Friday, December 09, 2005
On Wal-Mart and Gasoline
What does it mean to do something voluntarily? The dictionary defines it as, “Done or undertaken of one's own free will.” In a free society it is assumed that most of what we do is done under our own free will. Maybe I am too much of an optimist, but I believe that when people make decisions for themselves they make the best decisions possible with the information that they have. They also make these decisions VOLUNTARILY. These voluntary decisions also include the exchange of goods, services, money, and time. There is a basic tenet in economics that when people engage in voluntary exchange both parties benefit. Here is a basic example: I was having dinner with a friend the other night. When our salads arrived I was dismayed to see that mine had onions. I have onions. My dinner partner was also displeased; her salad had tomatoes. She hates tomatoes. Luck was with us that night because I happen to love tomatoes and she happens to love onions. So we did what any rational person would do, we VOLUNTARILY traded. I gave her my onions and she gave me her tomatoes. We now both had salads that were more valuable than before. You could say that because of this VOLUNTARY trade we were both better off. We were both wealthier.
People will engage in VOLUNTARY trade if the exchange will lead to a benefit. Sam Walton understood this concept and parlayed it into one of the most successful businesses in the world. Unfortunately not many people fully understand this concept and we all know that people fear what they don’t understand. Wal-Mart is one of the most successful businesses in the world for the simple fact that people prefer to pay less for goods and services when given a choice. People will VOLUNTARILY shop at Wal-Mart because they benefit from that trade. In fact, people VOLUNTARILY spent nearly $260 billion there in 2005. There is an unfortunate disdain towards big business in the United States and Wal-Mart is the quintessential embodiment of that disdain. We constantly hear how Wal-Mart destroys communities by closing small businesses. Wal-Mart doesn’t close businesses, people who VOLUNTARILY choose to shop at Wal-Mart close businesses. We also hear about the low pay and horrid working conditions at Wal-Mart. Despite these sentiments, there are still 1.6 million people worldwide who VOLUNTARILY apply, interview, and work at Wal-Mart. That means that all of these people are VOLUNTARILY exchanging their time for money.
When you fill your car’s gas tank up you are engaging in a VOLUNTARY exchange. You are telling the gas station that I value your gasoline more than I value my money. Think back to the onions and tomatoes example; if you valued your money more than the gas then you wouldn’t engage in that VOLUNATRY exchange. Unfortunately recent increase in gas prices (and subsequent decline) has made people quite upset about this VOLUNTARY exchange. What people are failing to see, however, is that they can VOLUNTARILY cease their gas purchases if they feel that they do not benefit from the exchange. Of course you can argue that gas is a necessity and you need it to do just about anything. My commute to work is 30 miles, so I would have to agree. However, despite the current price, gas is still the cheapest alternative for most people. The only thing that has changed is that the cheapest alternative just got more expensive. If there were a cheaper alternative then people would VOLUNTARILY choose that alternative. So despite the increase in gas prices, people are still benefiting from the VOLUNTARY exchange.
We elect politicians when we VOLUNTARILY vote, just like we control Wal-Mart’s size when we VOLUNTARILY shop there, and we control gas prices when we VOLUNTARILY purchase gas. Like it or not, that is how the free market works.
People will engage in VOLUNTARY trade if the exchange will lead to a benefit. Sam Walton understood this concept and parlayed it into one of the most successful businesses in the world. Unfortunately not many people fully understand this concept and we all know that people fear what they don’t understand. Wal-Mart is one of the most successful businesses in the world for the simple fact that people prefer to pay less for goods and services when given a choice. People will VOLUNTARILY shop at Wal-Mart because they benefit from that trade. In fact, people VOLUNTARILY spent nearly $260 billion there in 2005. There is an unfortunate disdain towards big business in the United States and Wal-Mart is the quintessential embodiment of that disdain. We constantly hear how Wal-Mart destroys communities by closing small businesses. Wal-Mart doesn’t close businesses, people who VOLUNTARILY choose to shop at Wal-Mart close businesses. We also hear about the low pay and horrid working conditions at Wal-Mart. Despite these sentiments, there are still 1.6 million people worldwide who VOLUNTARILY apply, interview, and work at Wal-Mart. That means that all of these people are VOLUNTARILY exchanging their time for money.
When you fill your car’s gas tank up you are engaging in a VOLUNTARY exchange. You are telling the gas station that I value your gasoline more than I value my money. Think back to the onions and tomatoes example; if you valued your money more than the gas then you wouldn’t engage in that VOLUNATRY exchange. Unfortunately recent increase in gas prices (and subsequent decline) has made people quite upset about this VOLUNTARY exchange. What people are failing to see, however, is that they can VOLUNTARILY cease their gas purchases if they feel that they do not benefit from the exchange. Of course you can argue that gas is a necessity and you need it to do just about anything. My commute to work is 30 miles, so I would have to agree. However, despite the current price, gas is still the cheapest alternative for most people. The only thing that has changed is that the cheapest alternative just got more expensive. If there were a cheaper alternative then people would VOLUNTARILY choose that alternative. So despite the increase in gas prices, people are still benefiting from the VOLUNTARY exchange.
We elect politicians when we VOLUNTARILY vote, just like we control Wal-Mart’s size when we VOLUNTARILY shop there, and we control gas prices when we VOLUNTARILY purchase gas. Like it or not, that is how the free market works.
