Customers get plenty of meaningful choice over the issues you describe. Most supermarket vegetables are labelled with their country of origin. Don’t buy the mangetout from Keyna. If you don’t like supermarkets driving down costs for consumers, sometimes at the expense of farmers, then there are a host of other places to go. There are still some butchers left, meat can be mail-ordered etc. It will be less convenient and probably more expensive but that’s the price you pay for rejecting the more convenient, less expensive option as immoral.

Your bit about competition and choice not being necessary because you just want high standards - rather than choice - misses the point. Choice and competition aren’t nice little add-ons. They’re the way you get high standards. By creating an imperative for companies to do things as efficiently as possible. The discipline of having to serve a market that can go elsewhere creates incentives for companies to innovate and get their services right.

You should try Somerfield over my way in Clapton, Dave. That’s a truly meaningful choice - it means you’re skint.

>I’ll probably be doing my mid-week fresh fruit and veg top-up shop there from now on.

I’m afraid that to the ears of a Ridley Road market shopper, that’s nigh on sacrilege. Especially as “irregular hours” is also my chosen euphemism for not usually having anywhere to get to after I’ve dropped the little one at school.

#1
Alas, Matthew, your neat little economics diagrams don’t work quite so well when 1 in every [8 isn't it] quid we spend goes to Tesco. I guess, yes, the farmers could always sell elsewhere; maybe even get another 5p from Sainsbury’s. Of course, where competition is meaningful, I totally agree with you. But in massive natural monopolies with huge (or even impossible - like a set of railway lines) costs to entry, it’s a bit silly to make those sort of claims.

Tesco is very successful but the evidence it is a monopoly is very, very weak. It has plenty of competitors - Sainsburys, Morrisons, etc. and local shops.

Railways aren’t necessarily a monopoly. They both compete with other modes of transport and can easily be arranged to have multiple companies running popular routes. I think there is a good book on this by the IEA.

Tom Papworth has recently made a welcome return to blogging, and has featured this topic of choice. Clearly, with a small number of dominant multiples and a large number of small suppliers for a commodity (e.g. milk), the suppliers often suffer, but regulation didn’t work for the milk suppliers: the food retailers agreed that more money must go to the milk suppliers and were then fined, but the middlemen who trousered that extra money were not fined. Admittedly the NFU, who should have shouted very loud at the time, was then very weak and is much stronger now. Back to Tom: on schools he put forward choice without pointing out that (as illustrated in the Julian Astle CentreForum paper that he quoted) the structure of the market (particularly the supply side) and its controls needs to be right before choice can usefully work. In electricity and gas supplies, the supply side has been changed by the trickle down of technology: it has become easier for multiple suppliers to enter the market, so the public sector lets go of its supply monopoly. The energy technology trickle down is continuing, with small scale, even personal, ‘green’ electricity generation just about economical (within the context of a national grid) for a significant number of property owners. But it will be a long time before even a stately home owner can think of having a mini nuclear power station in the converted barn or behind the swimming pool.

Forgive me posting again so quickly, but the discussion has ranged across multiple types of supply and on one of those, railways, I very strongly believe that it cannot ‘easily be arranged to have multiple companies running popular routes’. The reasons are threefold: there is no elasticity of supply on popular routes (they are already carrying close to or even more than their rated capacity at the times when competition would otherwise be attractive for suppliers to indulge in); railways run at a loss (i.e. are subsidised); and as a passenger I want interoperable tickets (available for use on all comparable services) if there are multiple suppliers. With some difficulty there is a little choice on a few routes, but more usually it is the case that some lucky people have the choice of more than one route but with rather different service characteristics. That occurs between London and West Midlands. It also occurs between central London and Heathrow Airport (Heathrow Express and the Piccadilly Line tube), but, as HE explained to a railway meeting yesterday, HE competes more with a very different mode, namely road-based limo services, than with the tube.

re Matt Sinclair’s comment no. 1

This analysis fails to take into account negative externalities and asymmetric information. It is true that a consumer has other choices available to shopping at Tesco, but it is very difficult for the consumers to know the true social cost of the products they buy, which is why they will often buy the cheapest option when in fact it may be more expensive in terms of their overall well being in the long term. Even if they did have perfect information, you the individual consumer is faced with a Prisoner’s Dilemma in reasoning how other consumers are going to behave - leading to a Pareto sub-optimal outcome.

Personally I think breaking everything down to methodological individualism is bullshit, but if you are going to do it then you shouldn’t cut corners. Perfect competition is a fantasy, as attested to by the vast field of welfare economics.

If I had to have an operation in a hurry, having a choice of which hospital performed it wouldn’t be nearly high on my list of priorities as New Labour seems to assume.

It might not be high on your list of priorities, but it would high on theirs, if their funding depends on your choice.

Which would give each of them an incentive to give you a better deal than the others. More to the point, those that give worse deals than the current average will tend to be replaced by those that give better deals than the current average. So that average will tend to rise with time.

“anti-sceptic wipes”

remind me to bring some of these to the next Global Warming Denialist meeting…

d0m,

You can’t just say “assymetric information” and “prisoner’s dilemma” and assume that forms a complete case against an effective market. People care, when they go to the supermarket, primarily about quality and price. The former is largely ensured by brands, the latter is clearly displayed. You can’t just assume there are a whole load of other issues people care about - if they really did you would assume there would be a market for making that information clear (as there is on, for example, nutritional information).

dreamingspire,

I think it is easy to forget the extent to which railways compete either with cars (outside London), with buses (inside London) or with planes (international travel). That increases competition beyond the amount among railway companies.

A lot of the problems establishing competition that you mention were actually solved under the original, private, railway system.

I assume you would not be in favour of a National Food Service (on the vastly successful NHS model) instead?!

Choice, as delivered by the market is generally an illusory marketing gimmick. Tiny differences between products create the impression of competition, this in turn encourages the consumer to feel empowered to select a product as an act of self-definition through consumption. Just look at Starbucks, all the same crap coffe, all sold slightly differently, with optional extras and all bought by nob heads who really think that ordering a double half caff skinny latte with extra vanilla (aka coffe flavoured milkshake) somehow makes them like, a really intersting and sophisticated urban warrior.

The railways are a poor example of competition as they aren’t really “private” and in fact receive more government subsidy now than when nationalised.