BuzzFeed does absolutely no research in misguided complaint about prices

July 18, 2022

By Tim Worstall

BuzzFeed runs what appears to be a lighthearted article concerning things that should be cheaper than they are.

This is, as it happens, part of their intensive journalistic research process known as “reading Reddit.” But that particular critique is getting a little old since it’s been repeated so often. The problem with the piece is that no attempt is made to describe why things are the way they are.

To explain why some things which, at first sight, should be cheaper but are not would be to educate the readership. For example, we’re told of the manner in which graphing calculators were  $89 in the 1990s and yet they’re still $89 today. Apparently, they should be cheaper.

Except, of course, they are cheaper today. The government has managed money so well over these years that what $89 bought then costs $176 today. Except, graphing calculators of course, which haven’t even gone up in nominal price as money has lost half its value. Or, the other way to put this, graphing calculators cost half what they used to.

Or the complaint about printer ink. Yes, it is expensive. But the way this business works is known, in industry, as the King Gillette tactic. Give away the razors to get people to buy the razor blades. It’s easy enough to see in any drug store, especially when there’s a sale on or a coupon available. It’s cheaper to buy the razor with a couple of blades than it is to purchase the replacement blades. So too with printer ink. The printers are sold below cost. The money is made over time with the profit on the replacement inks. PS5s and other video game consoles work the same way. The manufacturer subsidizes the machine – they lose money on every one sold at least to start with – in order to gain the commission the games manufacturers pay the hardware folk. The point here is that the overall ownership cost of the entire system – razor plus blades, printer plus ink – comes out about the same as if they charged full price for the printer in the first place and less for the ink. To complain about prices is fine, of course, but it has to be all prices which are thought about, not just the ones that sting.

Much the same can be said about the price of soft drinks in a restaurant. Yes, the margins are high on them. But that’s the way the business works – food doesn’t have much profit associated with it, and the costs of the business are paid out of the margins on all of the sales. Food margins are low, soft drinks high – it’s all the prices that need to be considered.

The costs of an EpiPen, now, we agree that is high. But the reason why is the Food and Drug Administration rules that mean that competition cannot gain a foothold in the U.S. The same, or similar, is indeed much cheaper in Europe, but that’s because there’s more competition given different regulation. No, it’s not that national health systems negotiate the price. It’s that more people are able to sell different things that do the job – competition brings the price down.

College textbooks – yep, that is appalling and it’s because it’s a monopoly. The college gets to decide what the students must buy. So, in each college class, it’s a monopoly, and monopolies lead to high prices.

Much of the list is much the same. There are reasons – and not necessarily bad ones, apart from the college textbooks – why things are the way they are. The usual reason being that there’s some cross-subsidy going on so that the total ownership costs need to be taken into account, not just the costs of one part of the system or experience. It’s only by explaining why things are the way that they are that it’s possible to then concentrate on changing those that need to be changed – textbooks, the FDA’s regulations of medicines.

BuzzFeed is normally thought of as primarily clickbait which is, to be fair, often fair enough. But it still ranks as No. 30 in the listings of U.S. news media outlets and gains some 95 million visits a month from that position.

The standard invocation about journalism is that it should explain the who, what, where and why. It’s that last that BuzzFeed is failing here. Sure, people say these things on Reddit, how interesting, but why is it that things are this way? Not telling folk is misleading them.


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