Saturday, March 17, 2007

eBay - The Last Bastion of Free Market Economics

The world of online auctioning seemed so foreign until that fateful day Hubby and I received a wedding gift we knew we would never use. Peering through the crack we made in the gift wrap, we could see there was no point in opening any further and we puzzled over what to do with the new addition to our marriage. It was too valuable to just give away, but so far outside the realm of our tastes that it was guaranteed to sit in a closet unused. There had to be someone out there who would appreciate the gift more than we did.

eBay instantly came to mind.

We went online, researched the retail value of the item, chose an attractively reduced opening bid and there began my personal eBay journey. And voila! There was a bidding war and the item sold for not too far under retail value. Now I use eBay to get rid of anything and everything.

As I headed to the post office this morning to ship an item that sold last week, the greater meaning of eBay hit me - the free market. eBay's system is based on five basic values -
  1. A belief that people are basically good.
  2. Everyone has something to contribute.
  3. An honest, open environment brings out the best in people.
  4. Recognition and respect of each person as an individual.
  5. Treat others the way you want to be treated.

Putting these principles into action, eBay engages the active participation of the entire community through its honor system. After a sale closes, you are asked to give feedback about the other side. The feedback you receive is linked to your screenname, which pops up with a rating next to it and anyone contemplating buying from or selling to you can look up what everyone else has said about you. With one click, one can learn whether a seller packages a product safely, whether a buyer pays in a timely fashion or if someone has a history of skipping out on deals. The most egregious violators of the honor system can be banned from the community.

If the financials are any indication, this simple free market formula works. eBay posted net revenues of $1.7 billion in the 4th quarter of 2006 alone.

No government regulations needed. No tariffs imposed that favor one seller over another. No quotas on how much can be sold or restrictions on to whom. Good old integrity, buyer beware and personal responsibility.

So far, I have 100% positive feedback. As a seller, it is important to me to package items well, ship promptly and refund any overcharges I may have quoted for shipping. It is the way I would want to be treated.

This week, however, I confess that I fell short of my own standard. The buyer paid for the item on Tuesday and my carpool/work schedule essentially guaranteed that I would not make it to the post office until Saturday. The buyer paid for Priority Mail, but will get the item a week after he paid for it. It occurred to me that the buyer might give me negative feedback. If so, would it discourage others from doing business with me? When I got home, I marked the item as shipped and sent a note to the buyer apologizing for the delay. A few days from now I will find out if the buyer is willing to vouch for me as a seller and encourage others to buy from me.

That is the free market.

26 Comments:

At 3:21 PM, March 17, 2007 , Blogger chad said...

I love Ebay. I'm a buyer and a seller (with a pretty good rating I might add). I love that I can sell stuff I don't want and can buy things I want at great prices. My favorite is watching the little bidding war that takes place the last hour your item is up for grabs...

But I must agree that the thing I like the most about it is the absolute democratic and fair nature of Ebay. Anyone can be a buyer or seller with almost no overhead, and your word is your bond and your bond is measured in your rating.
Ebay is the way the world should be... a level playing field with opportunity for all, and you reap what you sew...plain and simple.
I must admit that Ebay does have a bizarre if not troubling side as people are always buying and selling things that just should not be for sale like the used towels from Anna Nicole Smith’s last hotel stay, Brittany's shorn locks, or services/goods that are illegal in most of the civilized world, but I guess that's the two-edged sword of a truly free market.
I don't know what the future holds, but I'd say that technology and services like Ebay that make the world smaller and more level can only do more to lower the walls of economic disparity and help make the world a true global village.

Your fellow Ebayer,
chad

“The free market economy is supposed to be the only path leading to the happiness of humanity by promoting wealth and prosperity, power and influence of nations.”
~Omar Bongo

 
At 4:14 PM, March 17, 2007 , Blogger Free Agency Rules said...

Count me a beliver also!

The only negative is that on some things, you cannot "try it to see if it will actually fit, or work for you."

I love the free market!


FAR.

 
At 8:10 PM, March 17, 2007 , Blogger J.C. said...

The 'free market' is bought and paid for with money. Money represents debt tokens. The more money you have, the more of others 'debt' you have captured.
People will lie, cheat and steal for debt tokens. People will do almost anything, even re-enlist for the extra 20 grand bonus, and go to Iraq to kill people , because they are on the 'payroll'
Ayn Rands wet dream of the Glory of Money is a sad joke. She was actually a mean-spirited human hater.
Money controls this caste/class system.
It makes a lot more sense for people to get the things they need in a good culture for free. That however defeats the 'everything for me and nothing for you', that is the basis of every Price System.
A person can only consume so much, can only eat so much , and only wear one pair of pants at a time.
Americans are really idiots.
With our resource base the average American could be living at a standard so far above the current one that it is not even comparable.
Many of our ways of thinking of the world were developed in resource poor areas, where scarcity ruled.
Gushing over sad conniving rackets to feather ones own nest is not particularly creative, but that is exactly what people are forced to do in a society such as we have. All the more reason to change it.
When all play-acting is done over something of no value, then all choices are wrongly made. That ends badly for everyone.
Greed is the motivator, destroying anything that is beautiful, or has real value is the result.

 
At 12:19 AM, March 19, 2007 , Blogger Free Agency Rules said...

Skip said "It makes a lot more sense for people to get the things they need in a good culture for free."

We all must work within the system we have at present and try to make the most of it.

How does your statement not dis-agree with the correct statement of "There is no such thing as a free lunch?"

FAR.

 
At 5:34 PM, March 19, 2007 , Blogger J.C. said...

There is no such thing as a free brain actually free agency rules, unless you do actually work at it.
You are most likely in a deep slumber, and would not recognize a good society if it bit you in the ass, but perhaps think that maybe you got stung by a bee.
It`s funny when the Prisoners defend the Prison. Ha Ha.

 
At 2:02 PM, March 20, 2007 , Blogger RR said...

I don't see where you derive your "five basic rules". EBay works not because of the basic "goodness" of everyone, but because of the social pressure you note in your post.

Social pressure and effective policies that get violators banned or otherwise punished.

You make it sound like such a system works "innately" -- without the appropriate carrots and sticks...

If people could get away with cheating others easily, (esp without having to face them) many more would most likely cheat... It's only the mechanics of the system that limit this behavior (feedback, verified personal information, etc.)

Between the safeguards (e.g. - buyer pays before shipping, COD, the dispute resolution process, etc.) and the incentives for "good behavior" eBay has created a system that works given the premise of capitalism: greed.

Don't kid yourself: without enforceable regulations it would be a free-for-all mess...

 
At 3:04 PM, March 20, 2007 , Blogger Intellectual Insurgent said...

RoR -

The 5 values were lifted from eBay's website.

With regard to the carrot and stick of reputation and shame, that is exactly the point of my post. Community exchange is exactly what is meant by the free market. And, in that market, reputation is what you live and die by. There are always going to be unscrupulous people, but government intervention doesn't solve it. All it does is make the government a mafia that gets to buy and sell favors at the expense of some industries and for the benefit of others.

 
At 8:15 PM, March 20, 2007 , Blogger J.C. said...

Excellent post Reign of Reason. Your best I have read for a while.
The template of society determines the players actions mostly. The Rules of the Game encourage bad acting in our culture , and reward it. Preaching and moralizing never work Insurgent, 'unscrupulous behavior' as you put it, is the very premise of our system. That is the reason things never turn out right in this type of society.
All questions turn on the premise of making or losing money. Money has no value , and only measures debt.
The more 'money' one has means the more captured debt. Captured debt is also an abstract concept.
Since all these ideas and choices revolve around measuring 'value' with something that is not real , things always end badly. These bad choices pile up higher and higher.

 
At 7:36 AM, March 21, 2007 , Blogger Boris Yeltsin said...

II: I agree with you.

Skip: you make it sound as though all financial transactions are a zero-sum game. In other words, the buyer always gets screwed.

What if the "game," benefits both the buyer and seller?

At that point, it's not a zero-sum game.

I used to work for a car dealership.

I can tell you, the owner of the dealership tries to the utmost to make every transaction a zero-sum game (meaning the buyer gets screwed) but that isn't always the case.

Consumers have become much more savvy, and the era of the zero-sum game is quickly coming to an end.

It doesn't happen on a daily basis, but there are people who walk away from car dealerships with a really good deal, and a really good car, thanks in large part to the internet.

People who get good deals demand CarFax reports. If the dealership doesn't provide one, they get their own, and they use those CarFax reports as a negotiating tool.

(If the car you're buying, happens to have been a rental from a rent-a-car agency, that's a negotiating tactic which favors the buyer - and is the case, more often than not.)

They also use the Kelly Blue Book site (kbb.com) and the NADA (NADA.com) to get the true values of the vehicles they want to purchase, and they slap those printed reports down in front of the sales managers, and the sales managers know if they don't budge on price, some other dealership will.

The trick in using these sites effectively is making "apples-to-apples" comparisons. In other words, each model has unique features that add value. Don't compare a stripped down model from a kbb.com site to a fully-loaded model you want to buy, or you'll never go anywhere.

Caveat Emptor is a double-edged sword: it puts the seller on notice, too.

 
At 2:35 PM, March 21, 2007 , Blogger RR said...

II,

I guess I wasn't clear: "good rep" and shame will keep the system running, but without punishments outside of the "shame" model you herald, you end up with a system where the incentives to cheat outweigh the risks of being caught.

e.g. - If I can auction-off a broken, worthless camera for serious $$$, then never visit ebay again, the system would be a lot more rife with fraud. But there are enforceable regulations outside of the ebay model... buys and sellers know they have that recourse, i.e. - the law. Buyer/sellers know legal action is available if things really go wrong.

That is the REAL force behind your illusion of "honest" transactions.

My point is that the free-market/buyer/seller-rep only gets you so far. Such a self-policing effort doesn't work on it's own... That's why all societies have developed punishments for this type of behavior instead of just letting them get away with a scolding from others...

Listen to me lecture a lawyer on the evolution of law...

:)

 
At 2:45 PM, March 21, 2007 , Blogger Intellectual Insurgent said...

LOL RoR -

I don't think we disagree. Law is essential to the proper functioning of a free market, but the law is meant to arbitrate disputes, not impose arbitrary guidelines on how much you can charge for an item or whether you can even be a seller or not. The law and the free market are not mutually exclusive.

Using your example, if someone sells some broken stuff, you can sue that person to get your money back. And that is the appropriate role of the law. Indeed, that person will probably be put out of business fighting lawsuits coming out of the unscrupulous behavior.

What is inappropriate is the government stepping in and setting quotas on what products can and can't be sold, imposing silly licensing requirements that favor some sellers over others and similar absurdities. Take liquor licenses that are insanely expensive. If you want to sell liquor, you can't open a business and do it. You have to pay the government mafia thousands and thousands to be allowed to do it. So, it doesn't end up mattering if the one bar in town waters down your drinks. It's the only place in town that can afford the license so they have a monopoly. No competition/choice is possible because the government has shut everyone else out. But, as they are keen to remind us, it is for our own good of course.

All my positions start from a libertarian approach. What is the appropriate role of government? To arbitrate disputes and protect the country. That's why the Constitution limits federal power significantly. Whether certain laws have beneficial effects, handing over power to the government is a dangerous game that "the people" should not willingly play.

 
At 8:01 PM, March 21, 2007 , Blogger J.C. said...

And that Intellectual Insurgent is your statement , and I am sure you are sticking to it.
That is also a confession. Libertarians are the worst scum in the world , and you dear are a part of them.
What does that mean.?
It means that you do not give a shit.
You measure things in money.
You subscribe to the Everything for me and nothing for you , role .
You and your ilk will destroy the world in a desultory manner, just because you do not think.
It is amazing how many smart , dumb people there are.
Take a bow.

 
At 9:38 AM, March 22, 2007 , Blogger Intellectual Insurgent said...

Oh, my dear Skip, another one of your loving comments. I was wondering how long it would take to get another lesson from you about how stupid I am that I cannot grasp your infinite wisdom.
Didn't you get all this free time to blog from your success in the money system?

I measure things in productivity. Money is just a substitute. Personally, I think the barter system would be far better.

 
At 2:23 PM, March 22, 2007 , Blogger J.C. said...

The Price System is an extrapolation of the barter system. A feature of the barter system, when it became to complex , with the rise of huge amounts of trade.
'I measure things in productivity.'
Your statement means nothing except for its Price System logic.
Productivity is measured in cost effectiveness in this system , and cost means money.
Other types of productivity use mechanical energy, and no longer equate with human energy.
Sadly you were most likely in a gullible state of mind when you read the silly and people hating material from Ayn Rand.
You mistook the false aggrandizing of the human spirit that she related to fake ideas such as money and were inculcated, perhaps for life. Perhaps.
I like your blog and I like you. I am not so egoistic to think that I am smarter than you. I already know that you are plenty smart.
The group I belong to has nothing to do with my individual personality.
I am sorry though , you are not aware in particular of your closed minded attitude, and reality is that it is people like you that are and will destroy this country, and for no particular reason , than to make money.
For you to equate money with how a person chose their particular role -goes back again to your kind of mentality.
I would also be doing what I am doing if I were homeless and using the Library computer.
Can you say the same.?
So. Insurgent yes, Intellectual, NO. Not presently.

 
At 3:24 PM, March 22, 2007 , Blogger Intellectual Insurgent said...

I am sorry though, you are not aware in particular of your closed minded attitude

Actually Skip, the fact that I tolerate your caustic insults with such good humor illustrates that I am not as close-minded as you may think. Not that my self-esteem rides on your opinion of me but, factually, your statement of me as close-minded is incorrect.

The fact that I may not share your views of the world does not mean that I am close-minded. I would be close-minded if I refused to even consider them. There's a big difference and your inability or unwillingness to recognize that distinction speaks to your close-mindedness, not mine.

 
At 9:18 PM, March 22, 2007 , Blogger J.C. said...

I only meant you are closed minded in the sense that you are on a revolving loop, as regards your conception of a good society , and how to operate a society. I found your reference to the 'free market' to be rather silly.
'Law is essential to the proper functioning of a free market' statement also. 'Law' as you describe it , only caters to and promotes special interest. Special Interest runs our 'free market'
I reference your ideas to mainstream Libertarian ones.
Libertarians in my view are even worse than , Repubs or Dems, in that they would let the 'free market' run wild even more so.
In that aspect I believe you to be closed minded, or fixated on abstract concepts you believe to be real, but are actually belief systems. I don`t actually care what you think, so I am not preaching here or moralizing, just making a factual point.

 
At 9:37 PM, March 22, 2007 , Blogger Free Agency Rules said...

ii,

If we were all marching, skip would be the only one "in-step."

I think Skip means well, but he won't win many converts by insulting them all.

:)

P.S.

I agree with all of what you are saying on this....you go girl! :)


FAR.

 
At 9:39 AM, March 23, 2007 , Blogger Intellectual Insurgent said...

LOL FAR.

In that aspect I believe you to be closed minded, or fixated on abstract concepts you believe to be real, but are actually belief systems.

Skip, I have no idea what this means.

It is your ideas of energy trading that are abstracts. The rest of us are dealing with what is. And while I applaud your passion and idealism, I see your ideals as no more or less lofty than religion.

The free market is the only real thing that has ever existed, by the way. Having studied Arab/Islamic history, Orientals (meaning Easterners) are the real capitalists who practiced free market economics throughout their histories. Islam, contrary to popular misconception, has much more to do with business than it does with spirituality or god or anything else for that matter.

It was the modern creation of the nation-state, which was done to serve the needs of the special interests you mention, that destroyed the free market. Once arbitrary borders were drawn, people were huddled into cages called nations and humans were educated to become specialized workers and all real notions of supply and demand went out the window. Then the so-called economists entered the scene to "educate" us on b.s. theories that have zero application in real life. Arabs didn't need economists to understand how to keep a society functioning. That's why every major Arab city centers around the souk or khan (the market). I have ancestors who are Egyptian, not racially, because they happened to be there during their travels selling spices, when the colonizers drew the lines on the map, gave them racial/ethnic/nationalist labels.

The internet is revolutionary because it has removed the borders and brought people together in exchange, spiritually, financially.

There is nothing wrong with valuing labor and productivity and it is not a zero sum game unless someone has nothing to offer.

 
At 9:52 AM, March 23, 2007 , Blogger J.C. said...

Again, you don`t get 'it' but that does not matter. Our program is unrelated to belief systems, or special interests of any kind. Science for that reason was chosen as an administrator.
When you say , 'there is nothing wrong with valuing labor and productivity', within the context of what you are saying is the underlying idea , of valuing money as a measurement of those concepts. That leads to disaster. The example being the world we live in.

 
At 9:54 AM, March 23, 2007 , Blogger Intellectual Insurgent said...

Ok, perhaps we are getting somewhere. I want to understand the point where we diverge. Is it your argument that it is the creation of money that has destroyed society? Because if that is your argument, you won't hear any argument from me.

 
At 3:31 PM, March 23, 2007 , Blogger J.C. said...

Ha ha. You are a good debater.
I come here to relax and have fun.
I like your provocative questions, and general attitude.
Usually.
I love the history of the middle east, and as you say, our modern concepts mostly come from there. The code of Hammurabi reads much like a modern legal code in many places. That was written in the 19th cent. B.C. - It is an interesting thing to look at. Also a bit before that, our modern conception , or at least the spin-off religions of Iraq and Egypt, started.
They were clever. The human psyche was figured out almost like a science , and the spreading of false information occurred with the desire to control people in , as you say , 'our caged society`s`--
We have stuck with the twisted systems of scarcity maintenance, and false belief , since then.
The industrial revolution, and mechanical energy changed the template of the type of society we could have into a society of , Abundance, in North America, if the resource base was guarded. That became possible after about 1913 with human energy being eclipsed by mechanical energy. The concept of work was then changed forever , but... we have kept our old Price System that relies on scarcity , and measures things in 'money'.------- This system is not good for much, especially when population grows and resources are destroyed. A Price System MUST always grow , or it collapses, but there is a limit to growth. Hence a double bind.
People can`t wrap their minds around other ideas very well though, because they mostly haven`t heard about them, or have been, 'tricked'into believing they live in a system that is 'good' or with a little tinkering here and there , can be made good. Our present system though is not reformable as it relies on Belief system special interest, and Money special interest, both of which are dangerous and destructive. Both also turn people into slaves either to fake ideas , or to false values of how to measure things that are important.
I rest my case. For now. Ha.

 
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