Wednesday 6 November 2002

Pic of the day: And give us this day our daily bread.

All these choices

I just woke up from a nap. And I needed it too. I've got a bad case of the head cold and feel rather shabby. I see how people can confuse it with the flu. Anyway, in my sleep I dreamed. And in my dream we were in a supermarket, and I argued to a friend that it would be so much better if things were simpler. Did we really need many different types of bread? In the past, the village only had one baker. I woke up while still ashamed that I could say such a thing, but I decided to think it over.

In theory, there could be much money to save by reducing choice. If we all ate the same type of bread (except those with special medical needs) then we could make this bread in very large quantities and distribute it with very little waste. The economy of scale would make it possible to have noticeably cheaper bread.

In reality, of course, monopolies don't work that way. A monopoly will be ineffective, greedy and possibly even corrupt, since it has absolute power within its area. I remember when I was a child, my native Norway had a state-owned telephone company. Prices were high, service was bad and hardly with a smile, and the thing was organized with a bureaucracy as you normally expect to find in state administration. Then some years ago, competition was introduced. Prices fell like shot ducks, service improved, and new services abounded. Coincidence? I think not.

Recently, the Scandinavian Airlines (SAS) bought out their main competitor on air transport within Norway. Before the "fusion", they promised not to raise prices. I had a hard time believing my own ears. The point of acquiring a monopoly is to raise prices, as even the junior economy student will know. This also came to pass. Almost immediately after the deal was finalized, the prices shot up. There they remained until yet another company, "Norwegian", was established and started to traffic the same destinations. Nearly to the day, SAS lowered prices, but only on those destinations. Oh, and SAS is owned largely by the states of Sweden, Norway and Denmark.

Private or state-owned, monopolies can be relied on with the certainty of natural law to always cause higher prices, lower quality, and poorer service. There is not and can not be an exception to this. It is so by immutable law of nature, in the same way as the movement of the celestial bodies. Let no one ever tell you otherwise. (Microsoft is not actually a monopoly and has never been. They are a "dominating force in the marketplace".)

***

On the other hand, as I some days have walked through the supermarket, I have wondered: Do we really need a dozen different Taco products in Norway? In Mexico, sure, but in Norway? Do we really need and want all this variation, or is it caused simply by people grabbing the nearest product? The more different products on the shelves, the more different products will the (indifferent) shoppers buy. If they had to ask for them, I bet most of these would never be sold.

Some of the most successful shops in Norway (and presumably elsewhere) are chains that only have a limited choice of products. For instance "REMA 1000" in Norway originally had 1000 different products. I think this has changed, but it is still common for this type of shop to only have two or three competing brands of most common things, sometimes only one. If you want more choice, you have to go to a more expensive shop.

Some have bemoaned the focus on price, and I can agree. Ideally I'd like to see these shops carry two kinds of each product, where applicable: One quality brand, and one low-price brand. But in Norway at least, customers in such places always go for the price. That's why these shops are there: To cater to people who don't have much money. (By Norwegian standards, that is. Hunger is hardly a problem in Norway, except for some people with severe mental problems.)

Given that voters in the USA in practice have to choose between 2 political parties, it seems kinda ridiculous to have hundreds of different cheeses. But then again, cheese is an important part of life to many people. In Norway we have a bit fewer brands of food and a bit more political parties, and I guess that's another reason I'm in no hurry to leave. But the day the state-controlled monopolies return, I am willing to reconsider.