Capitalism and free markets can lead to extreme, but they aren't supposed to.
Supply/Demand pricing means that as a demand out strips a supply the price rises, and since a market is composed of people with varying wealth this means that few and fewer people can afford the item so demand drops to match supply. Conversely as supply outstrips demand then the price falls which encourages demand.
Perhaps I don't understand my economics properly but desire and demand should be separate as pre- post- pricing factors. We can lower the price of spoiled food as far as we want and people won't buy it, because it will make them ill.
Lets assume there is a bell curve over the social desire. That is most people are roughly the same, and there is Normal distribution of individual desires. This would fit with Darwinian evolution, that to exploit opportunities humans have a range of appetites from which selection can chose.
Then "relative pricing" works over the top of that to create demand. Relative pricing because £1 to someone with £5 I'm hypothesising is the same as £100 to someone with £500. At least that is better than absolute pricing where £1 is the same to everyone. So if no underlying desire then no price will cause any demand. But when there is a social demand then the two factors of distribution of desires, and distribution of wealth will combine to control the demand at each price.
As discussed desires change. So new technology and fashions can exploit previously unwanted resources causing social desire to develop. I didn't mention before and wanted to here: we are used to technology changing every year, and revolutionary changes every lifetime (computers being this lifetime, electricity the previous generation, steam power a few generations ago) but this is a new phenomenon. Palaeolithic stone tools did not change for well over 300,000 years. People made them exactly the same way for a million generations.
Supply/Demand, as mentioned, should lead to falling demand for rare things. If a rhino horn is worth £10,000 who can buy it. But conversely it means that anyone who can get a rhino horn will be rich. You might think that high prices would stimulate investment in the "industry" and rhino farms would be made to supply horns. But the turn over of horns is very low, there is not the mass social demand available to stimulate mass production, not least because of bans on ivory. But rhinos are also expensive to keep, and you get one horn per rhino which unlike heifers must be grown for many, many years. You cannot milk rhino ivory like you do cows. As a result ivory will always be very expensive and the demand low. It means that "free market" economics cannot help the rhino. At the moment the hope is that conservation and the money from wildlife tourism will maintain their populations. But it only needs one poacher to get through and a rhino is lost, and with such high prices there are many poor people prepared to try anything. Market forces also work against ivory because the scarcer it is the higher the price, so there is a financial incentive to stockpile and actually make the rhino extinct. Then the warehouse of ivory will be priceless! In this way scarcity leads to a positive feedback plunge to the bottom. The rarer things become the higher the price and the incentive to make them even rarer increases. Such is the inhumanity of some markets.
And behind all this is the plight of a living thing with its own desires and wishes to live a happy life. Sadly animals don't get a vote nor do they get to participate in human markets so as to influence market forces. It relies upon humans entirely to think about what they are doing in these markets. This is where Adam Smith is completely wrong. Free-markets only work for agents within the market being selfish, because anything outside the market cannot influence the market. Its a completely anthropocentric economic theory, and one biased even in the human realm to the owners of capital. I wrote a song once while working on the shop floor which began:
Staring down the barrel of my wage
Feeling inside a rage
That the owners get to say what goes
Get to say where the money goes.
As discussed also human desire is not randomly distributed. There are social desires which everyone shares. This may be because of biology and physical nature in that we all desire food of some type, or transport, but also because of trends. When things become "viral" there is a positive feedback. The more popular it is, the more popular it becomes. I mentioned the Huia Bird in the last post. Everything would have been alright except for a sudden fashion for their feathers. As with the rhino huge demand and increasing prices led people to exploit the bird to extinction. I imagine it would have been easy to catch a few and set up Huia farms but it was a fast buck gold rush and no one was thinking ahead. With fashions you need make money fast while the opportunity exists.
Completely unlike the Palaeolithic existence where life and desire was stable, in the excitable unstable world of Western markets fashions can last as little as one season. It is in the interests of producers to keep fashions changing so that people are always throwing things away, and therefore giving money to the producers for new things. It is even illegal in the UK for a listed company not to seek profit. This is how important the interests of investors and capitalists are! Ignore the customer and the employees, it is the investor that matters. All companies are forced to maximise their throughput, and that means getting customers to keep buying somehow. We see this in mobile phones, computers, cars, medicine, even houses these days. No one is supposed to be stationary, and they must keep working and spending to keep the economy spinning. From having the whole population on 5 pills a day, to constantly buying and selling houses, individuals in modern economies are always pursuing a quicksand of changing desires and expectations. And the true cost of course is that the natural world is being chewed up ever faster to keep the throughput of materials through the voracious Western economies just to keep the dividends and rent coming for the capitalists.
It is a problem that is getting worse. "Development", the new word for Colonisation, is the process by which traditional economies are transformed into these fast spinning engines of wealth. The drivers obviously are the same as in the West: the capitalists looking for new investments and returns on their wealth (i.e. opportunities to get richer for free). Everyone in Capitalism knows that for something to work it must be marketed well. "Development" is sold as making the lives of people better. But if it made people's lives better but cost investors it would not happen: investors are the key. But, as well analysed in this blog, does development mean that people have been unhappy for all of human history before the rise of modern economics? Wealth is relative, and the Palaeolithic achieving their meagre stable social desires were as happy as anyone today. Indeed probably happier because they were not always running to catch up with volatile markets and changing social desires. Essentially there were less ways for them to be unfulfilled and so unhappy.
So it is not just the natural world that ends up exploited by modern economics, even the human world has been exploited. These are the vast and fundamental problems that the new economics must solve.
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