Last month saw, sadly, two aeroplanes fall out of the sky killing everyone on board except, by freak chance (what the media calls a miracle), one teenage girl. While the cause of neither crash is known, and may never be known, air disasters almost always involve either maintenance failure or pilot error (occasionally they involve some freak weather event, or even more occasionally, terrorism). It can be a very fine line (or a very small screw) between arriving happily at your destination and crashing – not much margin for error when flying – and a fine line between the public having confidence in an airline and choosing to fly with it, and treating it like a swine flu carrier. So airlines, good airlines, have always had to invest a lot of their income back into maintenance and training, and ensuring safe working practices, and so on. And whereas companies in other industries cut costs to increase profits, good airlines don't. If you had a choice between paying more to fly on an airline that maintained its aircraft and trained its pilots well, or less to fly on one that didn't, which would you choose?
So last week I was even more annoyed than usual by the regularly appearing story "air fare wars" "competition results in very cheap flights" "fly around the world for a dollar". The usual wide eyed young reporters (is it just me or have television reporters suddenly gone from being only old enough to be my children, to being only old enough to be my grandchildren these days?) standing at the airport entrance blathering on about how airlines will keep on getting people to fly for less than the cost of flying them. Would you really want to get on a plane if that was true, I want to ask them, but they have a script to read, and a paypacket to earn, so I leave them in peace.
The next day the story was about how the federal government wanted to raise the qualifications, and numbers, of workers in child care centres, in order to improve standards and ensure that children were learning properly and developing well while attending. It is well known that this early childhood education is the most critical time for getting a child started on a life of learning and developing skills. The media reaction to this announcement though was as predictable as the airline story – "parents to be slugged with higher fees" was the tabloid headline in news bulletins. You could tell that they were annoyed not to be reading a story about how the white hot heat of competition between privately owned child care centres was forcing prices down and down to less than the price of a hamburger.
But if that really were the case, would you want your children, or grandchildren, attending centres where cost cutting was resulting in fewer and fewer teachers, with lower and lower qualifications? Would you really want to see them crash half way through their school career because they hadn't had a good preparation in preschool?
There are, probably, consumer goods whose quality has improved while their price fell as a result of competition in the market place. In many cases though the perceived benefits are the results of low prices paid to producers (notably farmers, or third world sweat shops), or the result of lowered quality or misleading packaging disguising reduced content. It may not always matter, and heavens knows people have enough to worry about without having to evaluate the implications of every single purchase in a supermarket (although the new content labelling requirements will make this easier). But when it comes to areas like safe transport, or childhood development, you really don't want to accept the results of price wars.
It has been said that an economist is someone who knows the price of everything and the value of nothing. Television reporters too, it seems. Parents need to be the reverse.
All David Horton's earlier writing is here.