confronted with a choice of the greater or lesser of two evils many people will close their eyes and imagine that in some alternate universe neither terrible event will occur, that magically, somehow, if they just curl themselves into a fetal ball and ignore the whole thing another alternative will emerge, and that if the prayed-for benign outcome does not materialize that they are not responsible for the catastrophe that takes place because they did not cause the bad situation.

Most people are motivated by emotion, by how they actually feel, not how logic tells them that they should feel.

— David Grace (Amazon Page — David Grace Website)

If you would like to know about David Grace’s new, always free, columns, click this LINK and then fill in your email address. When a new David Grace column is published, Medium (not David Grace!) will send you the new column as an email.

CLICK HERE to see some topic lists (Racism, Humorous Short Stories, etc.) and links in each topic list to some of my favorite columns on that topic.

To see a searchable list of all David Grace’s columns in chronological order, CLICK HERE

To see a list of all of David Grace’s columns sorted by topic/subject matter, CLICK HERE

To see David Grace’s Medium Home Page, CLICK HERE

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When Facing Great Harm, Why Some People Refuse To Pick The Lesser Of Two Evils was originally published in David Grace Columns Organized By Topic on Medium, where people are continuing the conversation by highlighting and responding to this story.

By David Grace (Amazon Page — David Grace Website)

Link to PART 1 — UNDERSTANDING HOW RENT WORKS AND WHY RENTING PROPERTY IS FUNDAMENTALLY DIFFERENT FROM ALMOST ALL OTHER BUSINESSES

BELOW IS PART 2 — HOW WE CAN SIMPLY AND QUICKLY FIX THE PROPERTY RENTAL PRICING SYSTEM WITHOUT RENT CONTROLS OR NEW BUREAUCRACY

How We Would Want Our Rent System To Operate

Tie Profits To Higher Occupancy Not Higher Rent

We want a system that ties an increase in the landlord’s profits to an increase in the occupancy rate instead of one that ties an increase in the landlords’ profits to an increase in the market price of rent.

We do that by giving the landlord a higher profit when s/he has a higher occupancy factor instead of giving the landlord a higher profit when the landlord charges a higher rent.

How We Link Landlord’s Profits To The Occupancy Factor Instead Of To The Building’s Value

We create a tax system where the landlord can earn an operating profit equal to 15%/year of the real property’s original purchase price (ROI) TIMES the occupancy factor before incurring the tax.

Why link the landlord’s profit to the occupancy factor?

Businesses that sell fewer products make less profit. Similarly, the smaller the percentage of your units you rent, the smaller profit you should make.

Moreover, by linking the landlord’s profits to the occupancy factor, the landlord is financially motivated to increase the percentage of occupied units which the landlord does by lowering rents.

Base Rent Prices On Costs + ROI, Not On Market Rates

We want a system that does not motivate an increase in rents in response to an increase in the prices charged to rent other similar properties.

We do that with an excess rent tax that caps the landlord’s net rental income at an ROI based on the original purchase price of the Landlord’s building times the occupancy factor plus actual costs exclusive of mortgage payments.

By taxing away any rental income that exceeds this cap the landlord has no motivation to charge a higher price for rent because s/he cannot keep the extra rent money.

Motivate More Spending On Maintenance

If we increase the landlord’s net, after-tax rental income by the amount necessary to cover taxes, insurance, overhead, maintenance, repair and amortized capital improvements (but not mortgage payments) before incurring the tax then we encourage the landlord to spend more money on maintenance, repair and capital improvements in order to avoid the tax.

Deliver Enough Profit To Motivate Investment

We want a system that allows landlords to make a reasonable profit because the profit motive drives investment, innovation, and the production of goods and services.

We don’t want a system that allows landlords to collect rent revenue that far exceeds the level of profit needed to motivate investment and innovation.

To do that we need to change the pricing system for rent to limit rental profits to a level commensurate with the level of profits of other businesses which is generally 5% to 20% times materials + labor + overhead.

Examples Of How This Would Work

We enact an excess-rent tax of 100% on the amount that the rental income exceeds the total of (a 15%/year return on the full purchase price of the property TIMES the occupancy factor) plus (actual costs exclusive of mortgage payments).

Example: Suppose we have a 100 unit apartment house that was purchased for $10,000,000 and that incurs $21,000/month in taxes, insurance, maintenance, repairs and other overhead, other than the loan payments on the purchase-money mortgage.

Let’s look at the numbers for various rent, occupancy factor, loan amounts, down-payment amounts and annual non-mortgage-payment expenses to see how this tax would work.

We will use $252,000 as annual costs exclusive of loan payments and a ten-year mortgage with interest rate of 6%.

We see that at a 40% occupancy factor the maximum rent revenue the landlord can keep before the excess revenue tax is applied is only $852,000 but at a 100% occupancy factor the maximum rent revenue increases to $1,752,000.

In other words, the landlord can earn $900,000 more profit on his/er investment if s/he increases the occupancy factor from 40% to 100%.

How does a landlord increase its occupancy factor? By lowering rents and increasing the quality of the property.

At a 40% occupancy factor the maximum ROI the landlord can make is $600,000 at a rent rate of $1,775/unit.

If the landlord increases the rent rate beyond $1,775/month/unit the excess rent will be taken away by the excess-rent tax.

But if the landlord reduces the rent from $1,775 to $1,600/month and thereby increases the occupancy factor from 40% to 60% the landlord can earn an ROI of $900,000.

Essentially, the tax structure pays the landlord an additional $300,000 to lower the rent and increase the occupancy factor.

If the landlord achieves 100% occupancy by lowering the rent to $1,460 the landlord can keep $1,500,000 before incurring any excess-rent tax.

Reduce Boom/Bust Cycles By Lowering The Break-Even Cost

If we look at the below numbers we see that the landlord can make only $84,000 cash flow profit (rent revenue minus all costs including the mortgage payment) at 100% occupancy if the landlord purchased the property with no money down, that is a very high mortgage payment.

The greater the down payment and the lower the mortgage payment, the lower the cash flow break-even occupancy factor.

The lower the break-even occupancy factor, the less likely an economic downturn or unexpected cost will reduce rent revenues below the cash flow break-even point and thus drive the property into bankruptcy.

As the below table shows, the greater the occupancy factor, the higher the landlord’s profit and the lower the maximum rent the landlord can charge before incurring the tax.

Appreciation Also Increases The Landlords’ Profits

Additionally, the building is appreciating in value.

If the landlord bought the property for all cash and maintained an average 80% occupancy factor, and if after ten years the building had a market value of $15M, then the landlord would have earned a rental profit $12M at the maximum allowable rental rate plus an additional $5M on the increase in value for a total profit of $17,000,000.

$17M/$10M cash purchase price = an overall ROI of 170% over 10 years or 17%/year ROI for each of the ten years.

If the occupancy factor had been higher than 80% the ROI would be even greater.

Factor Inflation Into The Return On Investment Calculation

To give landlords an additional incentive, each year the original purchase price would be increased by inflation before calculating the ROI.

For example if the building was purchased for $10M and ten years later the consumer price index had increased 25% then the 15% ROI factor for the tenth year would be based on $10M +$2.5M or 15% X $12,500,000 = $1,875,000 ROI at 100% occupancy.

Because of the complexity of adding that calculation, the tables do not include that higher amount of ROI at the various occupancy factors.

Average The Tax Over A Five Year Period

Because costs and vacancy factors are variable and unpredictable you would average the excess-rent tax over a rolling five year period to balance the years where the landlord received total rental income that was less than the maximum amount allowed against years where the rental revenues exceeded the maximum allowed.

That is if the landlord’s revenue was below the maximum by $100,000 in year 1 and exceeded the maximum by $100,000 in year 2, the amounts would offset and the landlord would not owe any excess-rent tax in year 2.

Purpose

• Landlords need to make a reasonable profit. Tenants need to be charged a reasonable rent.
• The current system promotes excessive rental rates.
• The current system promotes vacant properties, which is inefficient.
• The current system promotes boom-bust investment cycles, inflation and homelessness.
• The current system massively causes inflation

We need to fix it as simply as possible. Adding a tax without any bureaucratic overhead is the simplest, quickest, easiest, most effective way to quickly achieve these extremely important goals.

— David Grace (Amazon Page — David Grace Website)

If you would like to know about David Grace’s new, always free, columns, click this LINK and then fill in your email address. When a new David Grace column is published, Medium (not David Grace!) will send you the new column as an email.

CLICK HERE to see some topic lists (Racism, Humorous Short Stories, etc.) and links in each topic list to some of my favorite columns on that topic.

To see a searchable list of all David Grace’s columns in chronological order, CLICK HERE

To see a list of all of David Grace’s columns sorted by topic/subject matter, CLICK HERE

To see David Grace’s Medium Home Page, CLICK HERE

To follow David Grace on Threads, CLICK HERE

How To Quickly, Simply & Easily Get Reasonable Rent Prices Without Bureaucracy Or Rent Controls was originally published in David Grace Columns Organized By Topic on Medium, where people are continuing the conversation by highlighting and responding to this story.

By David Grace (Amazon Page — David Grace Website)

PART 1 — UNDERSTANDING HOW RENT WORKS AND WHY RENTING PROPERTY IS FUNDAMENTALLY DIFFERENT FROM ALMOST ALL OTHER BUSINESSES

Rent Is A Foundation Product That Drives Inflation

A product that most individuals and the sellers of most other products purchase is a foundation product.

When prices rise in a foundation product that price increase migrates through the economy, growing larger at each step up the chain and thus driving inflation.

As a foundation product, rent increases are huge drivers of inflation.

The Business of Renting Land Is Fundamentally Different from Every Other Business

→1) Most of the profit from renting property comes

• A) Years later when you sell the property and you only pay capital gains taxes, or
• B) Very Many years later when you pay off the mortgage, your equity soars, and your operating costs decline by 75% with the elimination of the loan payments.

→2) The price of rent is tied to what other landlords charge not to your costs of owning the property

→3) Unlike other sellers, most landlord’s costs are fixed costs not variable costs.

→4) Unless there is a large available additional supply at a lower price, which rarely happens, landlords do not compete on price but instead charge similar rates for similar properties.

Like an informal cartel, landlords use a follow-the-leader pricing strategy, not a competitive pricing strategy.

→5) Most landlords would rather leave some of their units vacant to restrict supply in order to be able to be able to collect higher rent on their remaining units

The Price Of Rent Is Tied To The Market Value Of Similar Properties Not The Costs Of Leasing Property

The price of almost every non-monopoly product is more or less linked to the cost of producing it — Price = Labor + Materials + Overhead (Costs) + Profit as some percentage of those costs.

The percentage of profit for any given product will vary with the increase or decrease in the available supply and how much people need that product, but the price of almost all non-monopoly products is fundamentally, inextricably, linked to a material degree to the costs of the production and delivery of those products.

Additionally, all the producers of a particular product have generally the same cost structure.

But none of that applies to leasing real property and the price of rent.

Instead of being linked to the costs of production, the price of rent is fundamentally, inextricably, linked to the market value of similar properties.

If one of two identical side-by-side buildings has a large mortgage payment and the other has no mortgage, the buildings will have vastly different operational costs yet both landlords will strive to collect the same rent.

Landlords’ Goal Is Higher Gross Revenues, Not Higher Occupancy Rates

Definition Of Elastic & Inelastic Prices

A price is said to be “elastic” when the revenue gained from charging a higher price per-unit is less than the revenue lost from selling fewer units at that higher price.

Elastic: The seller loses money by raising the price.

An price is said to be “inelastic” when the revenue gained from charging a higher price is more than the revenue lost from selling a smaller number of units at that higher price.

Inelastic: The seller gains money by raising raise the price.

The goal of sellers of products whose price is elastic is to sell as many units as possible by lowering prices until a lower price no longer results in an increase in revenue.

The goal of sellers of products whose price is inelastic is to accept the sale of fewer units and raise prices as high as possible.

The Price Of Rent Is Inelastic

Unless there is a large supply of units available at a lower price, rent prices are generally inelastic (why that is true is explained below) and a landlord’s primary goal is to increase gross revenue by renting fewer units at a higher price rather than renting more units at a lower price.

If a landlord can rent 100 units at $1,000/month ($100,000), 75 units at $1,500/month ($112,500) and 50 units at $2,000/month ($100,000), it will rent 75 units at $1,500/mo and accept the vacancy of 25 units.

The price of rent is inelastic at $1,000 (raising the price will make you more money; unity elasticity at $1,500 (neither raising nor lowering the price will make you more money), and elastic at $2,000 (make more money by lowering the price).

Landlords have a financial incentive to accept a material percentage of vacant units so that they can continue to charge higher rents on the reduced supply of remaining units.

The city of San Francisco actually considered levying a vacant-unit tax in order to force landlords to accept lower rents and lease out their numerous vacant commercial properties that the landlords refuse to rent at a lower rate.

Why Rent Is Usually An Inelastic Price

The price for rent is highly inelastic because:

• Housing is a vital product. People must have a place to live
• Moving is expensive
• There is a geographically limited availability of additional supply
• Landlords use a follow-the-leader pricing strategy that eliminates most lower cost rental alternatives
• Long term leases make landlords reluctant to rent for years at a lower price
• Landlords are motivated to leave units vacant in order to reduce supply and thus increase the market price
• Long-term Landlord’s break-even occupancy factor can be so low that they don’t feel a strong economic pressure to lower rent prices in order to gain additional tenants.

The “Higher Sale Price–Higher Rent Price” Feedback System

>The higher the anticipated net rental income of a building, the greater the market value of that building and other similar buildings.

>The higher the market value, the greater the loan the buyer must incur to buy the building.

>The larger the loan, the greater the buyer’s loan payment.

>The higher the buyer’s loan payment the higher the rent the buyer will seek to charge in order to achieve his target net rental income.

>The higher the rent that buyer charges, the higher the rent that the owners of other similar buildings will charge irrespective of their own costs.

>The higher the rent landlords receive, the higher the market value of other similar buildings.

>The landlords of other similar rental units will then increase their rent prices to match these new owners’ higher rental rates even though the existing owners’ costs have not increased at all.

Rinse and repeat.

The “Boom–Bust” Feedback System

Eventually the Sale Price Increase–Rent Price Increase feedback system raises rents so high that an increase in vacancies causes the rent revenue to fall below the break-even point for newer landlords and the system crashes into foreclosure.

The “Lower Revenue–Lower Maintenance–Lower Revenue” Feedback System

As purchase prices increase the high loan payments make it increasingly difficult for new owners to gain a high enough occupancy factor to break even.

This causes them to skimp on maintenance and repairs.

The worse the condition of the property, the more tenants leave.

The more tenants leave the lower the rental income and the more the landlord cuts costs by further reductions in maintenance and repairs.

Click here to go to PART 2 — HOW WE CAN SIMPLY AND QUICKLY FIX THE PROPERTY RENTAL PRICING SYSTEM WITHOUT RENT CONTROLS OR NEW BUREAUCRACY

— David Grace (Amazon Page — David Grace Website)

If you would like to know about David Grace’s new, always free, columns, click this LINK and then fill in your email address. When a new David Grace column is published, Medium (not David Grace!) will send you the new column as an email.

CLICK HERE to see some topic lists (Racism, Humorous Short Stories, etc.) and links in each topic list to some of my favorite columns on that topic.

To see a searchable list of all David Grace’s columns in chronological order, CLICK HERE

To see a list of all of David Grace’s columns sorted by topic/subject matter, CLICK HERE

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Understanding Why Rent Pricing Is Fundamentally Broken & How To Fix It was originally published in David Grace Columns Organized By Topic on Medium, where people are continuing the conversation by highlighting and responding to this story.

By David Grace (Amazon Page — David Grace Website)

New Tech Breaks Old Systems

People don’t imagine a massive change in their world, but new technologies can and do upend everything.

Imagine trying to explain to seventeenth-century Europeans a nineteenth century society without ruling royalty, without guilds, with social mobility and one that was generally governed by leaders chosen a vote of all citizens.

Massive changes in technology washed away everything they knew.

Social, political and economic organizations that don’t change in the face of a major technological upheaval either get progressively sicker or are killed.

The Uncontrolled Industrial Revolution Birthed Communism

The uncontrolled monopolies and plutocratic excesses of the industrial revolution led to the disastrous idea of communism as the way to fix the broken economic system even though communism was built on two fundamentally false assumptions:

• (1) that you could re-engineer the overwhelming majority of human beings to become empathic, self-sacrificing altruists and
• (2) that concentrating all of a society’s political and economic power under the control of one group of self-selected people would produce a beneficial, fair and efficient political and economic system.

The Rise Of Concentrated Production Is Killing Competitive Pricing

Today the terminal decline of competitive market pricing and its accelerating replacement with pseudo-cartel, follow-the-leader pricing mandates a fundamental change in the structure of our economic system in order to avoid a similar disaster.

Why Prices Are Going Up And Market Competition Isn’t Driving Them Back Down

Mechanisms To Restore Competitive Market Pricing

There are at least three ways to re-energize competitive market pricing, combat cartel pricing, and redirect corporate management from pursuing short-term gains to long-term performance:

• (1) Shift the corporate structure from Investor Controlled Companies (ICCs) to Customer Controlled Companies (CCCs).

Replace Investor Controlled Companies (ICC) With Customer Controlled Companies (CCC)

In an ICC the managers’ motivation is to increase short-term stock prices by raising product prices and cutting quality.

In a CCC the managers’ motivation is to increase customer satisfaction by lowering prices and increasing quality.

• (2) Flip corporate management’s motivation from making a higher profit per unit sold to making a higher profit by selling more units.

We Can Have Better Products At Lower Prices Without More Gov’t Regulation

(1) Cartel pricing: You make a higher profit per unit sold by raising prices and lowering quality.

(2) Competitive Pricing: You make a higher profit by selling more units by lowering prices and increasing quality.

You create this flip in the corporate pricing model by taxing at 100% profits that exceed a set percentage of costs.

The existence of this tax deprives the corporation of the ability to make more money by increasing fees, raising prices or reducing quality and leaves management with one and only one way to increase profits — by making a lower profit per unit sold and selling more units.

• (3) Stop the stock market from functioning as a gambling institution where companies are motivated to deliver short-term profits and instead convert Wall Street into a market place for long-term corporate investment.

You do that by changing publicly-traded shares of stock from today’s unrestricted short-term gambling tokens to long-term investment assets held in the form of Certificates of Investment (CIs).

You kill the Wall Street Casino.

If you buy a two-year CD you have to hold it for two years to get the return on your investment. If you want to cash in your CD before its maturity date you must pay a penalty by forfeiting some or all of the accrued interest.

Similarly, CIs would have a maturity date and penalties for early sale.

How CIs Would Work

Suppose you bought 1,000 shares of Alphabet as CIs with a five-year maturity date.

If you wanted to sell some or all of your Alphabet CIs before the five-year maturity date you would forfeit some or all of the stock’s appreciation.

The Penalty For An Early CI Sale

The proceeds you would receive from an early sale could not exceed the original purchase price plus, for example, a 2%/year appreciation. Upon an early sale you would get the lesser of (1) the current market price or (2) your purchase price plus up to 2%/year appreciation.

At the five-year maturity date you could either sell your shares at the current market price or you could elect to renew your Alphabet CIs for another five year term.

Renewing Your CI For Another Term

If you elected to reinvest for another term and you later wanted to sell your renewed Alphabet CIs before maturity your proceeds from the sale would be capped at an amount equal to the market price as of the time of the renewal plus 2% per year appreciation after that renewal date.

The purchaser would pay the current market price and the difference, if any, would accrue to Alphabet.

That means investors would only receive a substantial return on their investment if the stock they purchased had materially appreciated five years after the date of purchase.

OR, Limit Voting Rights To Long-Term Shareholders

What if everyone who bought their shares directly from the company, either as

· founder’s stock,

· pre-IPO purchases,

· via employee stock-option exercises or

· IPO purchases

had voting rights in those shares, and everyone who purchased shares on an exchange from a seller other than the issuer received shares without voting rights until the shares were held for at least five years?

In other words, shares would need to be held for a vesting period before voting rights would accrue.

Shouldn’t the people who control a corporation be the ones who actually put money into the company or who have demonstrated a long-term commitment to it?

Why should gamblers who never contributed a dime to the company be given the power to direct its conduct?

The people who can be counted on to really care about the company are the ones who actually invested in it, not those who merely use its stock as a short-term gambling mechanism.

What do gamblers care about the corporation’s long-term success?

Such a rule would weaken the implied equivalence of the terms “shareholder value” and “today’s trading price” so that when a CEO talked about increasing shareholder value we would know that he was not necessarily talking about simply increasing this year’s bottom line in order to benefit the gamblers in the Wall Street Casino who had never directly paid a single penny into the company’s coffers.

What kind of company would Hewlett Packard be today if those shareholder-voting rules had been in place for HP for the last fifteen years?

The Beneficial Consequences Of Long Term Investment

No short term profits, quick and dirty accounting tricks or market hype would be effective in gaining investors a quick or greater return.

Now both investors and executives with stock options would be forced to ignore short-term profits and instead focus on long-term company value.

Ask yourself how corporate policy and executives’ actions and priorities would change if everything they did would only pay off for themselves and their shareholders many years in the future.

You Need To Counter An Unbalanced Economy BEFORE The Society Goes Pear Shaped

If not mitigated by a structural, counter-feedback mechanism all societies degenerate.

To thwart today’s slide into plutocracy (and often a defacto dictatorship–plutocracy a la Russia) we need to install structural tools that

• neutralize follow-the-leader pricing;
• limit the corporate incentive to raise prices;
• incentivize corporate management to please their customers instead of their investors;
• encourage management to pursue a goal of long-term performance instead of short-term profits.

Reversing The Unchecked Concentration Of Wealth In The Executive Class

We also need a structural tool that will help counter the massive shift of compensation from public corporations’ general employees to the corporate executive class.

One mechanism would be a tax of 100% on all compensation (including the value of stock options) paid to the top 10% of a public corporation’s employees that exceeds 35 times the total compensation paid to the bottom 10% of that company’s employees.

To ensure that the directors would enforce this rule, it would deemed a breach of the board’s fiduciary duty to the shareholders to allow or pay any such executive compensation in excess of the ratio.

The greed of the executives for more money would quickly drive them to initiate an increase in the average employee’s compensation so that they could be paid more.

— David Grace (Amazon Page — David Grace Website)

If you would like to know about David Grace’s new, always free, columns, click this LINK and then fill in your email address. When a new David Grace column is published, Medium (not David Grace!) will send you the new column as an email.

CLICK HERE to see some topic lists (Racism, Humorous Short Stories, etc.) and links in each topic list to some of my favorite columns on that topic.

To see a searchable list of all David Grace’s columns in chronological order, CLICK HERE

To see a list of all of David Grace’s columns sorted by topic/subject matter, CLICK HERE

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Turn Stock Shares From Gambling Tokens Into Long-Term Certificates Of Investment (CIs) was originally published in David Grace Columns Organized By Topic on Medium, where people are continuing the conversation by highlighting and responding to this story.

By David Grace (Amazon Page — David Grace Website)

Unlimited Corporate Campaign Spending

After the Supreme Court’s Citizens United decision struck down the federal limits on corporate and union campaign spending, a tsunami of special-interest money began to pour into federal elections.

Unions, corporations, and the wealthy individuals who control them quickly saw funding federal candidates as a relatively cheap way to obtain legislation that either benefitted them or, more importantly, gave them the ability to block or neuter legislation that would erode their profits or increase their taxes.

Attempts To Stem This Massive Spending Have Failed

Today, people concerned about special interests’ control of Congress by funding candidates who will do their bidding have almost given up trying to find a mechanism that would insulate congressional candidates from the need to please their wealthy contributors in order to get elected.

Sadly, those interested in untainted elections have approached this problem from the wrong direction, namely, by trying to figure out some law that could constitutionally limit campaign spending.

Given the pro-corporate makeup of the majority on the Supreme Court this strategy is doomed to failure.

There Is A Constitutional Way To Turn Off The Money

But there is a constitutional solution to this problem. It lies not in restricting interest groups from spending as much as they want on their preferred candidates.

Instead Of Less Money For Candidate A, More Money For Candidate B

The solution is matching however much the superpacs spend on their pet Candidate A with an equal grant to A’s opponent, Candidate B.

Now, don’t get all upset just yet. Hear me out.

The Massive Spending Going On Today

In 2024 the total spent on congressional elections was $9.5 billion. An additional $5.3 billion was spent on the Presidential election.

$9.5 billion divided by 944 (34 Senate seats up for grabs) = $10 million average per candidate with much more being spent on the senate races.

In the 2024 Presidential election Elon Musk alone contributed over a quarter of a billion dollars to Donald Trump’s election campaign.

A Federal Sales Tax On Campaign Spending

What if we levied a federal sales tax of 10% on Congressional race contributions over $500? $9.5 billion X 10% = $950,000,000 that could go into a Federal Campaign Expenses Fund.

Sales Tax Grants To All Candidates

Let’s start with a federal grant from that fund in the amount of $250,000 to each of the top two candidates for each House seat — 438 X 2 X $250,000 = $219,000,000.

Generally there are 33 senate seats at stake so 66 candidates. Let’s give them $1 million each for a total of $285 million — only 3% of the $9.5 billion spent on federal congressional elections in 2024.

This leaves $665,000,000 remaining in the federal election fund.

Sales Tax Matching Grants To Each Candidate

Let’s say that in the contest for Congressional District XX the major candidates are incumbent Congressman Smith and Candidate Jones.

Smith and Jones each get $250,000 from the fund for their campaigns.

Let’s say that Smith raises an additional $300,000 in direct contributions and a superpac spends $500,000 on ads that benefit Smith — $800,000 total.

Jones collects $200,000 in contributions and no superpac money.

The federal campaign fund would offset that $600,000 imbalance in Smith’s favor with a $600,000 campaign grant to Jones.

But, wait.

The Availability Of These Matching Grants Ends Big Money

Knowing that this is what would happen, would the pacs and wealthy donors really have had much of an incentive to actually give Smith that $800,000 in the first place? No.

First, knowing that they couldn’t outspend Jones, the contributors’ motivation to invest more of their money in Smith would be massively reduced.

Second, and more importantly, giving Smith more money would be counter-productive because any additional money they gave to Smith would only serve to enrich Jones, giving him/er more money that s/he could use to amplify their Anti-Smith message.

Because the special interests would know that those contributions would be an exercise in futility they would not make most of them.

More Contributions Are Self Defeating

Again: Spending more on Smith would be self-defeating, actually harmful to Smith’s cause, because it would end up giving Jones more money to tell the electorate how bad Smith is.

We fix the problem of unions and corporations and massively wealthy individuals financially controlling members of congress by using a campaign-contribution sales taxes to fund equal campaign grants to the each of the two top candidates for House and Senate seats.

This will dry up a huge percentage of the superpac money in congressional elections because the superpacs will know that most of the contributions they might make will be both futile and self defeating.

Yes, we will need to figure out a way to apply this strategy to the primary elections, but that is too complicated a plan to get into in this column.

And, yes, we will need to have a mechanism to increase the sales tax percentage as may be necessary if the superpacs try to win by spending enough to bankrupt the fund.

The Fundamental Strategy

Right now, let’s concentrate on the fundamental strategy:

→>> Because unions and corporations and wealthy individuals will understand in advance that

• if you can’t outspend your candidate’s opponent, and
• if every dollar you give to your pet candidate will result in an additional dollar being added to the opponent’s campaign fund,
• it will be better for your candidate to have less money if that simultaneously keeps his/er opponent too poor to vigorously deliver their own message.

— David Grace (Amazon Page — David Grace Website)

If you would like to know about David Grace’s new, always free, columns, click this LINK and then fill in your email address. When a new David Grace column is published, Medium (not David Grace!) will send you the new column as an email.

CLICK HERE to see some topic lists (Racism, Humorous Short Stories, etc.) and links in each topic list to some of my favorite columns on that topic.

To see a searchable list of all David Grace’s columns in chronological order, CLICK HERE

To see a list of all of David Grace’s columns sorted by topic/subject matter, CLICK HERE

To see David Grace’s Medium Home Page, CLICK HERE

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How To End The Superpacs’ Massive Campaign Spending Spree was originally published in David Grace Columns Organized By Topic on Medium, where people are continuing the conversation by highlighting and responding to this story.

By David Grace (Amazon Page — David Grace Website)

The Complaint That Dumb Voters Ruin Democracy

As long as democracy has existed there have been critics who have complained that the system is fundamentally flawed because of ignorant voters, stupid voters, biased voters, and self-interested voters.

Those critics argue that democracy cannot work well unless and until we filter out these defective voters and instead let only “smart” people or educated people, or moneyed people pick our leaders.

Fixing Democracy By Restricting Who Can Vote

These so-called reformers have tried several tactics to accomplish their goal:

• a literacy test to weed out illiterate or uneducated voters;
• a property test to only allow upper-class property owners to vote;
• a poll tax to only allow people who are successful enough and committed enough to pay to cast a ballot.

All of these schemes are between flawed and massively flawed, and worse, they have approached democracy’s central problem, the potential election of bad leaders, from absolutely the wrong direction.

The Fallacy Of Thinking That Smart Voters Always Pick Good Leaders

The failed logic of those who want to fix democracy by limiting who can vote is the false belief that smart, well informed, objective, fair-minded voters will always elect smart, well informed, objective, and fair-minded politicians.

Dumb.

It’s fundamentally silly to try to solve the “problem” of dumb voters possibly electing incompetent, corrupt or evil politicians by limiting who can vote.

The Problem Is Not Bad Voters. It’s Bad Politicians

Democracy’s problem is not biased, racist, mean or fanatical voters who might elect bad leaders. Its problem is the biased, racist, mean or fanatical politicians whom they might vote for.

Eliminate The Bad Politicians & The Bad Voters Won’t Matter

Instead, we solve the problem of dumb voters possibly electing incompetent, corrupt or evil politicians by preventing incompetent, corrupt or evil politicians from getting on the ballot inn the first place.

Get rid of the unqualified politicians and the qualifications of the voters become irrelevant.

How Do We Eliminate Bad Politicians?

The same way that we keep psychopaths and idiots off the police force, that we keep dangerous people from manning nuclear missile silos, that we keep pedophiles from teaching in elementary schools.

We Screen Out The Psychopaths

Because it was recognized that we didn’t want psychopaths becoming police officers and pyromaniacs becoming fire fighters, years ago psychiatrists developed lengthy and complex personality tests that are highly effective in flagging those with serious mental conditions.

While I have little confidence in the effectiveness and reliability of LLMs for general purpose tasks, focused AIs whose training is limited to a narrow set of data can be very effective at discerning patterns in the answers to psychological tests.

Administer a two or three-hundred question psychological test to five hundred known psychopaths and five hundred known non-psychopaths and an LLM can learn to effectively score unknown individuals on a psychopath scale.

The same for common-sense reasoning ability and other psychological characteristics that we would want to screen in or screen out.

Can We Require Candidates To Pass A Psychological Exam?

While it can be argued that in a democracy everyone of legal age and citizenship has a right to vote, there is nothing in the Constitution that guarantees everyone the unfettered right to serve.

We already legally deny felons the right to vote, and I doubt that there is any legal impediment to forbidding felons the right to serve.

We can already legally deny psychopaths the right to be police officers. There should be no legal barrier in forbidding psychopaths the ability to hold elected office.

Fix Democracy By Weeding Out Bad Politicians, Not Dumb Voters

To improve democracy it’s silly to try to require a higher level of wealth, eduation or intelligence from the voters.

To improve democracy we should instead require a higher level of intelligence and character from the politicians.

— David Grace (Amazon Page — David Grace Website)

If you would like to know about David Grace’s new, always free, columns, click this LINK and then fill in your email address. When a new David Grace column is published, Medium (not David Grace!) will send you the new column as an email.

CLICK HERE to see some topic lists (Racism, Humorous Short Stories, etc.) and links in each topic list to some of my favorite columns on that topic.

To see a searchable list of all David Grace’s columns in chronological order, CLICK HERE

To see a list of all of David Grace’s columns sorted by topic/subject matter, CLICK HERE

To see David Grace’s Medium Home Page, CLICK HERE

To follow David Grace on Threads, CLICK HERE

Don’t Fix Democracy By Limiting Who Can Vote. Fix It By Limiting Who Can Serve was originally published in David Grace Columns Organized By Topic on Medium, where people are continuing the conversation by highlighting and responding to this story.

By David Grace (Amazon Page — David Grace Website)

We’ve all been taught that a free market always drives prices down. That’s not true.

The classical theory is that

• (1) each sellers’ top priority is selling more units
• (2) the most effective way to sell more units is to offer a lower price and
• (3) if a seller in a free market raises its price then its sales volume will fall causing it to make less money.

Those ideas are sometimes true and sometimes not true. This column explains why today they are increasingly untrue.

Does A Higher Price Earn A Seller More Money?

If a seller increases the price of its product and the higher price causes the number of units sold to decrease, the seller looks at two numbers:

• (1) how much less money it gets because the higher price has caused it to sell fewer units.
• (2) how much more money it gets from the higher price it charges for the number of units it does sell

Elastic Prices — The Higher Price Reduces Revenue

If the seller previously sold 1,000,000 units per month at $10 each then its gross revenue would be $10,000,000.

If the seller increased the price by $1/unit to $11 each and because of the higher price sales fell to 900,000 units then its gross revenue would fall to $9,900,000, a $100,000 decrease in revenue.

The money lost from fewer units sold was greater than the money gained from the higher price.

When you make less money by raising your price, the old price is said to be “elastic.”

Inelastic Prices — The Higher Price Increases Revenue

If the price went up by $1/unit to $11 each and sales fell to 950,000 units because of the higher price then gross revenue would increase to $10,450,000, $450,000 more revenue.

The money lost from fewer units sold was less than the money gained from the higher price.

When you can make more money by raising your price, the old price is said to be “inelastic.”

Unity Elastic Price

If sales had dropped from 1,000,000 units/month to 909,091 units then the money lost from the drop in sales volume would exactly equal the money gained from the higher price.

In this case the old $10 price would be neither elastic nor inelastic, but rather it would be called the “unity elastic price” or sometimes the “unity price.”

A Market With Many Competing Sellers — Elastic Price

Suppose you have a product, let’s say ballpoint pens, with 10 major manufacturers who all offer similar products and where each has around a 10% market share.

If one of those ten companies raised its price the other nine sellers could easily supply the higher-priced seller’s customers who wanted to change vendors to avoid the price hike.

Because there would be a readily available supply of pens at the old price from other established sellers, an increase in price by one of the sellers would result in a large decrease in that seller’s sales volume.

The seller who raised its price would lose more money from the reduced sales volume than it would gain from the higher price which means that the old price would be elastic.

The market would punish the seller who raised its price thus deterring price increases.

The More Concentrated The Market The More Inelastic The Price

But let’s say that through acquisitions and consolidations the number of sellers dropped from ten to five with each having a 20% market share.

Now, if one of those five companies (20% of the market) raised its price by $.25/unit its customers would want to take their business to another seller, but each of the other four would have to increase production by at least 25% (20%/4 = 5%/20%) to be able to service all the increased-price company’s unhappy customers.

Increasing your factory’s size, your raw materials purchase, and the number of skilled employees by 25% is time consuming and difficult enough, but doing it while each of your competitors are also competing with you for the same specialized equipment and trained employees is even harder.

In practical terms, the other sellers would, in the short term, find it difficult to impossible to fill the needs of all of the customers who didn’t like the higher price, and therefore the drop in sales volume for the seller who increased its price would be less than it would have been if there were nine instead of four other sellers who could have satisfied the needs of all those extra customers.

Due to the limitation of the immediately available supply from other sellers, the drop in sales from the higher price would be lower in that concentrated market than than it would be in a non-concentrated market making the price increase profitable.

A price in a market with ten sellers that would be elastic because of the additional available supply would be inelastic in a market with five sellers because of the lack of an additional available supply.

This ability to increase prices with increasing market concentration continues until you get just a few sellers who will act as a pseudo cartel or one seller who has a monopoly.

When that happens you get the monopoly price which is the price that will generate the maximum level of gross revenue that can be squeezed out of the product’s customers.

The Relationship Between Market Concentration & Higher Prices

There is a direct relationship between

(a) market concentration and (b) the market share of the seller that is raising its price, and

(c) the unity price, namely,

the more concentrated the market and the greater the market share of the company raising its price, the more inelastic is the old price, the higher is the unity price, and the more the seller can charge a higher price.

Two Pricing Strategies

There are two basic pricing strategies:

• (1) a Competitive Pricing strategy where sellers offer a lower price than their competitor’s price in order to increase their sales volume, and
• (2) a Follow-The-Leader pricing strategy where sellers increase their price to match their competitor’s higher price in order to increase their profit per unit sold

The Tipping Point That Energizes Follow-The-Leader Pricing

As the number of sellers decreases,

• (1) the sellers’ market shares increase,
• (2) the unity price increases, and
• (3) we more closely approach a tipping point where sellers switch from a Competitive Pricing strategy to a Follow-The-Leader pricing strategy.

An Example Of The Switch In Pricing Strategy

When one ballpoint pen seller raises its price by $.25/unit the other four sellers weigh their options.

• (1) Competitive Pricing: They can either keep their old, lower price and struggle to increase production to absorb some of the new customers fleeing the higher-priced seller or
• (2) Follow-The-Leader Pricing: They can raise their own price to match their competitor’s new higher price.

Let’s say that the market is 5,000,000 units per month and each of the five companies sells 1,000,000 units.

Let’s say that the higher-priced seller’s competitors can each scale up to produce an additional 125,000 units/month. In that case the seller raising its prices might see its sales volume fall no more than from 1,000,000 units/month to 500,000 units/month.

1,000,000 units at its old profit of $.25/unit = a monthly profit of $250,000

500,000 units at the new profit of $.50/unit = a monthly profit of $250,000.

The price increase does not hurt the increased-price company. The price increase stays in effect.

If the profit of the other sellers is $.25/unit that means that before they recover their costs of increasing their production they each would have an additional $31,250 in profits/month ($.25 profit X 125,000 additional units sold).

On the other hand, if they each increased their price by $.25/unit to $.50/unit profit and they gained zero increased unit sales then they would each see their profit increase by $50,000/month. (Old: $50,000 profit — 200,000 units x $.25 profit. New: $100,000 profit (200,000 units x $.50 profit).

Clearly, it’s better for the other companies to raise their prices and earn an additional $50,000/month than to keep their current lower price and only earn an additional profit of $31,250/month, less the costs of increasing their production capacity.

And notice, if the other four companies also raise their prices the company that first raised its prices does not lose any sales because of the higher price and its profits increase from $50,000/month at the old price to $100,000/month at the new price.

Yes, some customers might reduce their orders but the total sales decrease across all five companies would likely be no more than 10%.

ALL of the five sellers make more money from the price increase. The market does not counteract the price increase. In fact, the market rewards the sellers with higher profits for increasing their prices.

Supply & Demand

While prices may be dependent on supply and demand, supply is dependent on the immediately available additional manufacturing capacity sufficient to satisfy the needs of all of the customers of the largest producer in the event that the biggest producer increases its price.

When that additional manufacturing capacity is not present then there is insufficient supply to satisfy the needs of the largest producer’s customers who wish to switch vendors.

That limitation on supply not only insulates the seller from a huge reduction in sales because of the price increase but it will also likely cause that price increase to spread like an infection to all other producers of that product in the form of Follow-The-Leader pricing.

The Effect Of Market Concentration

Two very important facts stem from there being only five sellers instead of ten sellers serving the entire market:

• (1) Fewer sellers means that the old unity price becomes an inelastic price, that is, fewer sellers means that increased market concentration changes a price increase from being unprofitable to being profitable.
• (2) Fewer sellers means that sellers are motivated to switch their pricing strategy from competitive pricing where the sellers keep the old low price in response to a competitor’s higher price to a Follow-The-Leader pricing strategy where other sellers raise their prices to match their competitor’s new, higher price.

We See This In Our Consumer Prices Today

This is what we are seeing in today’s much more concentrated markets.

Four meat producers butcher and distribute almost all the beef in the U.S. Three producers dominate chicken production and three control pork. In total, six companies overwhelmingly control the market for all the beef, pork and chicken sold in the U.S.

You can see this same concentration in consumer goods from ketchup to disposable diapers, from gasoline to pharmaceuticals.

When six or fewer companies supply 60%, 70%, 80% of the entire United States’ market for a product, that concentration changes prices from elastic to inelastic, increases the unity price, and motivates sellers to switch from a competitive pricing strategy to a Follow-The-Leader pricing strategy.

Is There A Realistic Mechanism That Will Restore Competitive Pricing?

If you want lower prices then you either

• (1) find a way to lower market share for most products to below 10% per supplier or
• (2) eliminate the profit motive for charging higher prices
• (3) find a way to switch sellers from a Follow-The-Leader pricing strategy to a competitive pricing strategy

It’s Almost Impossible To Reverse Market Concentration

For many reasons including but not limited to the economies of scale, I think it is impossible to reverse today’s market concentration.

Prevent The Profit Motive From Driving Up Prices

It is mechanically (not politically) easy, however, to prevent the profit motive from driving higher prices by levying a 100% tax on taxable profits that exceed 20% of deductible costs.

If a seller knows that it will lose all the extra money it might make by charging a higher price to an excess profits tax then it has no motive to increase its price.

Switching Sellers From Follow-The-Leader Pricing To Competitive Pricing

A Follow-The-Leader pricing strategy won’t do a seller any good if all the extra money it might make from those Follow-The-Leader higher prices will be taken away in an excess profits tax.

If a seller knows that it will lose in taxes all the extra money it would gain from a Follow-The-Leader higher price per unit then the only way the seller will be able to earn twice as much in profits next year as it earned this year is to live with the same amount of profit per unit sold and double the number of units it sells.

To double its unit sales it will have to switch from a Follow-The-Leader pricing strategy to a competitive pricing strategy.

Put differently, if Acme sells 10,000,000 units and it makes a profit of $1/unit and it knows that if it raises its price to $2/unit that extra dollar in profit will be taken away in taxes, then the only way Acme will be able to increase its profits from $10,000,000/year to $20,000,000/year will be for it to sell 20,000,000 units next year.

In order to double the number of units it sells a company will need to compete on quality, features and price rather using its large market share to facilitate it and its competitors raising prices by adopting a Follow-The-Leader pricing strategy.

— David Grace (Amazon Page — David Grace Website)

If you would like to know about David Grace’s new, always free, columns, click this LINK and then fill in your email address. When a new David Grace column is published, Medium (not David Grace!) will send you the new column as an email.

CLICK HERE to see some topic lists (Racism, Humorous Short Stories, etc.) and links in each topic list to some of my favorite columns on that topic.

To see a searchable list of all David Grace’s columns in chronological order, CLICK HERE

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Why Prices Are Going Up And Market Competition Isn’t Driving Them Back Down was originally published in David Grace Columns Organized By Topic on Medium, where people are continuing the conversation by highlighting and responding to this story.

By David Grace (www.DavidGraceAuthor.com)

There are two personality traits that will make your life easier if you can acquire them:

• Not Living In The Past — Letting Go Of Guilt
• Not Living In The Future — Not Suffering Today The Pain You May Encounter Tomorrow

Not Living In The Past — Letting Go Of Guilt

Guilt is the memory of doing wrong combined with empathy for the person hurt by that wrong.

People who have no empathy can’t feel guilt. They are sociopaths.

Guilt is an effective mechanism to correct bad behavior. It motivates us to recognize our mistake, do whatever we can to fix the damage we’ve caused, and commit to do better the next time.

But because we don’t have a time machine, that’s all we can do. Beyond that, continuing to punish ourselves with guilt is worse than useless. It’s a harmful choice to live in pain and in the past, and we need to stop it.

Unfortunately, many people don’t allow themselves to get past the guilt. In a form of masochism, they feel that they deserve to be punished so they let the guilt sit there, nurturing it and slowly poisoning themselves.

And, if any happiness does happen to enter their life, they push it away because they think they don’t deserve to ever be happy again.

“How dare I be happy when Billy is dead? What kind of a person enjoys a party after they’ve done what I’ve done?” they ask themselves as if having a decent life is immoral and they deserve to be unhappy forever as punishment for their mistake.

If we had a working amnesia machine we could free ourselves from guilt by erasing the memory of our wrongful conduct.

But we don’t, so in order to survive we have to turn off the guilt by an exercise of will. We have to tell ourselves:

“What’s done is done. I’m sincerely sorry for what I did. I’m going to do everything I can to never make that same mistake again. I’ve done everything I can to make amends. I can’t go back in time and undo it. Continuing to punish myself over mistakes I cannot fix is an exercise in masochism and futility. I cannot live in the past.”

To save ourselves, we need to turn the guilt into just a memory of the past and not constant suffering in the present.

Not Punishing Yourself Today With The Pain You May Encounter Tomorrow

Living In Fear Of What Might Happen

Planning is a powerful tool we can use to have a more successful life or at least a less mistake-filled one. By anticipating problems we can often avoid them. By anticipating opportunities we can often take better advantage of them.

The problem comes from having a personality that is obsessed with predicting some kind of a potential future pain and then choosing to live in fear today of the pain that might or might not happen tomorrow.

People who live this way construct a mental series of ever more dire events like a row of dominoes and then, over and over, they imagine them toppling.

Your company is having problems. You know that you might get laid off. You lie in bed worrying,

• What if I lose my job?
• If I lose my job, I won’t have health insurance.
• If I lose my health insurance and I get sick, the hospital bills could bankrupt me.
• If I get sick and I don’t go to the hospital, I could die.

This is common. To some extent we all do this, but it’s an exercise in trying to live in the future, unnecessarily suffering the feared failures and disappointments of tomorrow, today.

When we do this we not only choose to experience today the pain we might feel in the future, but if the feared event does occur we suffer that pain twice — both now and also later.

And if the disaster doesn’t happen, we’ve tortured ourselves for nothing.

It’s one thing to recognize a potential future problem and another to punish yourself by worrying about it now before it actually happens.

The future does not yet exist. Those painful events do not yet exist. They may never exist.

Recognizing that a problem might arise is an act of logic.

Living in fear now of all the bad things that might happen to you later is just another way of trying to live in a future that today is only an illusion.

We cannot successfully live in the future any more than we can live in the past. No good will come from trying to do it.

Suffering Today From A Pain You Will Not Experience Until Tomorrow

From time to time we find ourselves in situations where we know that at some point in the future we will experience pain — a pending operation, a court hearing, etc.

People who choose to live in the future allow tomorrow’s pain to poison today’s happiness.

I used to marvel at the mobsters who seemed to be able to enjoy life while under indictment or awaiting sentencing. How could they tune out the knowledge that in a few weeks they were going to be thrown into prison?

I think the key to dodging that bullet is being able to force yourself to recognize that tomorrow does not exist and, for you, may never exist. You have to have the mental toughness to refuse to live in tomorrow, to refuse to experience future pain in advance.

Easy to say. Difficult to do.

We Cannot Live In Yesterday Or Tomorrow

The people who instinctively, automatically, don’t feel the lure of re-living today the pain of the past or anticipating today the pain of the future are lucky indeed.

For the rest of us who don’t have that innate ability, we constantly need to remind ourselves that

• the past is irretrievably gone
• the future does not yet exist
• all we have is now

We deserve a now that is not tainted by

• old mistakes we regret but cannot undo or
• a future pain that has not yet arrived.

It’s not easy to let go of the guilt and fear. Not everyone can do it. But we need to try and even if we are only partially successful, it’s worth the effort.

— David Grace (www.DavidGraceAuthor.com)

To see a searchable list of all David Grace’s columns in chronological order, CLICK HERE

To see a list of David Grace’s columns sorted by topic/subject matter, CLICK HERE.

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The Toxicity Of Trying To Live In The Past Or In The Future was originally published in David Grace Columns Organized By Topic on Medium, where people are continuing the conversation by highlighting and responding to this story.

By David Grace (Amazon Page — David Grace Website)

Simple-Minded People Don’t Want To Think Because They Can’t

Because simple-minded people can only understand simple concepts they are thirsty for simple answers. Simple ideas. Stereotypes and slogans that reinforce their prejudices and hatreds.

“I don’t need no book learnin’ to know that . . . .” is their constant self-defense refrain

Dumb people just want to be given a list of simple ideas that they can memorize and trot out to deal with whatever questions life throws at them.

Dumb People’s Slogans They Think Are True

We’ve seen these silly notions our entire lives:

• “Those people all have rhythm.”
• “Those people are good with money”
• “How many Poles does it take to screw in a light bulb?”
• “Poor people are poor because they’re lazy.”
• “Gay people chose to be homosexual”
• “Democrats are socialists who hate America”
• “The people in ‘red states’ are all redneck racists”
• “White people are genetically superior to other races”
• “Black people are genetically more violent and more stupid than white people”
• “Black people don’t want to work hard”
• “Mexicans are lazy losers who come here to get free money from the government”

There are many, many more. Sorry if I didn’t include yours.

The Truth Is Different

The truth is that every day the so-called “lazy” Mexicans are performing the back-breaking labor of harvesting America’s melons, tomatoes, strawberries and a laundry list of other crops.

These same “lazy” Mexicans are the America’s gardeners, painters, dishwashers, maids etc. who do every menial, back-breaking, tedious, tough and difficult job in America, jobs most white people won’t accept at any price.

In point of fact, no one works harder than a Mexican.

For well over one-hundred and fifty years the so-called “lazy” black people performed the back-breaking labor of planting and harvesting all of this country’s tobacco and cotton.

Chinese and Irish immigrants sweated their lives away building America’s railroads.

Poor People Are Poor Because They Don’t Have The Money Needed To Get Trained

Poor people don’t get a free ride anywhere in this country. They work their asses off in restaurants, hotels, retail stores, construction sites and any other place where you don’t need a college degree to get hired for barely enough money to feed yourself.

Lots of states have a minimum wage of under $10 and hour. That’s $20,800 per year gross. About $17,500 per year take-home pay. How many of you could live on $17,500 per year, leastwise support even one child on it?

Dumb people toss around the myth of “welfare queens” referring to women who had a bunch of children so that they could sit at home and collect a welfare check for each child.

The federal government changed the welfare rules to eliminate that sort of thing when Clinton was President back in 1996, almost thirty years ago.

Dumb People Elect Toxic Politicians

The wreckage simple-minded people leave in their wake goes far beyond their racist, sexist, stupid, false, bigoted, angry notions about people who are different from themselves.

Much worse is that they impose those same stupidities on the rest of us through the similarly simple-minded, or worse, the fundamentally toxic politicians they elect.

If a politician tells these people that

• gays are sick sinners and shouldn’t be allowed to get married,
• abortion is murder,
• black people and Hispanics are lazy losers who, if not stopped, are going to sit on their asses all day drawing those sweet welfare checks

and that if elected s/he will fix all that, the dumb people will vote for them even though those politicians

• are in the pocket of the drug companies, oil companies, Wall Street & insurance companies,
• will cut taxes for wealthy people and corporations thus increasing taxes on them,
• will prevent workers from getting a living wage or overtime pay,
• will preserve a system where ordinary hard-working people are unable to afford to buy a house, get needed medical care or educate their children.

What’s More Important, Fighting Sin Or Taking Care Of Your Family?

What’s more important to you, housing, feeding and educating your family or punishing gay sinners and stopping unmarried teens from getting birth control and then an abortion when the lack of available birth control yields its inevitable result?

I think we know the answer to that question.

Lyndon Johnson once said: “If you can convince the lowest white man that he’s better than the best colored man, he won’t notice you’re picking his pocket. Hell, give him somebody to look down on, and he’ll empty his pockets for you.”

Still very true.

BTW, if you think I think that the Democrats are wonderful, here is what I have to say about them:

• Why So Many People Dislike The Democrats
• How The Democrats Destroyed Their Brand & Gave The Country To Trump

— David Grace (Amazon Page — David Grace Website)

If you would like to know about David Grace’s new, always free, columns, click this LINK and then fill in your email address. When a new David Grace column is published, Medium (not David Grace!) will send you the new column as an email.

CLICK HERE to see some topic lists (Racism, Humorous Short Stories, etc.) and links in each topic list to some of my favorite columns on that topic.

To see a searchable list of all David Grace’s columns in chronological order, CLICK HERE

To see a list of all of David Grace’s columns sorted by topic/subject matter, CLICK HERE

To see David Grace’s Medium Home Page, CLICK HERE

To follow David Grace on Threads, CLICK HERE

The More Deeply Someone Believes Lies About People Different From Themselves, The Dumber They Are was originally published in David Grace Columns Organized By Topic on Medium, where people are continuing the conversation by highlighting and responding to this story.