Arnold Kling  

Free Trade with the AARP

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What, Me Rich?... Social Security Incrementalism...

Should you join the AARP if you disagree with its political positions? Carrie Lukas says no. So does Professor Bainbridge.


Why? Because they are just one more liberal special interest group, albeit a particularly well camoflauged and effective one (using those discounts to pull in seniors who probably vote red).

My wife has a different view. She points out that you can take advantage of the AARP discounts and then contribute that money to political causes that you like.

She clearly knows her free trade. It is a bad idea to discriminate for or against merchants based on their political beliefs or ethnic solidarity. Just pick the best deal, and address your feelings about politics or ethnicity by contributing to the appropriate causes.

But I still did not join the AARP. In this case, even I could not behave in accordance with the logic of free trade.

For Discussion. Is there a flaw in the free trade logic?


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CATEGORIES: International Trade



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The author at Right Mind in a related article titled Free Trade with the AARP writes:
    TITLE: Free Trade with the AARP URL: http://right-mind.us/archive/2005/02/12/1685.aspx IP: 198.206.162.134 BLOG NAME: Right Mind DATE: 02/12/2005 04:07:13 PM [Tracked on February 12, 2005 4:07 PM]
COMMENTS (11 to date)
Avery writes:

That's the beauty of free trade. You make your decision based on whatever you wish. She chooses to find the best deal no matter who is behind it similar to people that choose to ignore Wal-Mart's moral downsides because they like the lowest priced merchandise.

Jim Erlandson writes:

From the AARP Website,

With over 35 million members, AARP is the leading nonprofit, nonpartisan membership organization for people age 50 and over in the United States ... Advocating on legislative, consumer and legal issues.

If you join AARP for the "good deals", you become part of the 35 million member "club" that AARP uses to lobby state and federal legislators. And they may be lobbying for things you don't want.

You should look at the logic behind the headline: New AARP Poll Finds Appeal of Social Security Private Accounts Drops When Consequences Are Known.

Brad Hutchings writes:

Arnold, look at their membership agreement and see if it precludes you from saying, "I am a card carrying member of AARP and I think [insert contrarion stance here].".

Thinking about this now, the AARP of today reminds me of the Auto Club of yesterday. My grandfather was a career employee with the Auto Club of Southern California and they've treated him well in retirement, so they are near and dear to my heart. But... a couple years ago, I decided not to renew my membership. It was cool having a card that said "Member Since 1946" (a year before my Dad was born -- it was cool how they used to recognize the longevity of ancestors' membership) and I once walked into one of my grandfather's old offices, presented my card, and was asked if I was related to him. But you know what? In 15 years, I hadn't needed a tow or a jumpstart. Thanks to MapQuest, I no longer need printed maps. I can renew my vehicle registration online. I once used them for a passport photo, which took almost an hour, and found out later that a number of places do it for cheap real quick. Politically, I found myself at odds with most of their agenda at the state level, from their support of a bicycle helmet law for kids to support for No-Fault car insurance policies to their lack of support for private or public toll roads to their support for a gas tax and transportation directed sales tax and then caving when fiscal "crises" reappropriated the monies to the general fund. They were once a strong pro-driver lobbying group with valuable services for members. Now, not so much so. They certainly didn't have a perpetual monopoly on the benefits (or need for them) and neither will AARP.

Patrick Charles writes:

Here's a flaw in that so-called free trade reasoning:

Joining AARP doesn't necessarily provide you with a "free" benefit. If AARP uses its gargantuan size to advocate policies that exact a higher social cost (than the benefit received) on you, then joining AARP could be a sub-optimal decision.

Of course, at this point AARP has so many members that its marginal increase in political power (from your membership) is minimal. Still, I respect your decision not to join -- I make a similar choice by refusing to shop at Wal-Mart.

Tom writes:

I see no flaw in the free-trade logic. But, as other commenters have pointed out, AARP may not offer the best free-trade deal for everyone (or anyone). It pays to shop around for discounts.

That said, if AARP had the only discount game in town, should I contribute my dues to a lobbying organization that pursues policies against my interest? The answer depends on the effectiveness of an individual "boycott" of AARP, which is practically nil. It's analogous to voting: One vote is extremely unlikely to make a difference; we tend to vote because it makes us feel good. Well, an individual "boycott" of AARP may make the individual feel good, but it's unlikely to be effective.

Lawrance George Lux writes:

Free Trade Logic? Where is this Animal(or machine)? Any Economist will tell that Discount policy is basically anti-Free Trade, as it gives preferred rates to some Customers for reasons other than market forces, raising Market Costs for other Customers. lgl

Brad Hutchings writes:

You're kidding me lgl... Differential pricing schemes are anti-free-trade? Textbook time. Let's say I can produce a report for $1100. I have two potential customers. One is willing to pay $700 for the report, the other $500. If I am not allowed to use a differential pricing scheme, then my revenue is either $1000 or $700. If I am allowed to, my revenue is $1200, and the activity is profitable. Differential pricing (through club cards) probably saved the grocery business from total domination by the likes of Costco and WalMart.

Lawrance George Lux writes:

Brad,
I was talking in the sphere of economic theory and generic product. Discounts will always exist and be used, because of the maximaization of Profits, but not because of the long-run benefit of the Customer. Your example simply expresses your ability to make your effort pay a Profit; it does not cheapen the cost of its production. lgl

Knut Wicksell writes:

The AARP is the worst kind of lobby. They have delayed or destroyed any reasonable discussion of alternatives on Social Security and related programs for seniors. They exploit their ยง501 (c)(3) to the hilt and then run discounts that distort the market. Why should I get a discounted price on something like hotel rooms or insurance merely because I am over 50? How does any of what they do help improve either the political process or the market?

Brad Hutchings writes:

lgl and Knut... Going back to Arnold's recent posting about pricing at marginal cost, yeah, I see that if you buy into that logic (that prices should reflect marginal cost) then discounts become a zero-sum game in your mind. The customer who gets the discount necessarily increases the price for other customers. That's fine in a textbook, but it doesn't take into account the individual psychologies of your customers. Some customers, for whatever reason, just want a discount. Take your most expensive price, mark it down 20%, and you have a deal. Others want a competitive price. Find out what the competition is charging and match it. Sometimes, a loss-leader will get you tremendous repeat business. Hole-in-the-wall restaurants tend to make money in the long run by luring repeat business with coupons. Senior discounts can also be a feel-good for younger folks who shop/eat with parents and grandparents, much as Costco catering the Los Angeles train disaster gives us all a warm fuzzy about them. Discounts may not appeal to certain notions of fairness, but they certainly appeal to objective market notions of profitability. That's why they happen.

anon writes:

"Just pick the best deal, and address your feelings about politics or ethnicity by contributing to the appropriate causes."

Lemme get this straight. Instead of boycotting companies that abuse animals, discriminate against gays, support Republicans, I should buy from them just based on the "best deal" and then give money to charities to communicate my values.

Do you really believe the nonsense you write here or are you trying to be provactive by showing how pathologically insane economics is, when stripped of its mathematical gobbledygook?

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