03 October 2007

The Hidden Cost of Free Ponyism...

Pastor Jeff has a good post explaining why free ponies (aka Universal, Affordable and High Quality Health care) can't possibly work. 2 out of 3 wouldn't be bad, but politicians insist that 3 out of 3 is possible.

With that in mind, I find it interesting the differing price of the new PS3 bundle. It's not yet official, that'll be next week, but the nearly official numbers are that the exact same console will be USD$399, €449, £299, and AUD$699, with slightly less certain rumors of CDN$449, and ¥47600 in Japan

Using current exchange rates that translates to $399 in the USA, $637 in Europe, in Great Britain $610, in Australia $620, in Canada $451, and $411 in Sony's home market of Japan.

So we get the cheapest PS3s in the world, and Europe has to pay a 59% premium for just being so damn European. Sony is taking advantage of the low value of the Yen versus the Euro, but rather than lowering the price of their console to match the price in Japan and North America, they're extracting a bigger profit margin. Another big chunk of that 59% price difference is the cost of all the different kinds of 'free ponies' that Europeans enjoy (in the form of VATs). You pay for your cradle to grave entitlements with every purchase you make.

Do we want an economy distorted by free ponyism?

(and as I mentioned over at Pastor Jeff's post, I don't care what color my free pony is, so long as it craps ice cream and urinates root beer...)

Pony picture borrowed from here, if you are in the vicinity of Dallas, your princess can ride a pink pony, too! (but not for free, this is still America)

UPDATE: Pastor Jeff links to my linking of his piece, and has expanded thoughts (which I've now just linked to as well. I know, I know, links to links, linking back on links, it's linkeriffic). This got me thinking, Amazon.co.uk, and Amazon.com would be an excellent reference for comparing costs on a variety of consumer goods. I'll limit my study to five goods, an electric tea kettle, the complete Buffy TV Series DVD set, an expensive treadmill, an 8 pack of razor blades, and a complete set of the Harry Potter novels in hardcover. I'll focus on goods that are identical (or nearly identical) in both places, I'm going into this assuming all the American prices are cheaper, but I'm not sure...

Krups Electric Tea Kettle, on sale at Amazon.co.uk for £44.99 (or $102.05), comparable Krups Electric Tea Kettle is available at Amazon.com for $69.99. The model numbers aren't exactly the same, but that's just cause of the different plugs (I think). If you look at the specs for the two items, they are identical. You'd think demand in Britain would be higher for this item (in theory putting downward pressure on the price as there's a bigger market for competing products), as they remain a country that loves their tea, yet this item costs 46% more on Amazon.co.uk. I threw in this item to help the Brits, I even chose a European brand, I doubt it will get better from here.

Buffy, the complete boxed set. For the Region 2 coded edition it sells for £119.98 (or $244.93), the Region 1 coded set of all seven seasons of Buffy goodness (and it is a great show) goes for $164.99. Both come in special boxes, the US version contain 40(!) discs, yet in Britain you have to pay 49% more (and the British boxed set is missing the last bonus disc).

Treadmills should be a good thing to check, both the American and British press (as well as political establishment) are 'concerned' about all the chubbies running around. Found one with the same model number and everything. The Tunturi T20 goes for £849.00 (or $1733.17) in the UK, and in the good old US of A the same item sells for $1399.00. That's a minuscule (by comparison) 22% difference. I wonder if there's some sort of gov't subsidy thing going on with work-out equipment?

What about cheaper consumables like fancy-schmancy razor blades. The 5+1 blade Gillette Fusion Power is sold both in the UK and USA, and the real profit is in the blades (Gillette sent me one free in the mail a few months ago, the non-powered Fusion razor with one cartridge). In the UK, an 8 pack of blades costs £15.99 (a whopping $32.64), while in the USA the identical item costs $17.95. That's the biggest percentage so far, an astronomical 82% difference in cost for these little items. Next time you go to London, smuggle some of these buggers into the country, you could turn a nice little profit for yourself. Also of note, it appears YOU MUST BE at least 18 years of age to buy razor blade refills in the UK. You can't send little Tommy to the cornershop to pick up your replacement blades should you suddenly run out. Nope, that'd be dangerous. The old cutthroat's friend, a deadly, super sharp straight razor, no age verification required. Don't you just love nanny-laws (and their arbitrary enforcement and nonsensical application)?

On to Harry Potter. The boxed sets aren't identical, so this isn't a completely fair comparison, but both in the UK and USA the complete 7 book extra super-cool hardcover boxed sets are being released. In the UK their "children's" edition of the boxed set is £68.25 ($139.33) while the comparable set for the United States is $116.99. These aren't identical, but the book dimensions themselves are similar, and the US edition comes in a box that looks like a chest. I'm guessing these are about the same edition, even though the US edition isn't the "children's" edition, the trunk-like box and stickers would suggest that's the target market (Scholastic never bothered coming out with an Adults/Children's version of each title the way Bloomsbury has in the UK). $116.99 for 7 hardcover books is pretty reasonable, especially given the bloated length of the latter titles. The difference in price between the two markets is pretty small at 19%, that barely covers the 17.5% VAT that gets factored into the UK price, so I'm guessing the US edition is slightly better quality, or the US customers are getting a raw deal for a change. If you want to prove your undying love for all things Harry Potter, though, the super-duper edition boxed set available in the UK for £148.00 ($302.13) is your only choice. There are no American equivalent of the Bloomsbury "adult" editions it would seem, so Americans who want to overspend for their Harry Potter will have to sneak one of those $300+ UK boxed sets back over the Atlantic (and Amazon.co.uk would probably even ship it to you in the USA if you really want to spend the money, I've bought some items at Amazon.co.uk, most items they'll send to the United States, it just takes extra time, and extra money).

Ouch. VATs alone don't account for the differences. Likewise the smaller market that makes up Great Britain doesn't account for what seems to be a fairly consistent mark up on most items sold in the UK well beyond just the VAT. The dollar is taking a beating in currency markets, but that doesn't seem to effect our purchasing power. If anything we have much greater purchasing power in the United States, even as our currency gets killed by the Euro and GBP. The products I picked were arbitrary, and non-random, so this isn't an entirely fair comparison, but I doubt a more thorough study would produce stunningly different results. Our larger market, freer and more ruthless competition, relative lack of barriers for imports, and relatively low tax burden combine to hold prices down on nearly everything we buy in the United States. I was in Best Buy on Saturday, walked in behind a group of non-English speaking tourists (I think French, but not sure) and they seemed downright giddy when they viewed the price tags of various items (OK, allowing themselves to appear giddy in public would strongly suggest these tourists/students were not French).

Free Ponies don't come cheap, the cost of Free Ponyism should be obvious to anyone paying attention, yet politicians around the globe insist that there are only benefits and no costs to unrestrained Free Ponyism (I also changed one of the tags on this to "Free Ponyism" from "Free Ponies" and altered this post's title to reflect the coinage of this seemingly new phrase). Interestingly (at least to me), the only hit on google for "Free Ponyism" (when the phrase is put in quotes) is Pastor Jeff's blog (but not the specific post) pointing to this post, but this post itself is absent from the first page of results, oh well. The number one hit for "free ponies" is the Daniel Drezner article where I first remember reading the phrase as a put down against reflexive social welfare statism. I guess I get credit for turning "Free Ponies" into an -ism. Seems like a natural evolution, we'll see if it catches on...

Also all currency conversions were done using today's numbers at OANDA.com.


Pastor_Jeff said...

Dang! With a pink mane and tail, no less.

Thanks for the link. I've got a follow up post with a link back to you.

"Free ponyism" is absolutely perfect. I've added it to the tags for my posts.

Pastor_Jeff said...

I recently read about Canadians complaining about the cost of American printed materials due to the stronger Canadian dollar - you know, paperbacks marked "$5.99 US, $6.99 Canada." At least the price gouging there can be blamed on unexpected exchange rate parity.