EconX 101

I confess that I have no background, education, or training in the field of economics, which makes me uniquely qualified for this lecture.

The most important lesson you might take home from this lecture is that the old cliché about supply and demand is not a law. It is not like Gravity. It is not even a theory like Relativity. It is merely an observation on human greed.  

Let’s say that unique fruit trees in my backyard produce golden plums that have great medicinal value: One plum cures a rare but fatal disease. And these trees grow only in my backyard. The orchard requires negligible maintenance, a little water, a little pruning. Let’s also say that the trees produce 10,000 plums a year. (I know, I know. That’s a lot of plums, but I like to dream big.)  Let’s also say that with good food and better wine I could live another 20 years. Let’s further say that I charge the deathly ill $50 per plum, a small price to pay for a life, and a substantial profit for my declining years:  $10,000,000. Before taxes. I could get by on that. What? You say that’s the income over a twenty-year period and I would have to get by on only half a mil a year? The horror.

Let’s say that the rare and fatal disease becomes pandemic and many more people are in need of my plums, but my unique trees cannot produce more plums. My expenses do not go up, unless word got out about my plums and I had to take security measures to protect my orchard from plum plunderers. Even so, only a minimal increase in overhead. But were I, let’s say a big Pharma or Petroleum company, I might well claim that I must obey the fictitious law of supply and demand and raise my rates to $10,000 per plum. That’s a lot of money for a plum, but, again, what’s the value of a human life? I would then earn $2,000,000,000 (two billion) over twenty years, or $100,000,000 (one hundred million) a year, enough to assuage any guilt feelings about profiteering. And enough to pay a creative accounting firm to help me avoid any and all taxes. Or I could violate the law of supply and demand, tighten my belt, and get by on the same measly $500,000 a year.

In both cases I was producing the same amount of plums for the same negligible expenses. The only difference in the equation is that when tempted by a billion bucks or two, I became a Plum Profiteer. In a rare moment of honesty, exceedingly rare for us PPs, I might admit that the increased demand in no way forced me to raise my rates per plum and I only did so because my love of the big bucks was greater than my love for sick and dying humans. Speaking of PPs, Martin Shkreli who raised the price of a life-saving drug (for children) from $13.50 to $750 a pill, serves as our Pharma Profiteers poster boy.

You could substitute any number of products for my plums in the equation and get the same result.

If hypothetical word problems frightened you to the point of paralysis in school, let’s keep it simple and get down to reality. In April 2021 the price of crude oil was around $60 a barrel. In March 2022 it shot up to over $120 a barrel. We’re talking only about the price of oil as it comes out of the ground. The cost of sucking it out of mother earth might have climbed a few pennies per barrel during that year if the famously generous petroleum companies gave raises to their workers. They are notoriously eager to share the wealth. The petroleum companies claim that were required to double the price for crude because the supply went down due to the (predicted) boycott of Russian crude while the demand increased due to a cold front in the north, a warm front in the south, and a looming battle front in Ukraine.

One oil company made a record profit of 22 billion in 2021, with a record profit of 8.9 billion in the last quarter, putting to shame my putative plum profits, all because they were forced, kicking and screaming, to obey that tyrannical law of supply and demand.

Remember: The only law here is that Petroleum companies are Profiteers. An essential corollary is: Petroleum speculators are Profiteers.

You will be tested on this, over and over, especially when elections are near and Petroleum Profiteers want to influence the results.

Don’t take my word for any of this: For you soldiers in the anti-vaxxer army who do their own research, just google “Price of crude oil per barrel 2021,” and you will get 6,540,000 results, enough to keep you too busy to troll public health experts for a while.