Reverse Economics

Milton Friedman

Economics has never been a particularly precise discipline, and its followers don’t tend to agree on much. You’ve got your traditional economists, your liberal economists, your Keynesians, Monetarists, neo-Keynesians, a few Game-theorists and some other assorted nutcases. All of these seem to take pride in disagreeing with each other, with the result being nothing short of complete confusion.

However, there is one thing all of this lot do agree on. Supply and Demand. Put simply, the core of the notion is that the price and quantity of an item being produced are determined by the amount supplied and the amount demanded. Seems pretty sensible – the cheaper an item is, the more people demand it, so the more you sell.

We’ve been having a think about this, and we’ve decided it’s rubbish. We wouldn’t buy a car for a fiver, because we’d assume there was something wrong with it. Charge half a million for it, and we’d assume it was pretty amazing. Equally, call something limited edition (i.e. reduce supply) and everyone wants a piece.

So here is our recession-busting tip for any companies in trouble. Forget half-price offers and freebies, and forget trying to attract new audiences. Put out fewer products and charge more for them. Consumers will be queueing up for them, eager to get in on what will fast become a new status symbol.

Now economics does admit that some products are indeed status symbols, and that you can get away with charging more for them. Rolls-Royces, Apple Macs and houses in Mayfair are perfect examples. They argue that the reputation comes first, however before you can hike the price. We reckon it’s the other way around. Charge a bucket and people assume it’s worth it, especially in today’s world where reputations are made in an instant and everyone is keen to be seen at the cutting edge of fashion.

So there we are. Rover should have introduced a new ‘limited edition’ Metro and Woolworths should have charged the same prices as Godiva for their chocolates and everything would have been okay.


One response to “Reverse Economics

  1. Pingback: Reverse Economics « Baby Creative's Blog

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