Thursday, August 01, 2002
eBay: The World's Online Marketplace
Some may feel that eBay.com may be bragging a little bit with their slogan, but with closer examination it appears the eBay could be Capitalism perfected.
Ok, this post is so going to scare certain majors away but try to stay with me.
You have all heard of eBay, and a great deal have met its baby website: half.com, but the implications of these two sister sites is phenominal. On eBay, as most of you know, you bid on items, just like in a real auction. On Half.com you just buy stuff, but from independent sellers, just like the ones that stock up eBay.com.
Ok, you're thinking: "That's great Matt, but what does have to do with perfecting a free market?" Well, it all has to do with property rights and honesty. No doubt at some point in your high school career (this is assuming you've done all that) you were introdued to Communism. It sounded like a nice system, but you all figured out really quickly that the only problem with equal distribution as that internet human corruption would eventually topple the system (i.e. people like to steal things and screw other people over for their own good).
Unfortunately the same goes for Capitalism. For a perfect free market society, property rights have to be properly enforced (if anyone really wants to know why, e-mail me). The only entity fully capable of this is the government. But wait, doesn't this remind you of something? For Communism to work you need someone to distribute the wealth, thus needing a government, which opens the way for corruption; well the same goes for the other end of the economic stick. Whenever there is a government, for all the good it can do, there is always a certain amount of corruption, and when there is corruption, business men can get around silly things like properly enforced property rights (i.e. Enron, Worldcom..Qwest /7Ride the lightning baby /7).
Anyway, this prevents capitalism from getting any closer to the economist's fantasy world of ceteris paribus, and thus nullifying the concept of a "perfect system." Human nature defies a perfect free market in the same way that it defies total equality.
Some of you might have had to take microeconomics once in your life. In these classes, your free market obsessed grad student may have made the point that governments don't need to put restrictions or create watch programs because the consumer can regulate business just as well (i.e. if someone sells a faulty product, people will stop buying it, if a certain airline crashes lots of planes, people will stop flying it). Although it made a certain amount of sense, this belief often left us wondering if that's how things would always really work, especially with today's corporations doing most of the dirty stuff behind out backs.
What does any of this have to do with eBay? Well eBay maintains exact property rights and prevents corruption because of the way its sellers are presented to the consumer. Let me explain: When you search for an item... lets say.. a computer game, on eBay (or half.com) you are presented with the username of the seller, some info about that seller, including the seller's rating. This is based on little reviews given by the consumer after receiving the product. Most sellers have excellent ratings, meaning that they took their payments and quickly and correctly shipped the exact item that the consumer thought they were getting. Basically, by looking at the seller's info, a customer can instantly know whether or not this is a good buy.
Although eBay takes a little bit of a commission from the seller's earnings, they don't actually mess around with the payment, so there is no chance for corruption on the governing level (i.e. eBay preserves safe and easy transfer of funds while maintaning property rights) and the seller wouldn't dare screw over someone with a product, because they know that one bad review can bring down the whole house. That's right, bad reviews count worse than good reviews.
So now you have a self-regulating economic market that is controlled by the consumer, who maintains a distant relationship with the actual site of eBay (just having a typical account with basic info) leaving no room for corruption, as the only two parties that are relatively close, the sellers and eBay, don't regulate the system to nearly the extent that the consumer does.
Not only does this system work, for the most part, flawlessly (every now and then there is a bad apple, but it usually involves people ordering from others with either no or really bad ratings), but it also offers standard, often new items, at cheaper prices than most internet retailers. And it preserves the quaintness of the small business. That's right, despite the assumption that consolidation always leads to a lower price level, here we see a group of individual/small stores offering a cheaper and more effective service than, shall I dare say, amazon.com
Listening to: The Deftones - Digital Bath
Some may feel that eBay.com may be bragging a little bit with their slogan, but with closer examination it appears the eBay could be Capitalism perfected.
Ok, this post is so going to scare certain majors away but try to stay with me.
You have all heard of eBay, and a great deal have met its baby website: half.com, but the implications of these two sister sites is phenominal. On eBay, as most of you know, you bid on items, just like in a real auction. On Half.com you just buy stuff, but from independent sellers, just like the ones that stock up eBay.com.
Ok, you're thinking: "That's great Matt, but what does have to do with perfecting a free market?" Well, it all has to do with property rights and honesty. No doubt at some point in your high school career (this is assuming you've done all that) you were introdued to Communism. It sounded like a nice system, but you all figured out really quickly that the only problem with equal distribution as that internet human corruption would eventually topple the system (i.e. people like to steal things and screw other people over for their own good).
Unfortunately the same goes for Capitalism. For a perfect free market society, property rights have to be properly enforced (if anyone really wants to know why, e-mail me). The only entity fully capable of this is the government. But wait, doesn't this remind you of something? For Communism to work you need someone to distribute the wealth, thus needing a government, which opens the way for corruption; well the same goes for the other end of the economic stick. Whenever there is a government, for all the good it can do, there is always a certain amount of corruption, and when there is corruption, business men can get around silly things like properly enforced property rights (i.e. Enron, Worldcom..Qwest /7Ride the lightning baby /7).
Anyway, this prevents capitalism from getting any closer to the economist's fantasy world of ceteris paribus, and thus nullifying the concept of a "perfect system." Human nature defies a perfect free market in the same way that it defies total equality.
Some of you might have had to take microeconomics once in your life. In these classes, your free market obsessed grad student may have made the point that governments don't need to put restrictions or create watch programs because the consumer can regulate business just as well (i.e. if someone sells a faulty product, people will stop buying it, if a certain airline crashes lots of planes, people will stop flying it). Although it made a certain amount of sense, this belief often left us wondering if that's how things would always really work, especially with today's corporations doing most of the dirty stuff behind out backs.
What does any of this have to do with eBay? Well eBay maintains exact property rights and prevents corruption because of the way its sellers are presented to the consumer. Let me explain: When you search for an item... lets say.. a computer game, on eBay (or half.com) you are presented with the username of the seller, some info about that seller, including the seller's rating. This is based on little reviews given by the consumer after receiving the product. Most sellers have excellent ratings, meaning that they took their payments and quickly and correctly shipped the exact item that the consumer thought they were getting. Basically, by looking at the seller's info, a customer can instantly know whether or not this is a good buy.
Although eBay takes a little bit of a commission from the seller's earnings, they don't actually mess around with the payment, so there is no chance for corruption on the governing level (i.e. eBay preserves safe and easy transfer of funds while maintaning property rights) and the seller wouldn't dare screw over someone with a product, because they know that one bad review can bring down the whole house. That's right, bad reviews count worse than good reviews.
So now you have a self-regulating economic market that is controlled by the consumer, who maintains a distant relationship with the actual site of eBay (just having a typical account with basic info) leaving no room for corruption, as the only two parties that are relatively close, the sellers and eBay, don't regulate the system to nearly the extent that the consumer does.
Not only does this system work, for the most part, flawlessly (every now and then there is a bad apple, but it usually involves people ordering from others with either no or really bad ratings), but it also offers standard, often new items, at cheaper prices than most internet retailers. And it preserves the quaintness of the small business. That's right, despite the assumption that consolidation always leads to a lower price level, here we see a group of individual/small stores offering a cheaper and more effective service than, shall I dare say, amazon.com
Listening to: The Deftones - Digital Bath
