Wednesday, November 22, 2006

Rent and Consumer Good Prices

A few weeks ago, I spent some time manning a snack bar on behalf of my mother. The prices were outrageous... which gave much inspiration to this ramble.

When we think about Rent, the concept that generally comes to mind is the money we pay for the place we live. Some might take it a step further and realize that businesses must pay rent, as well, but may not realize the consequences of this. Those consequences are experienced quite intimately whenever we attend a sporting event, a county fair, or go to an amusement park.

Try to buy a hot dog outside the park; you'll likely not pay more than $1.50 for the hot dog... maybe $2.00 if it is somehow REALLY special. I know we charged $3.50 for a regular old misnamed "jumbo" hot dog at the football game. How about a little bag of peanut M&Ms? Probably you pay no more than $.75 at a store. If you buy it from a kid's fund raiser, you might pay a dollar. At the stadium, we charged $3.00. At a mini-mart, you'll pay maybe $.80 to $1.00 for a 24 oz soda; at the stadium, we charged at least $3.00. This is a fact of life, few people question it. I think about these things; what causes prices in the stadium (or at the fair, or Magic Mountain, or inside the movie theater...) to be so much higher than just outside?

The answer, of course, is Rent. There is a massive number of people inside the stadium, crowding around the field to see the game. Their ticket price, of course, contains an element of Rent; they are paying for the privilege of seeing the game up close, without having to push and shove to get a good view. The fact that the stadium was not full shows the effects of Speculation; seats that might otherwise be full remain empty, potential spectators being driven away by a price set according to an overestimated demand.

However, the food prices also contain a large element of rent, as well. With that crowd there, the right to sell food in proximity to the crowd, rather than someone else, is highly valuable. The food prices are inflated by the price one has to pay to the stadium owners in order to do business at that location. People are generally willing to pay these prices because the sort that can afford to attend a sporting event can generally afford to pay outrageous prices (though I recall, when growing up, that my parents absolutely refused to buy food inside Disneyland).

A general increase in rent is like a whole country becoming like the stadium, except instead of football players, you have a society's technical elite. Instead of stadium owners, you have a society's landed elite. Instead of people who are unable to afford the stadium food prices and have the option of buying outside the stadium, you have the desperately poor, who sacrifice much just to afford the basic necessities. And instead of people who have the choice to watch from outside the stadium (or not to watch at all), you have the homeless, who, unable to afford a "ticket" for one reason or another, stand at the edges of society, outcast.

That is Rent.

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