A brouhaha has erupted this week over the Nike shoe company's release of a twenty-first century version of the wildly-popular "Air Jordan" athletic shoes.
Air Jordan shoes date to the mid-1980s during basketball star Michael Jordan's NBA heyday. Nike's re-release of the shoe line just before Christmas resulted in sporadic incidents of violence among young people clamoring to get their hands on a pair of the shoes. Even at a price of two hundred dollars per pair, news reports showed one such incident in Houston, Texas where police were needed to prevent riots from breaking out.
Community leaders pleaded with Nike officials encouraging them to lower the price of the Air Jordan shoes, presumably so that everyone could afford them. The Fox Television affiliate in Houston carried an interview with community leaders who were pleading for law and order. One of these spokesmen was a gentleman named Ben Mendez. Mendez was identified as a local Hispanic "business leader". Mendez was quoted as saying that,"The people that can least afford these shoes are buying them, and what happens as a result of that? Well there's more crime."
One would think that Mr. Mendez, as a business leader, would have a firmer grasp on the principles of capitalism, specifically the laws of supply and demand. If the shoe price of two hundred dollars is resulting in hordes of people fighting over a limited supply of Air Jordans, do the aforementioned community leaders honestly believe that LOWERING the price of the shoes will result in an increased supply? The law of supply and demand states that, given a fixed supply, raising the price will decrease the demand for goods or services. Conversely, with the same fixed supply, decreasing the price will actually INCREASE demand - not decrease it. The fact that demand for Air Jordans is so great already allows one to make the argument that the price is really too LOW - not too high. If Nike were to increase the price, fewer people would be able to afford the shoes, demand would decrease, and we would see fewer incidents of violence, not more.
Look at it another way using gold as an analogy: Right now, gold is trading at around $1500 per ounce. But are people rioting in a frenzied quest to acquire the precious metal? No. And why not? Because it is expensive. Who does not like gold? Not many people. But we don't hear business leaders imploring that gold producers lower the price so that everyone can have some. Can you imagine what would happen if the gold producers were suddenly forced to drop the price of their product? You would have a sudden rush for it as people would crawl over one another trying to get their hands on it at the reduced price. The demand would soon outstrip the supply and one of two things would have to happen: The price would have to increase to bring supply and demand back into equilibrium or the product would have to be rationed.
Short of instituting some sort of rationing for the Nike shoes, the producer should increase the price to help to quell demand.
Then again, we could merely wait for the government, in its infinite wisdom, to step in. Perhaps what is needed is some sort of taxpayer-funded voucher system. Then, as with cell phones, everyone can have a pair of Air Jordans and We The People would, no doubt, end up footing the bill.
James Sharp is a middle-aged, middle-class, middle-management salesman who believes in secure borders and fighting our enemies with a strong military. He also believes in limited government, free markets, and unlimited opportunity and personal liberties for all citizens of the U.S.
