Of the several books I’ve read and reviewed lately about the economics of everyday life, Ellen Ruppel Shell’s Cheap: The High Cost of Discount Culture taught me the most. Shell looks at the mystery of how prices are set, and because she doesn’t try to be comprehensive or to propose an approach to pricing that fixes the many pathologies she encounters, she is able to take a fairly objective look at a wide range of puzzling outcomes without obscuring their weirdness.
Shell opens the book with a note to readers that explains what inspired her to write it. She establishes her credentials as a lifelong seeker after bargains, then says this:
What changed me was the boot incident. A couple of years ago I needed a pair of dress boots to complement a New Year’s Eve outfit I’d purchased on super sale at Bloomingdale’s (you would not believe how much I saved). I went to my local shoe store—a mini-outlet—and had a look around. The selection was just so-so. I asked the salesman whether he had anything special, and he brought over a gorgeous pair of boots from Italy. The leather was buttery, the look great, the fit perfect, but the price well out of my range. I settled for some Chinese imports selling for about one quarter the price. The boots were clunky and so uncomfortable that on New Year’s Day I tossed them to the back of my closet, where they landed in a heap of other unwearable “good deals” in bad colors or unflattering shapes: a bargain hunter’s pile of shame.
The footwear fiasco got me thinking about all those cheap gloves and socks and T-shirts and “Guess how much I saved?” gizmos cluttering my family’s life. How much of this stuff had we used once or not at all and then packed away, given away, thrown away? Why were we doing this? It was time to take a hard look at this behavior, a behavior that on its face seemed not quite rational. And why was there such a scarcity of things reasonably priced? It seemed that almost all consumer goods were cheap, like the Chinese boots, or extravagant, like the Italian boots. Where, I wondered, was the solid middle ground that offered safe footing not so very long ago?
And that is the primary insight of this book, that in many different ways our modern devotion to buying at bargain prices has in fact hollowed out the middle range of products available, with quality goods becoming exorbitant luxuries and affordable goods being extremely affordable but also nearly worthless. It is now exceptionally difficult to buy or sell decent, durable goods at a reasonable price.
Shell then proceeds to walk through a rogue’s gallery of culprits who each contributed a a key innovation that drove us towards our current mess: John Wanamaker, who invented the price tag that completely changed the common understanding of price; Frank Woolworth, who searched the world for junk which he was able to get people to buy solely because it was cheap; Eugene Ferkauf, who used Korvette’s to create the now omnipresent low-margin, low-service, high-turnover model of retail sales; the shopping cart and the bar code that facilitated the shift from full-service to self-service; outlet malls, which figured out how to apply brand names to cheap junk without diluting the power of the brand; markdown sales, which trained buyers to seek out bargains and even expect to always buy at a discount; IKEA, which proved that quality was irrelevant if price and style were brought to bear; the industrial food system, which has trained people to hunger for whatever the system can produce most cheaply; China, which has catapulted itself into the 21st century by leveraging the extreme poverty of its people and the willful gullibility of its customers to fill the global pipeline with goods whose dangerous lack of quality is being exposed daily.
I think there is much, much more that needs to be thought and written about the problem of price in the modern-day free market. But Shell’s book is a very good place to start for anyone who suspects that something is wrong here, and would like to know exactly what it is.