CHEAPONOMICS: THE HIGH COST OF LOW PRICES
Reviewed by Sudhirendar Sharma
In a free market economy, the incentive to externalize costs is so huge that the seller and the buyer reach an unapologetic understanding to get away with it.
Cheaponomics: The High Cost of Low Prices, by Michael Carolan, Earthscan/Routledge, 2014
Cheaper products are a marketing gimmick but an enticing one nonetheless. Deep discounts on popular brands release pent-up demand, and less expensive products encourage over-consumption. ‘Cheapness’ has become an enigma. While one may avoid buying anything considered ‘cheap’, striving for bargains remains alluring, and the lowest possible price paid for a quality product can be a measure of shopping prowess.
In Cheaponomics: The High Cost of Low Prices, sociology professor Michael Carolan states that ‘Cheapness is an illusion.’ Low prices arrive an at alarmingly high cost because this low price neither reflects the real cost of production nor accounts for the environmental factors. A 2008 UN study estimated that the cumulative cost of environmental damages caused by 3,000 of the largest publicly-traded corporations in the world could run future generations up to 2.2 trillion USD.
In a free market economy, the incentive to externalize cost offers a comparative advantage to both buyers and sellers, albeit at a tremendous cost to these later generations. Carolan questions the economic status quo, arguing that a system that socializes costs for the benefit of few can do little to enhance well-being for the majority. Drawing on a wide range of examples, he unfolds the compulsive economy of cheaper goods which create a false sense of consumer celebration by making large social and income inequalities tolerable. Over-consumption, which is linked to cheaper products, lies at the root of present-day crises from growing urban trash to mounting atmospheric emissions.
Cheaponomics is a revelation, and Carolan concludes an engaging story with a set of practical recommendations. Governments ought to incentivize accurate pricing and enable affordability as the key to price rationalization in the market. Real cost may make goods expensive in the short term but not over the long term as these would be designed to last longer and avoid wastage. Affordability is about enabling, about capabilities and about holistic well-being rather than the shallow advantages of cheap goods.
