Ian Blyth – It's Just a Thought

My thoughts and opinions

Lessons of Supply and Demand

Posted by Ian Blyth on 17 October 2006

Governments generally get this wrong especially as their ideologies tend to make them favour one approach over the other. The left wants everyone to be workers whereas the right wants everyone to be consumers.

Most governments tend to deal with things that they do not want (like drugs) by restricting the supply and trying to stop it or destroy it. That just inflates the price as demand is still the same. Which means it becomes even more profitable for criminals and so creates openings for people to create more supply.

Look at two approaches to dealing with similar issues – fur and ivory. The ivory trade goes on although there are laws against poaching but a single “catch” for a poacher can feed his family for a month. A big incentive especially if the chance of getting caught is slim. So the result is that poaching continues, elephants are killed for their tusks and ivory goods are still made and sold.

The anti-fur trade took a totally different stand. Instead of going after the supply they targeted the demand. With spectacular results. The advert showing a model on a catwalk draped with a fur coat and leaving a trail of blood behind shocked most people. But the message got across and if you wore a fur you were cruel and insensitive. When I was a boy my mother, grandmother and practically all female relatives had a fur coat that was their best and that they were proud of. And we were not a well off family. It was just what every woman had to have. Now you do not see people wearing fur at all. Demand was taken away and so the supply dried up of its own accord. If there is no money in it why do it.

Governments, even with this classical example that everyone quotes, have not learned from this and they still go after supply. Will they ever learn?

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