Comments on: How to choose your job, your oncologist, your fund manager and you real-estate agent: improving information flows in markets

By: Nicholas Gruen

Nicholas Gruen — Thu, 28 Sep 2006 12:13:08 +0000

Yep, I couldn’t agree more and spend a fair bit of my time arguing just that – against producers. But that wasn’t the point I was trying to make.

The principle of consumer sovereignty does not dictate that consumers are always right in disagreements with producers. And it doesn’t dictate that in the interests of consumer sovereignty we give consumers access to a forum for complaints in which they bear no cost or risk while they rack up costs of up to $7,000 a pop for producers quite irrespective of the merits of the case. This is what we have with Consumer Ombudsmans (Ombudsmen?) set up in a whole swathe of industries around the country.

I think they’re a great idea, but they’d be a lot better with a small (refundable) deposit from consumers as an earnest of their bona fides, some small barrier against vexatious litigation.

By: derrida derider

derrida derider — Thu, 28 Sep 2006 05:44:36 +0000

Nic,as you well know it’s not that consumers are more virtuous than producers. It’s that the purpose of of an economic system is to meet peoples’ wants – that is, we produce to consume, not consume to produce.

Any help for production has to answer the question “how does this ultimately benefit the consumer?” because it’s consumer welfare that is the measure of the system.

By: Nicholas Gruen

Nicholas Gruen — Wed, 27 Sep 2006 07:28:53 +0000

Yes Andrew you’re quite right about dodgy consumers. Tell me about it! Then again one must not say that – especially not anywhere near the Ombudsman or the consumer movement.

Repeat after me.

Consumers are always good. Producers are always greedy bastards.
Consumers are always good. Producers are always greedy bastards.
Consumers are always good. Producers are always greedy bastards.
Consumers are always good. Producers are always greedy bastards.
Consumers are always good. Producers are always greedy bastards.

By: Andrew Norton

Andrew Norton — Wed, 27 Sep 2006 06:05:08 +0000

Phil – Any company in a competitive environment is interested in customer satisfaction. But any continuing customer is presumably satisfied enough to at least not be bothered switching, while non-customers still need to be persuaded to try, hence the special deals.

Many people in business do of course have an intrinsic interest in the quality of their goods and services, but a strength of the market system is that it does not require this, since financial incentives are generally aligned with consumer interests. The interesting subjects Nick raises are in areas where this process can get confused because of information asymmetries (which incidentally, and this is often overlooked, go both ways – businesses have trouble finding out enough about their actual or would-be customers).

By: Nicholas Gruen

Nicholas Gruen — Wed, 27 Sep 2006 04:41:00 +0000

Love to – if we get a deluge of interest here – happy to oblige.

By: hrvoje

hrvoje — Wed, 27 Sep 2006 03:16:13 +0000

Would you consider organising evening session? I’m sure there would be plently of takers who work full time!

By: Nicholas Gruen

Nicholas Gruen — Tue, 26 Sep 2006 15:25:29 +0000

Anon,

I don’t think you have to book.

By: phil

phil — Tue, 26 Sep 2006 10:16:13 +0000

Well tapping into one of my more persistent prejudices, are companies really interested in the satisfaction of their customers? If that was the case, companies would make more effort at keeping their current customers than gaining new ones, surely? The banks are a good example – the best deals are for people who switch; same applies to hospital/medical insurance companies. I note that the couple of magazine subscriptions I have also reward newly joining customers, not people who renew their subscriptions.

Also, what about the tendency to make it more difficult for customers to compare ostensibly similar products from different companies? Again, the insurance companies and also telephony providers seem to go to some lengths to make this difficult. Hence the rise of online services to assist in product choice, but how can one trust the advice? What type of disclosure is valid? This goes to the heart of your suggestion about mechanisms to confirm reputation.

By: anon

anon — Tue, 26 Sep 2006 06:16:47 +0000

Can people just show up on the day or is it necessary to book?

By: Amused

Amused — Tue, 26 Sep 2006 04:37:21 +0000

Nice thinking Nicholas. That should sort the ‘markets as free speech/thinking’ faction, from the ‘markets as forces of nature/winners are grinners brigade.