This is difficult to explain. I can’t figure out a rule of thumb for spending, the prices of things fluctuate so quickly it’s confusing. Here are some examples
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A house, prices are out of control, inventory is low, sellers are greedy. I’m feeling not only unable to afford it but finding lack of value in inflated prices
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Computer parts. Relatively cheap compared to pandemic but more expensive than before but also much cheaper than 90s/00s, but still could be cheaper
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TWS earbuds, completely different ball game from regular earbuds, disposable electronics.
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Food. Nights out with drinks now sometimes cost me more than 2 & 3, but seem like just keeping up with inflation
The prices range from 100,000s to 100s, but some are fleeting, some semi permanent, some last a long time. I also spend hours researching prices of parts and waiting for sales, but spending the same amount on social events in an instant
I think we’re seeing large scale price gouging.
Yeah, definitely business taking advantage of COVID era shortages that caused prices to spike, and continuing to carry those prices despite not having the same shortages anymore.
Put the cost of things into terms of hours you would need to work to cover its cost. On an individual basis, you know very well how to gauge an hour of your working time, and inflationary effects will become apparent when there is something you used to buy routinely and suddenly find you have to work two or three hours to cover its cost.
If you’re looking for a rule of thumb to decide if something is worth the price, I have a basic method that helps me:
Don’t think about the thing itself, think about what it provides to you. Say you are thinking about buying a GPU to play games on your computer. The one that seems like the best fit costs $400.
What will that GPU provide you? You will get to play the games you want for about 5 years on average before the card starts to become too old to give you solid performance anymore. Or maybe you’re not too picky on framerates and settings, so it will last you 7-10 years before your next upgrade.
Consider how many hours of enjoyment you will get by playing games for the next 5, 7, 10 years. 5 hours of gaming a week, 52 weeks a year, 5 years gives you 1,300 hours of enjoyment. Now divide the original cost by that number. In our example, that’s roughly $0.30 per hour of enjoyment.
Does that feel like a good price for fun to you? If you could go to a magic vending machine, pay 30 cents, and feel enjoyment for an hour, would you?
That’s how I think about purchases, and it helps me quantify the value better and make purchases that are likely to be a good value to me. It also encourages me to use things a lot for a long time to get an even better amount of value out of them, which in turn is more environmentally friendly and helps me avoid the traps of rampant consumerism. Win win win.
Hope that helps!
Dude where can you find that magic vending machine? I meed one.
For me, it’s my computer lol.
I think the Cardassians had a dopamine implant. Maybe something like that?
Pretty sure they have Dilaudid vending machines in Vancouver.
Utility, not market value.
I reckon the utility of our house is equal to some % of the average or median (probably median) wage in my city, plus some premium for it being a house not apartment. Calculate that monthly or annual amount and back into a reasonable cost of housing.
Market value of the house is what I could sell it for. Right now that is much, much more than what a house is “worth”.
Which leads to funny conversations because I think we overpaid for our house & husband thinks we got a good deal. And both are true.
Sometimes fun things go by very quickly 😉. But it’s the same rule of thumb I have for content and games
Prices don’t make sense because you, as a regular person, don’t see the overwhelming majority of what contributes to them.
For instance, I figure you aren’t particularly familiar with the output quantity of various semiconductor factories around the world, the overall percentage that are good enough for high end computers, and how many different companies around the world need them for their products, and in what quantity. Or even on the consumer end, how different use cases effect demand, along with how the various brands stack up against each other in their current offerings.
Yes
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Product pricing actually has very little to do with what the actual product costs to make, other than to determine whether it is financially viable to produce.
Rather, the aim of a seller is to maximize their profit by choosing the most efficient selling price for a specific demand. For a house, demand has greatly outstripped supply, and a buyer requires a place to live, so prices are high. Similarly, during the pandemic, the utility of computer parts was high and demand was high since many had to work from home, so prices went high.
It certainly gets more complicated than my (ECON 101 level) explanation here, but companies have just been taking advantage of a high demand for things and for people’s needs (e.g. housing and food) there is little to no pressure to reduce costs as demand is poorly correlated with price (inelastic).
Somewhat related, you can still get SSDs pretty cheap due to the oversupply of NAND flash (supply greater than demand = prices go down). That’ll clear up in the next few months though, with manufacturers like Samsung reducing production and increasing prices of NAND flash.
well if you want a basic idea of how prices work, then study some economics, as that’s a big part of the fundamentals economists learn. Essentially a bunch of funny curve shapes that try to guess how much people will want to pay for something. Those curves change shape based on interest rates, how necessary an item is, how easy or cheap it is to make a lot instead of a little, and so on and so forth. We can use them to predict stuff but so much of economics is ultimately unpredictable because it relies on human factors.
In terms of how you behave, there’s a few elements to it. With events, the window of opportunity is limited, while you can put off a new device purchase, you can’t postpone the concert as an attendee, so you can’t wait for a sale and FOMO is strong. Many things where you tend to impulse buy are presented as an offer you “can’t put off til later”, so you have to step back to see if you really need it now. Best way to try to even it out is to budget before you start checking current prices and see how they compare.
Studying economics brings little help.
First of all, the models are seemingly easy, when you compare the preference for two goods, or assume a market with a true polypol, but get incomprehensibly complex, the moment you start looking at multiple goods, typical supply chains of today and most importantly, that most markets aren’t polypols, many goods aren’t substituable etc.
But even assuming you have a great model understanding of things, you simply lack the information. That is also the reason, why no single actor can consistently beat the stock market, aside from shear luck (which tends to run out eventually). There will always be so much more to the picture, that you don’t know, than what you know.
To be fair if the goal is understanding why, then even things like goods not being substitutable are useful for understanding. The OP wanted to know why, not know how to predict them accurately. The original suggestion to learn economics would teach them that.
It’s a combination of people taking advantage of things, peoples’ hands being forced, and trying to make sure only certain people get the stuff.
I remember there was enormous backlash because people keep raising the prices on medical supplies such as insulin and inhalers. One day I discovered there was actually one place a friend of mine could get medical supplies for a reasonable price, but alas, people who didn’t even have the medical condition would buy it all in bulk… all before selling it at a separate location for the normal insane price.
It’s clear that you cannot totally follow both prosperity and freedom.
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Some people know people will buy what they have to offer, so they ask for more in return. I will say what I object to is people killing the competition, for example the same YouTube we currently know was responsible for the Tiktok gossip.
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If money is a priority, you take your mind off a lot of subtleties. Going back to the topic of medicine, the mafia tried selling insulin cheap in some places, at least before they ran out and started selling unassuming random assortments in it. This trend, which you can actually blame Reddit for, didn’t last.
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The biggest thing to remember is this thing we call currency is regulated and is dependent on uniqueness. It must be balanced with things like population and conflict. And note a part of this implies how non-automatic its existence is. If I began a civilization somewhere, the closest I’d do is go commodity, possibly with a services system, which I can already hear people bringing up my currently-faulty subreddit in response to (needs a few systemic fixes, I know).
No matter what country anyone mentions here, there’s a 100% chance it has a system that doesn’t work. If it’s not equal opportunity, it’s an unequal opportunity, and if it’s not flexible/independent, what you describe is inevitable, and things snap in two or get dragged down.
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Curious if OP keeps a budget, log of his spending.
Your title may be the one time this year we could’ve seen proper application of the phrase “begging the question”.
I don’t know, I’m not American.
