Tuesday, January 15, 2013

"Can't Afford"

In the late 70s, there was a killing coffee frost in Brazil.

The price of coffee skyrocketed.

Yet you could buy all the coffee you wanted. The shelves were full, just shorter shelves.

People were buying less coffee, in just the right amount to meet the coffee available.

Obviously the poor could no longer afford coffee.

Suppose the government started a coffee aid program for the poor.

If you hand out free coffee, very fast you run out of coffee.

Suppose, instead, at the door of the supermarket, the poor are handed $10 for a pound of coffee.

Will the poor buy coffee?

No. They have a better use for $10 than coffee at $10 a pound. They prefer something else to coffee at $10.

That is the meaning of "can't afford." The price is such that they have a better use for the money, not that they don't have the money.

It's the same in health care. There's a better use for the money, at some price.

That's what holds the price down. Or, if you go the free health care route, that's what makes the price skyrocket.