Caroline Lucas tries to learn economics

And manages to fail both the economics and the logic part of the paper:

Competition law is designed to protect us from monopolies – where there is only one seller but many buyers. Yet the big supermarkets also hold monopsonies; many sellers (such as farmers) and one buyer (the supermarket). As the only major purchaser of a product or service, the ‘monopsonist’ may dictate terms to its suppliers in the same manner that a monopolist controls the market for its buyers.

Between them, the Big Four – Tesco, Sainsbury’s, Morrisons and Asda – account for more than three quarters of the UK grocery market,

The logic failure? If there are four supermarkets competing with each other then there is not \”one buyer\” now, is there?

OK, maybe that\’s not a logic failure: maybe it\’s just numeracy she\’s lacking.

The economics fail? Yes, one seller many buyers is a monopoly. But several sellers with market power and many buyers without it is an \”oligopoly\”.

So the supermarkets are not monopsonists (note that in the plural they cannot be) or a monopsony, they are an oligopsony.

It just never works when these humanities folks (note that Dr. Lucas\’ Ph.D is in Elizabethan sonnets) try to deal with the sciences, does it?

15 comments on “Caroline Lucas tries to learn economics

  1. I don’t suppose she appreciates a huge cause of the supermarket oligopoly – I don’t think, until recently, a new chain had started for 30 years – is the very regulation she, presumably, supports.

    Minimum wage anyone?

  2. “It just never works when these humanities folks… try to deal with the sciences, does it?” But she didn’t try to deal with the sciences, did she?

  3. economics is a BA is it not? And i’d love to see an economist tackle an elizabethan sonnet sequence… In my experience, the mental rigour requiredfor an analysis of 16thc poetry far outstrips the efforts of political economists…

  4. *gives other Richard a high-five for such unrepentant conceit*

    But seriously, applying for Economics absolutely requires an A-level in Maths. At least in this university. I’d say that it’s closer to the sciences than it is to Elizabethan sonnets…

  5. The economic “welfare” loss of concentrated market-derived power in a competitive economy is tiny compared with the welfare loss of subsidies and regulation.
    As an example, world food prices have doubled over the past few years through the subsidised switch into bio-fuels. This has not only caused increased starving amoungst the world’s poorest, but given extra incentives to uproot virgin forest. They do not understand, as the study of unintended consequences of human action is a part of economics.
    But then feeding the poorest is not the concern of the Green Party, as they oppose the best modern means to raise productivity and dependable output agriculture – GM foods. But factor productivity (per capita or per unit area of land) is another area of economics the Greens have yet to grasp.

  6. Shall I compare thee to a Somerfield?
    Thou art more grandly built with wider bays:
    Fair winds do bargains for the shopper yield
    And our consumers profit all their days.

  7. I’ve been arguing this very point for the last few days with a gang of old-fashioned lefties on a Rugby League forum who seem to hark back for a golden era which never existed where we all shopped happily in the high-street.

    I kept pointing out that if the suppliers don’t have a strong position in the negotiations, it is because between them they supply too much of the stuff they’re trying to sell. Tesco cannot squeeze Proctor & Gamble, Carlsberg, and Jacob’s Creek, why are they able to squeeze cabbage farmers? Too many cabbages, that’s why, whereas only P&G make Sunny Delight.

  8. Some years ago one of my sons considered reading economics. I remember two options being offered. BA(Econ) and BsC((Econ) the latter having a significant element of econometrics which required A level maths.

    Either way Ms Lucas is like so many in NuLab – good on fluffy soundbites and light on detail and experience. Hence the tens of billions they shell out to KPMG and co to tell them how to do their jobs.

  9. Supermarkets have consistently lowered the price of food over their 30-40 years of trading in the UK. It is now entirely feasible for a family to eat a sensible, varied and balanced diet at a cost substantially below what it would have cost 30 years ago.

    Aldi & Lidl and others are now breaking in to the UK market with even cheaper ranges than the big four, driving food costs even lower.

    Lucas and her water-mellon colleagues ought to tell us what size of population agriculture would be able to support on her preferred model – I reckon about 30-35 million in the UK – and how they would decide who got to die and who got to live as the food ran out.

  10. “Tesco cannot squeeze Proctor & Gamble, Carlsberg, and Jacob’s Creek, why are they able to squeeze cabbage farmers?”

    Actually, they do squeeze the likes of P&G in the same way.

    But it all depends on what you consider as “squeezing”. If you’re in business, you either accept the deal when you supply to people or you don’t. If a customer fucks you around, you either decide to continue to supply to them next time, or you don’t.

    Some companies simply don’t supply the supermarkets for that reason. They’ve worked out that the late payments, the discounts and the hassle that it’s just not worth it.

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  12. Supermarkets (and petrol stations) are just such easy targets. If they charge less, that’s predatory pricing; if they charge the same, that cartelisation; if they charge more, that’s gouging.

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