On Pareto improving trades!

When I first came to US (suburban CT), the idea of thrift stores was totally new me. At first, I had no idea what these stores were about.The name suggested that one could possibly save money by shopping at such stores. It was only later when I actually visited one in NYC that I realized that much of what these stores sold were used clothing, books, kitchen stuff, shoes, etc. The stuff was indeed cheap and sometimes even brand new, probably chucked of someone who got bored with the purchase. As an international graduate student on a shoe string budget it was a great boon to have one right near where I lived.

As a student of economics the question that intrigues me  was why are there thrift stores? It was particularly interesting because stuff from China and other developing countries had already made sure that goods are available at dirt cheap prices. Also, if you are not picky and can be patient, then you could get all that you wanted at a price that is affordable. But I think there in lies the answer. There are consumers who are obviously poor and benefit from thrift shops. But then there are others who are not that poor but would like to have things now and thrift stores provide an opportunity for them. Later, as I finished my studies and moved to other town for a job, I became a donor to these shops. This was stuff that I had acquired over the years, brand new and used, but did not see me using it anymore. So the thrift store provided an avenue to reduce clutter and then buy stuff that I would need for the new phase in my life. I am sure mine is not a peculiar case and many people at some or the time have been on either the consumer or supplier side of thrift stores.

When I moved to south east Massachusetts, I came across another variety of stores called consignment stores. This was a version of a thrift store but only somewhat pricier. Here the stuff is actually consigned by owners to be sold for them. So the products are not donated. The quality is overall better than a thrift store and at times you just might get lucky with a latest fashion shirt or a jacket!

So what the thrift and consignment stores seem to be doing is provide an opportunity for a beneficial trade (people who want to get rid od stuff and people who do not mind using it), clear the markets( reduce the price to ensure sales) and in the process create sustained demand for new products. Given this, I think they are an integral part of a market based economy. Do we see these kind of stores in other countries? I can speak for India. Markets for used automobiles are every where. You can also buy used books and other second hand goods sometimes through stores and at other times through personal and social networks. In my home town there is also this network of people who buy junk, exchange old clothing for new sundry items like utensils, crockery, etc and then sell the junk and old clothing to people who are in need of them. So the markets may not be as organized as in the US but they are certainly there and there might be an argument for making them more visible and ubiquitous to improve economic efficiency.

I have not come across any studies on this phenomenon but then that is just a good excuse to dig deeper, is it not?

Leave a comment

Filed under markets and efficiency

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s