Wednesday, August 17, 2005

The wonder of supply and demand,

While discussing the Fair Tax plan with my local talk show host Phil Valentine , he told me that he is not so sure that once we get rid of the IRS and its heavy taxation that prices will naturally drop once we tack on the extra 23% sales tax that the Fair Tax calls for. I would suggest to Phil that the law of supply and demand works every time it's tried. Supply and demand is what keeps the market in check even when greedy business owners try to shaft the consumers. Once one business drops its prices to gain a competitive advantage, other businesses follow suit in order to compete. I guess you could say such behavior is what Adam Smith called the "invisible hand" of Capitalism.