Give Me Five Of Those

You’ve seen it before. You walk into your Wal-Mart looking for just a handful of ingredients: milk, eggs, peanut butter, and water bottles. Just enough to make it through the week. But then you see something on sale. Then another. And another. And another. Pretty soon, you’re walking out of the store with a hundred dollars’ worth of items. You feel pretty pleased with yourself that you were able to get such a haul at such a bargain, even though you would’ve saved a lot more money if you’d have just bought what you came in to get.

This is the story of what happens sometimes when my Mom goes to the supermarket. I find it sort of bizarre. I don’t know about you, but when I hope to save money, I actually want to… save the money. I don’t want to spend it on things I don’t need. It’s one thing to spend money when you are on a spending spree, but when you are going out to just buy some bread and end up bringing a bunch of things home, I think it starts becoming a little much.

Now, this isn’t a criticism of my mom. I think everyone (including me) is all guilty of this to some effect. No, I think this is a trick played by the grocery store to get people to spend more money on the products. Sure, you think, you are getting more bang for your buck; you are getting more goods at a lesser price than they would if they weren’t on sale. And in some cases, you actually do need those goods for later. But I can’t help but wonder: do you actually need those goods on sale? Or is it just something you’re getting because it’s a bargain price?

The basic law of supply and demand states that higher supply and lower demand creates lower prices. Therefore, if something is at a very low price, that’s usually a sign that the demand for it is low. In other words, nobody would want the good if it wasn’t at a low price. This means you aren’t really all that attracted to the good itself, but to the low price of the good. This is how stores like Walmart operate.

Okay, so what’s the big deal? Why does this affect you? Well, the Walmart Effect is a real phenomenon. Businesses with lots of buying power and crummy wages like Walmart can reach those bargain prices that make you want to spend all your money. Other businesses in the area cannot afford to lower their prices so much, so they either cut their own employees’ wages to compensate or go under. The entire economy of an area begins to revolve around the Walmart.

The key to recognizing this phenomenon is the idea of the just wage, a foreign concept in modern economies. The nineteenth century German economist Heinrich Pesch discusses this phenomenon in his book Lehrbuch der Nationalökonomie (literally “Textbook of Economics”). In the second part of the fifth volume, he starts with the just wage. Man’s ability to work has to earn him enough to provide him with his necessities while giving him enough time for things like family and culture, else the human race would’ve long ago perished or descended into semi-human barbarism to survive. Under this realization, a normal adult person, working a reasonable number of hours a day, will generally be able to produce enough to provide for himself and his family, provided he has the right tools and habits. This remains constant whether a man is a subsistence farmer or a worker in a modern economy, so any economic circumstance that makes his subsistence impossible is a sign that something is wrong.

Pesch provides three possibilities for why the employer is not giving the worker a just wage. First, the employer is inept at using the labor he paid for and is unable to produce enough sellable goods for this reason. Such an employer “would nevertheless be required to pay the kind of wage which labor is intended to provide,” according to Pesch. Second, the employer might be purposefully exploiting the laborer by paying him too little even though the worker is producing enough to be able to do so. Third, and most pertinent to the example of Walmart is the industry that cannot sell enough their product to give the worker a just wage even under optimal circumstances. Such an industry, says Pesch, “is lacking in economic justification” because “the requisite consumer demand is lacking, and such an industry no longer has a place in the pattern of satisfying normal human wants.”

If I am only willing to patronize certain businesses because their labor costs are so low, then that means that I don’t really want it all that badly. And if my actual demand (that is to say, my actual desire) for the product is that low, why should I support a business that can only survive by paying its employees substandard wages? It’s not like I really want to buy the product in itself; I’m only getting it because it’s cheap. It turns out bargain prices are a “steal” in more ways than one.

Now, I understand the desire to be a smart shopper. We only have a limited amount of money, and we’d rather spend it on nice things like Christmas gifts for family or vacations to Hawaii than on groceries. But I think this is something we ought to consider. Next time we go out, ask yourself: “do I really want this product for its own sake? Or do I only want it because it’s at a low price?” I guarantee that you’ll save a lot more money that way, and you may make the world a better place in the process.