Middlemen, Scanners, and Pricing

My model of exchange standards has three agents. These three go by many names. For example: buyer, seller, and middleman; boy, girl, matchmaker; application, hardware, operating system; or client, server, protocol. The last of the three, the broker, is the most often ignored and most often the one with the most power. My father used to say that one of the problems the communists ran into was an insistence that the middleman is nothing but a parasite.

In addition to these most situations are populated by numerious agents of these agents. For example both buyer and seller may have a bank and that bank will, by virtue of aggregating a relationship with a large number of small and hence marginally powerful players, become a key player in setting exchange standards about how transactions take place. Sticking to the currency exchange standards, examples of middlemen include the the check clearing houses, the treasury, and the body of practices, rules, and laws that frame how the work gets done and the disputes get resolved.

As much as the middleman is often overlooked in discussions of this stuff the agents are even more likely to remain below the radar. I’d even say that one of the key foolishness with Libertarians is their blindness to the power of the agents.

The setting of the standards, rules, laws, etc. etc. that forms the frame or foundation for the entire enterprise is negotiated by the players. Happenstance, path dependencies, ethics, and the power of the various players and their agents shape how the standards emerge and evolve. The entire tangle of organizational politics comes to bear.

Here’s an interesting example of that. In the 1960s a number of consumer protection laws were passed.  These included laws requiring clear labeling on products; i.e. what ingredients were in the food, how much the can of coffee weighted, or the legality of making claims about the health benefits of your product.  It maybe hard to imagine by there was a time when a can of coffee didn’t say what it weighted and after the law was passed we discovered that some cans were a pound while others were 12 ounces.
All of these were passed because the buyer’s agents were in the ascendancy (i.e. the Democrats), helped along by some very shocking scandals.  These days the seller’s agents (i.e. the Republicans) are more in the ascendancy.  So we get this example.

We currently have a Republican governor, he’s claim to fame is having been an early investor in Staples. His attorney general decided sometime ago to stop enforcing the law that requires that items for sale must be clearly marked with their price.  Now the state has repealed the law that requires prices to be marked.  The law now requires that every 5,000 square feet have a scanner available that consumers can walk to, scan the item and hence determine the price (at that instant).

What triggered this posting was this line in the article in the paper:

“John Simley, a spokesman for Home Depot, who said price stickers are not important to most customers.”

In the seller’s dreams the buyer’s don’t care about prices.

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