No Ritchie, no

Two things follow. First it shows that Willetts does not undertsand the demand for education – which is a classic Giffin good because of this perverse incentive to buy it, whatever the price.

You mean Giffen Good.

And even then you\’ve got it wrong.

You\’re intimating that demand for education is fixed, whatever the price. A Giffen Good is when the demand for the product rises when price rises. Education isn\’t one of these: although, oddly, wheat noodles in North China do seem to be.

9 comments on “No Ritchie, no

  1. Has anybody ever found one that works over the long term? In the short term you can have things, like UK houses, where people see the price going up and want to get in on the ground (well first or second) floor.

  2. The ‘market’ for university education is rather opaque. No-one has to pay up front with their own cash – they get a soft loan which they pay back over a long period (subject to certain criteria). Thus an increase in loans to £9K/pa is not going to have the same effect as £9k/pa in hard cash. Does Ritchie really think that if students had to find the money themselves up front that ‘demand’ for a university education might not nosedive a bit?

  3. Bread in really poor countries.
    If the price of bread rises, other more luxury foods – often meat – can’t be afforded and consumption of bread rises to replace the amount of luxury food not bought.

  4. @NoelC: I think you are right.

    Giffen goods are inferior goods, which are purchased in higher quantities despite a price rise due to a substitution effect following price rises in other (pricier) goods.

    Veblen goods are the ones with the snob value.

  5. @SadButMadLad – yes, perfume is a classic example. Many years ago Bic reverse-engineered a number of high-end perfumes including Chanel No.5 and started selling them for a few francs in cheap plastic spray dispensers. They smelt exactly the same as the originals but were a sales disaster – one reason is that 75-80% of perfume is bought by men as presents for women and no-one wants to looks like a cheapskate.

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