There are many different types of value. Humans perceive value based on usefulness, need, rarity, mental stimulation, work or resources that went into an object, age, and many other factors. Probably the biggest factor of real value is need. What value is a big screen TV when you are starving the death? Usefulness and cost of production are also very strong factors of real value. Humans have invented another factor of value though. The phrase, "It is only worth what people are willing to pay," has been misconstrued to mean that the value of a thing is the highest price people are willing to pay for it.
The phrase, "It is only worth what people are willing to pay," was originally intended to convey the fact that an object which is appraised at a high value is only really worth that if you can find someone willing to pay that price for it. It was not intended to mean that it is ethical to charge any amount of money for an object, if someone is willing to pay that much. In fact, the US has anti-extortion laws to prevent businesses from taking advantage of shortages of goods needed for survival by raising prices (laws which have not been enforced during the last few disasters of sorts that those laws were created to cover).
I find that the most ethical method of determining value of goods for sale is to base the price on the cost of production. If a device costs $50 in parts and labor to produce, then that device should not be priced at $1,000. If it is, then it is extortion and theft. Of course, if the production of that device requires expensive equipment, then the cost of the device should reflect that, but it is still not ethical to make the first 100 customers pay for the manufacturing equipment and then keep the excessive profits from future sales.
There are many industries that abuse capitalism in ways that rip off the customer. Companies that produce electronic media are a major contender for the least ethical business practices. Electronic media is especially easy to do this with, because it only has to be produced once and then unlimited numbers of copies can be made at almost no additional cost. A music artist may spend 320 hours (2 months at 40 hours a week) composing a new album. The artist might then spend 20 hours recording all the tracks. Several people (3 maybe) at the studio will also be working to record the album and they might then spend 20 hours editing the tracks and mastering the first copy of the album. The record label might spend 100 hours working on advertising and pay some radio stations or TV stations for advertising time. The label will then copy the master onto thousands or millions of CDs. After this, people or stores will order the CDs, but they will pay shipping and handling, so the label does not have to worry about that. If each person involved gets paid $50 an hour (which I doubt), then the total labor costs through creating the master comes out to $25,000. The cost of the actual CDs (let's say 500,000) probably comes out to less than $50,000 (10 cents a piece is probably a high estimate). If each CD sells for $15 and the record label gets $10 from each, that comes out to $5 million. Presuming $500,000 in advertising costs, the company spent $575,000 on the entire thing and just made nearly 10 times that back. That is 1,000% return. That is absurd, especially given that the stores only made a 50% profit. Worse though, if the CD sells well, then the record company can quickly make another 500,000 copies for less than $50,000 and make another $5 million, at a 10,000% rate of return. Right, some money goes to royalties, but the pathetic rate of royalties for nearly any form of media is negligible (ever wondered why many musical artists keep going on tour, even when they have repeatedly stated how much they hate it). Why do we let the companies keep charging us for a product when society has already paid back several times what it cost to produce? This is extortion. Continuing to charge for a product that has already been paid for is theft.
It is not just media companies that do this though. Whenever new technology comes out, prices start very high. They generally slowly drop over time, but not at the rate they should. I understand that the cost of research and development has to be paid. This does not bother me. Once it is paid off though, quit charging us for it. New computer technology can take years to perfect. A lot of money goes into research. When it is finally ready, the prices are necessarily high. Most technology research is paid off within the first year after release. Somehow, even though devices like laptops only cost $50 to $100 to manufacture, we are still being charged $1,000 or more five or ten years later. When I found out about the low cost of manufacturing laptop computers, the technology was 5 years old. Now, 3 or 4 years later, the prices are finally dropping to more reasonable rates (though, $200 from $50 is still 400% return). The funny thing though is that they are not even using the old, cheaper technology. The new laptops are using new technology, which leads me to believe that $50 a piece was a high estimate and that modern laptops cost more like $25 (or less) to make, which means the return on a $200 laptop is 800%, which is still extortion.
Most of the world may disagree with me, but I am here to say: Charging the highest prices people are willing to pay is not ethical. Cheating people because they don't know better or because they are desperate is wrong. The value of merchandise should be based on how much it cost to produce, not on some math that maximizes profits but puts it out of the budget of people who really need it. What happens to those people that need food, but the math excludes their budget? Ever wonder why so many people need welfare just so they can afford to eat? Charging more than the poor can afford for food just to get a few extra dollars is evil and wrong. People are going hungry in the US because businesses have convinced us that it is ethical to rip off anyone who can afford to pay. It is not ethical to base prices on what people can afford. This is what is destroying our economy.
Lord Rybec
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