Volitional Pricing

It doesn’t matter what we charge, unless others to agree to pay it. Virtually everyone would prefer to get a higher price for what he sells and pay a lower price for what he buys. The history of most great American fortunes—Ford, Rockefeller, Carnegie, etc.—suggests that the way to amass vast amounts of wealth is to figure out some way to provide goods and services at lower prices, not higher prices. When Richard Sears tried to overtake Montgomery Ward, he did it, not because he did not have enough money to live on, but because he wanted more. If that is our definition of “greed,” then he was greedy. Realistically speaking, do keep in mind that when prices go up, it is far more likely to be due to supply and demand than to greed.

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Inventories Definition

Inventory is a substitute for knowledge. Since you don’t always know just how much inventory you are actually going to need and since inventory costs money, a business enterprise must try to limit how much inventory it has on hand. Those businesses, which have the greatest amount of knowledge and come closest to the optimal size of inventory, will have their profit prospects enhanced. Just as prices in general affect the allocation of resources from one place to another at a given time, so returns on investment affect the allocation of resources from one time period to another. A high rate of return provides incentives for people to save and invest more than they would at a lower rate of return. – A higher rate of return encourages people to consume less in the present so that they may consume more in the future. It allocates resources over time. The present value of an asset is in fact nothing more than its anticipated future returns, added up and discounted for the fac...

Efficiency and Its Implications

Production costs are reduced when the fixed overhead costs can be spread out over a large volume of output, adding little to the cost of each individual item. Scheduling also affects production costs. When a high-volume retailer signs a contract for a large order from a given manufacturer, that manufacturer can then schedule the work evenly throughout the year. This avoids the additional costs that go with ups and downs in the orders that come in unpredictably from the market, leaving the manufacturer’s workforce idle during some weeks. The fact that profits are contingent upon efficiency in producing what your customers want, at a price that customers are willing to pay – and that losses are an ever present threat if a business fails to provide that – explains much of the economic prosperity found in economics that operate under free market competition. Profits as a realized end-result are crucial to the individual business, but it is the Prospect of Profits – and the threat of loss...

Winners & Losers

Whatever the merits or demerits of various political proposal, what must be kept in mind when evaluating them is that the good fortunes and misfortunes of different sectors of the economy may be closely related as cause and effect - and that preventing bad effects may prevent good effects. It was not accidental that Smith Corona was losing millions of dollars on its typewriters while Dell was making millions on its computers. It was not accidental that Safeway surged to the top of the grocery business while A&P fell from its peak to virtual oblivion. The efficient allocation of scarce resources, which have alternative uses, means that some must lose their ability to use those resources in order that others can gain the ability to use them Typewriters were no longer what the public wanted after they had the option to achieve the same end result and more with computers. Scarcity implies that resources must be taken from some places, in order to go to other places.

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