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Comment by codedokode | Hacker News Reader

Could it be because in capitalism, the seller tries to take as much money as possible from buyer and the price is not related to expenses?

Let me give an example that can illustrate this: a typical mobile plan from Verizon in US costs $45/month and gives you 15 Gb of traffic. At the same time in Russia one can get 30 Gb for $9/month. Are expenses for maintaining a cell network 5 times higher in US? Unlikely. It is just customers in US are richer and are ok to pay more for the same service.

I don't know how this effect is called, but couldn't the same thing happen to education, land or housing costs? These are obviously things that everyone needs desperately so the seller will squeeze the maximum they can, and the price is unrelated to how much the lecturer earns or how much the bricks cost. The house will cost you almost all your life's earnings no matter where you live.

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I was with you until "It is just customers in US are richer and are ok to pay more for the same service." How did you reach that conclusion? The other reason (which seems more likely to me) is that it is because the free market is not functioning because of monopoly/duopoly created by regulatory capture.

Let me explain. If a Russian mobile provider would ask customers to pay $45 starting next month, then majority of users would say: "No thanks, I don't really need mobile data that much. Also by law you must provide us with free access to VK (social network) anyway so it makes no sense to pay you $45 for this". But is US, customers are paying and do not complain, because for them it is not that big price. This is what I meant by "customers are ok".

Yes, mobile providers market is not a free market, as there are small number of companies both in US and in Russia. But the price they charge customers is different in these countries despite they use similar equipment which probably has the same cost. So the difference in prices can be explained by what people in different countries consider "cheap" and "expensive". The provider charges as much as possible, but less than a customer would consider "too expensive".

And the same thing is about housing prices, they do not really correlate with expenses to build them. It takes the same amount of money to build an apartment in Moscow and in a small city in Siberia, but the price for the buyer will be very different.

Also, regarding houses and land prices, there is no monopoly, but the prices are extremely high in large cities. So "it is a monopoly" doesn't sound like an explanation, but "charge the buyer as much as they can afford and a bit on top of that" is more realistic. And as for education, there seems to be no monopoly too.

Isn’t Russia capitalist too? I’m confused but your comparison. Sounds like you’ve just compared two markets without myriad variables.

The fact that student loans are backed by the government would in fact undermine this as a good example of a free market.

Almost every country is capitalist, including Russia. I didn't try to compare capitalist vs non-capitalist countries, I tried to show that in capitalist countries the price of services is not related to expenses. In both countries mobile providers use similar equipment which probably cost the same, but the price they charge from consumers is significantly different.

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