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The bad side of supply and demand

By Cedonia Peterson
web posted September 22, 2014

What is the first thing you think of when you read the words "supply and demand?" For many people, it is economics. The principle of supply and demand is the backbone of economics, and has been for a long time. The idea that retailers supply what consumers demand can be traced far back into history. However, 2004 Nobel prize-winner Paul Krugman takes supply and demand in a different direction in his essay Supply, Demand and English Food. In it, he states the negative side of supply and demand: "a free-market economy can get trapped for an extended period in a bad equilibrium in which good things are not demanded because they have never been supplied, and are not supplied because not enough people demand them." I agree that both sides of this economic coin occur because of my own experiences: While studying European history I have seen Peter the Great combat a lack of demand for the commodity of Western culture, and in my own life I have seen a doll company go out of business because there was no demand. I have also seen the literary culture climb out of the "bad equilibrium" Krugman describes, as it responded to a lack of Fantasy novels for youths.

The first side of the supply and demand coin described by Krugman is a lack of demand due to no previous supply of some commodity. When I studied European history last year I saw this in mid seventeenth century Russia. When the Russian ruler Peter the Great was still a young king, he travelled to Western Europe and experienced first-hand the modern social rules and superior technology that those countries took as a matter of course. He saw their society and technology as a commodity he wanted to bring to his own backward and traditional home country. Peter went home and began to modernize Russia. He famously forced all men to shave their beards in keeping with the customs of other countries and to cut their coats short in the style of Western men. He brought in new weapons and even built a new capitol city, Petersburg, closer to Western Europe and called it his "window on the West." While Peter strove to bring the commodity of Western culture to Russia, the Russians had no interest in receiving it. Peter had to resort to drastic measures such as taking control of the Russian Orthodox Church in order to control the Russian citizens. The commodity Peter forced on them was one that had never been supplied before; as such, they did not demand it or want it.

The second side of the coin Krugman describes is when there is no supply because there is no demand. My example of this comes from my own experience: when I was younger my friend had a Life of Faith doll (this is basically the Christian equivalent of an American Girl doll) that I envied with all the passion an eight-year-old could possess. My next birthday, my parent gave me my very own Life of Faith doll. My friend and I played together with our dolls for years, and we were not the only consumers to purchase dolls from the company; Christian bookstores at the mall offered a fine collection of dolls and accessories. However, as all girls do I began to drift away from my doll. Soon she took up residence in the back of my closet, all but forgotten. Years later my sister wanted a doll. When I went to the Life of Faith website, imagine my shock to see that they had gone out of business! While my back was turned, demand for the Life of Faith dolls disappeared and because of this lack of demand, the supplier of the dolls stopped supplying them.

Finally, sometimes both sides of the coin come together and form the bad equilibrium Krugman wrote about in Supply, Demand and English Food. I have seen the literary world recovering from this equilibrium in my own life: for a long time before I was born, children (and their parents) did not demand or buy many books written specifically for tweens and teens, because they had never been supplied. Teens read the books that were available, and did not ask for more books written for them. In return, the Young Adult market (which is what the tween and teen age group is called in publishing) was not considered a viable consumer market by publishing companies, who had never seen any big successes in the Young Adult field. However, this bad equilibrium of no supply and no demand changed in the late 20th century; the greatest factor toward this was J.K. Rowling's Harry Potter series, which catered to the Young Adult niche and was a massive success. Suddenly suppliers realized that there was a lot of money for the taking in a previously un-explored niche of publishing, and teens began to protest the scarcity of what they got in Harry Potterexciting fantasy written for their own age group. As I have grown up, I have seen the Young Adult genre to grow from a stub to a booming market with everything in it from my own favorite genre, science fiction, to the creepy-but-really-popular paranormal romances like Stephanie Meyer's Twilight. The rise in the Young Adult market in the last fifteen to twenty years shows that while Krugman is right about the existence of bad equilibriums, those equilibriums can be altered for the better. ESR

This is Cedonia Peterson's first contribution to Enter Stage Right. © 2014 Cedonia Peterson

 

 

 

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