A perfectly competitive market is one where there are many buyers and sellers. Information between buyers and seller is distributed symmetrically and products are homogenous. Barriers to entry and exit do not exist and the consumer is king. A perfectly competitive market is a politician’s idea of capitalist bliss.
It is exactly this type of market structure that - although completely hypothetical and impossible to realise - encourages Eurocrats, bureaucrats and Liberal prats to perpetually manipulate markets to stimulate competition.
Competitive markets lead to a more efficient allocation of scarce resources, which to a politician is like a month in St Barts. Competition lowers prices, lowers the cost of production and ensures resources are used to produce what society actually wants. Competition increases choice and choice in a democratic society (which is ironic when the vast majority of democracies only give voters two choices).
This drive towards increasing levels of competition amongst policy makers, think tanks and other self-important groups is an understandable pursuit. However I always thought medical experts were intelligent.
The British Medical Association (BMA) recently announced it wished to see all alcohol advertising banned. Not curtailed or scaled back or regulated but banned.
Their argument is simple: advertising creates demand and creating demand for alcohol is socially undesirable. Alcohol consumption, they argue, creates a multitude of social costs: drink driving, domestic violence, street brawls, unprotected sex on back alley bins, vandalism, speech impediments and an uncontrollable hunger for dog meat.
Advertising does not create demand. It may increase demand and make consumers less price sensitive, but the main purpose of advertising is to induce brand switching. Diageo want you to buy Smirnoff not Absolut.
The need for alcohol is created by boredom at the age of twelve, weddings, baptisms, funerals, exam success and failure, nights out, nights in, barbeques, losing your virginity, getting that big contract, divorce, the birth of a child, getting that job, being made redundant and celebrating friendship. The demand for alcohol is created by everyday living.
But this is not the biggest flaw in the BMA’s argument. Advertising is a key weapon in a new entrant’s arsenal for breaking down entry barriers. Advertising allows a firm to enter a market and let consumers know they have arrived. But if a potential entrant cannot advertise their new brand of beer are they going to enter the market?
Probably not and this will create exactly the opposite of what every politician wants. It will lock up the current market structure and allow incumbent firms to collude and produce inefficiently without fear of losing market share to new competitors. The same has happened with cigarette producers: advertising in the UK is banned so no new brands have entered the market for years. British American Tobacco et al can sit back, carve up the market and inhale profit.
So if the BMA want levels of alcohol consumption to fall they must first do harm and destroy the purity of life. In every house they must want only the worst for their patients and if they keep this oath faithfully they will enjoy their lives. But they will be disrespected by all and in all times. But if they swerve from their announcement and violate it may the reverse be their lot.
It is exactly this type of market structure that - although completely hypothetical and impossible to realise - encourages Eurocrats, bureaucrats and Liberal prats to perpetually manipulate markets to stimulate competition.
Competitive markets lead to a more efficient allocation of scarce resources, which to a politician is like a month in St Barts. Competition lowers prices, lowers the cost of production and ensures resources are used to produce what society actually wants. Competition increases choice and choice in a democratic society (which is ironic when the vast majority of democracies only give voters two choices).
This drive towards increasing levels of competition amongst policy makers, think tanks and other self-important groups is an understandable pursuit. However I always thought medical experts were intelligent.
The British Medical Association (BMA) recently announced it wished to see all alcohol advertising banned. Not curtailed or scaled back or regulated but banned.
Their argument is simple: advertising creates demand and creating demand for alcohol is socially undesirable. Alcohol consumption, they argue, creates a multitude of social costs: drink driving, domestic violence, street brawls, unprotected sex on back alley bins, vandalism, speech impediments and an uncontrollable hunger for dog meat.
Advertising does not create demand. It may increase demand and make consumers less price sensitive, but the main purpose of advertising is to induce brand switching. Diageo want you to buy Smirnoff not Absolut.
The need for alcohol is created by boredom at the age of twelve, weddings, baptisms, funerals, exam success and failure, nights out, nights in, barbeques, losing your virginity, getting that big contract, divorce, the birth of a child, getting that job, being made redundant and celebrating friendship. The demand for alcohol is created by everyday living.
But this is not the biggest flaw in the BMA’s argument. Advertising is a key weapon in a new entrant’s arsenal for breaking down entry barriers. Advertising allows a firm to enter a market and let consumers know they have arrived. But if a potential entrant cannot advertise their new brand of beer are they going to enter the market?
Probably not and this will create exactly the opposite of what every politician wants. It will lock up the current market structure and allow incumbent firms to collude and produce inefficiently without fear of losing market share to new competitors. The same has happened with cigarette producers: advertising in the UK is banned so no new brands have entered the market for years. British American Tobacco et al can sit back, carve up the market and inhale profit.
So if the BMA want levels of alcohol consumption to fall they must first do harm and destroy the purity of life. In every house they must want only the worst for their patients and if they keep this oath faithfully they will enjoy their lives. But they will be disrespected by all and in all times. But if they swerve from their announcement and violate it may the reverse be their lot.
