The forgotten viewpoint

Mark Perry, at Carpe Diem, reminds us of some good advice from French economist, Frederic Bastiat:

Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race.

Let’s apply this advice to some common situations.

Minimum wage.  Here’s a good story about how consumers pay for higher minimum wages (HT: Don Boudreaux, Cafe Hayek). The costs to the consumer includes higher prices and fewer options. Some of the cost is also born by low-skilled workers who will have fewer employment opportunities.

Credit card regulations: Don Boudreaux does a nice job in his Pittsburgh Tribune column, Help That Hurts, of looking at the credit card regulations from the viewpoint of consumers.  Here’s an excerpt:

Congress, the White House and most of the news media describe CARD [Credit Card Accountability, Responsibility and Disclosure Act of 2009] as “pro-consumer.” At first glance this description seems accurate. After all, don’t consumers benefit when the fees and interest rates they must pay are reduced?

Although the answer to this question is “yes,” this isn’t the correct question.

The correct question is, “Don’t consumers prefer to have the option of paying higher fees and interest rates if the alternative is having no access to credit at all?”

Not everyone is financially careful or responsible. Traditionally, credit-card issuers dealt with this fact not by refusing to lend to consumers with poor credit scores but, instead, by using an ingenious approach that helps both those consumers with poor credit scores as well as the banks that lend to them. That approach is to charge delinquent customers significant fees for late payments and to raise interest rates on delinquent balances.

Here are a couple more things where the consumer viewpoint is usually ignored:

  • Foreign trade – Who would be hurt by restricting access to foreign goods? Consumers.
  • Labor unions – Who funds the generous wages and benefit packages of unions? Consumers.

I’ve added a new category to my blog, Consumer Viewpoint, to remind me to continue to apply Bastiat’s advice as I encounter various situations.

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3 thoughts on “The forgotten viewpoint

  1. Pingback: Consumers, Not Producers | The Pretense of Knowledge

  2. Pingback: Things fail | Our Dinner Table

  3. Pingback: Rubber stamped degrees | Our Dinner Table

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