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words, words, words

When was the last time you read a newspaper article and just shook your head and signed “why?”  Well, this article in Calcalist is guaranteed to do that (click here for English).

MKs Limor Livnat and Nitzan Horowitz are proposing a bill that will make it illegal to discount children’s books more than 50% from the ridiculously high cover price.  Apparently the price set by the publishing companies, which does not take into account the basic ideas of supply and demand, cannot be discounted too much, less the authors receive too little.

My reactions are mixed.  On one hand, I think “this is what is bothering you? This demands actual time from a government so overwhelmed with expectation in the areas of finance, security, and culture that the Knesset will actually discuss this?”  One the other hand, I think “these people do not even know the first lesson one learns in economics – how can they be running the country?”

For starters, who is deciding that the authors receive too little?  The consumer?  Not at all, the consumer pays money to the store who pays the publisher.  It is the publishers who decide to pay the authors so little.  They are using an internal issue in order to force the consumer to pay more to them.  And what if this does not leave enough money for the publishers?  Then they will have to renegotiate with the authors and restructure their business.  This is all basic supply and demand.

You don’t have to be an expert in the area of selling books in order to understand this.  But in case you insist on only trusting one, Iris Barel, CEO of Steimetsky explains the real problem is “the issue of joint ownership” – meaning the relationship of the publishers to the authors.

The supply of books is high.  The demand is high too, but not as high as the supply, so there are more than enough books and the price drops.  If the price is too high, some will still buy, but on the whole people will seek alternatives like second hand books, borrowing from friends, printing offline, and the library.

And once people begin to buy less children’s books, other book sales will fail as well.  Book stores know that the main reason that many people come to the store is for kids books, which is why they are always kept in the back of the store.  The bookstores use the layout in order to force the parents to walk through the other books, in the hope that a parent will pick up something for the adults in the family as well.

But even if this action were to help book sales, what gives the Knesset the right to force parents to pay above market price?  Parents already have to compete with aggressive advertising toward their children, much of which is designed literally to brainwash their kid into annoying the parent in order to get something.  Studies show that parents will give into their kids if annoyed an average of seven times – and this is the goal of advertising towards children.  How problematic is it?  Well, according to the UK, Greece, Denmark, and Belgium, it is problematic enough that they have specific restriction on advertising towards children.  And in Quebec, Sweden and Norway, it is illegal altogether.  But not only does Israel not do a darn thing about advertising towards children; now the Knesset wants to force parents to pay even more for products, some of which the children were brianwashed into demanding in the first place.

Do not give into this.  Allow the book stores and publishers to suffer the price of their lobbying stupidity.  Hopefully, at the end of all of this, the Knesset will understand the very basics of economics.  I wouldn’t hold my breath, but I can still hope…

How to pay LESS for your purchases DESPITE the recent increase in VAT

In order to understand what I am about to explain, I need to bust one myth.  The price of an item has little to do with the cost.  The price of an item reflects the image and, most importantly, how much the consumer will pay.  Cost is only used to determine IF the item should be sold, based on the price it can be sold for and its profitability.

So how can you spend less?  Go to a neighborhood where people don’t spend as much money.  Prices for most items are cheaper in poorer neighborhoods Because (1) these people don’t have the money to spend and (2) the corporations are trying to get as much money as they can from each demographic, corporations have to charge less in these areas in order to get a sizeable profit.

This is not limited to food items.  Electronics (space heaters, extension cords, converters), toys, clothes, and furniture are incredibly cheaper in poorer neighborhoods.  And there is usually little to no quality difference; most items are even from the exact same brands.

Back when I was in Yeshiva in Har Nof, I went to Mea She’arim to buy a heater, because I found that in Har Nof (a middle last area) the heater cost ₪ 100, while in Mea She’arim (a poorer area) it was only ₪ 30.

But won’t you have to pay more anyways because of the increase in VAT?  Not necessarily.  An increase in taxes does not always fall on you, even if the government says it will.  When a tax is levied, the greater burden of the tax will fall on the more inflexible of the buyer and seller.  The explanation is pretty long and involves too much math, but to summarize, if you can go to a cheaper supermarket, the original seller will have to decrease his price, thus absorbing more of the tax.  So by shopping in the poorer neighborhood, you are not only saving yourself money, but causing your local seller to decrease prices, and begin to unburden yourself of the VAT tax.