Controversy As Louisiana Walmart Charges Less For Black Barbies Than White Barbies

Those that are angry at Walmart simply have no basic understanding of how prices are determined in a free market. They are ignorantly talking about "ugly inequalities" as if the prices of the Barbie dolls are being determined by Bull Connor. In reality, the lowered price does not reflect the intrinsic value of the product. As anyone with even a basic understanding of economics knows, it is a reflection of supply and demand. The supply of black Barbies at the store exceeded demand for that Barbie. Lowering the price was the rational response to market conditions in order to meet the realities at the store. Those that think this is controversial seem not to realize that if the price of the black Barbie did not decrease, it would simply stay stocked on the shelves rather than getting sold as the new inventory arrives. A self-imposed price control based on racial sensitivity, artificially keeping the prices of black Barbie dolls at the higher price of white Barbies despite the lower demand, would simply result in a black Barbie surplus. As Thomas Sowell explains, "a chronic surplus of the same thing...means that somebody is preventing the price from falling. Otherwise the excess supply would drive down the price, leading producers to produce less -- and consumers to consume more -- until the surplus was gone... People with a basic knowledge of economics would understand that words like 'surplus' and 'shortage' imply another word that may not be mentioned explicitly: Price. And chronic surpluses or chronic shortages imply price controls. Conversely, price controls imply chronic surpluses or shortages -- depending on whether price controls keep prices from falling to the level they would reach under supply and demand or keep them from rising to that level."

The fallacy that prices reflect intrinsic value is based on misunderstandings of how prices are determined. For example, often one hears that it is a scandal that a man can make millions of dollars for throwing a baseball really fast while the wages of America's teachers are far too low. This is another example of the misguided view that prices somehow reflect moral worth or reflect the values of our society. However, this is based on the lack of realization that wages are essentially the price at which one sells his labor and therefore the wage is determined by the market through supply and demand. The reason that the ball player makes millions is because the supply is very limited, as the skill necessary to be a great pitcher is limited, and the demand is very high by baseball clubs which are in turn able to utilize the great pitcher to attract more people to the stadiums and to their televisions to watch games. On the other hand, the supply of those with the skills necessary to teach public elementary schools is not limited at all. Therefore, the elementary school teacher, who may be doing something more valuable every day than the ball player, will earn a much lower wage. The principle applies as equally to Barbie dolls as it does to wages. Tweet