Knowledge And Decisions

Similar principles apply in the very different world of organized crime. From the point of view of career criminals, there is some optimal quantity of violence associated with economic crimes, such as robbery. With zero violence and zero threat of violence, no one would turn over his economic assets to the criminal. But beyond some point, violence causes public outcries which bring more police power to bear in a given sector, reducing crime opportunity for other criminals as well as for the one who committed some “senseless” violence against an economic crime victim. Where each criminal is a separate decision-making unit, these external costs of his crime have no deterrent effect on his conduct. When crime is organized into larger units, however, these larger units have an incentive to minimize public outcry per unit of economic crime, which usually means reducing the amount of “senseless” violence against the victims. In short, with organized crime as with Oriental families, internalizing the external costs created by individuals means greater social control and greater responsiveness to public reactions which might safely be ignored by an individual malefactor whose identity was unknown to authorities or whose guilt would be difficult to establish through formal legal processes. In both cases, the source of this greater control is the lower cost of knowledge by those with whom he is closely associated. The relative abandon with which organized crime figures kill each other only reinforces the point; there is little or no public outcry at the death of a mobster.

TIME

Time is perhaps the ultimate constraint. Few things can be done instantaneously, and with unlimited billions of years virtually anything is possible. Even complex human beings may evolve from an initially lifeless planet. On a more mundane level, the cost of constructing a house literally overnight would be many times the cost of constructing the same house in the normal time or constructing it in whatever “free time” was available sporadically over the next decade.

Time is, of course, never free. Its value is whatever alternative opportunities must be foregone in order to use it for a particular purpose. The value or cost of time is often overlooked, as among bargain hunters who ignore the time spent searching for “bargains” (not simply the time spent finding the things actually purchased, but the time spent looking at the whole array of possibilities from which the purchased items were selected), or waiting for service in low-priced stores, or seeking frequent repairs for low-priced items with less durability. The “same” merchandise generally sells for a higher price in stores with a more varied stock (of brands or sizes), more (or better) salespeople, and more numerous cash registers, with correspondingly shorter lines at each — all of which save time. It is not really the same merchandise because what is being purchased is not simply the physical item but also the associated services required for its discovery and use.

Another way of looking at this is that every item has both a money price and a time price, and it is the combination of the two that is its full cost. Since the value of time varies from person to person, in terms of his foregone opportunities (whether earnings or other activities), this invisible combined price may be equalized by competition while the visible money price components remain disparate. Flea markets, for example, incur virtually no costs of stocking a standard selection or wide variety of given items, nor for various after-sales services, and the consumer pays low money costs and high search costs to get what he wants, or pays other intangible costs by not getting exactly what he wants in the condition that he wants. At the other end of the spectrum is the more elaborate kind of department store, with personnel trained to explain and demonstrate the intricacies and nuances of the specific kind of merchandise in their respective departments, a wide range of brands, qualities, and sizes of each commodity stocked, and with defective items sorted out for return to the manufacturer, whether discovered by the store before display or returned by the customer for a refund after the sale. Where on the spectrum between these two kinds of sellers a particular buyer will go depends on his own incremental trade-off between time and money, determined largely by his income and impatience. In this context, persistent money price differences for the “same” merchandise sold at different kinds of stores do not prove the consumers “irrational,” nor the merchants dishonest, nor the economy noncompetitive.