Consumer Surplus

In essential terms, consumer surplus is getting more than you paid for. Or, in more rigorous terms:

Consumer surplus is a measure of the welfare that people gain from the consumption of goods and services, or a measure of the benefits they derive from the exchange of goods.

Consumer surplus is the difference between the total amount that consumers are willing and able to pay for a good or service (indicated by the demand curve) and the total amount that they actually do pay (i.e. the market price for the product).

The surplus may be in the form of additional goods, like the beer snit that usually comes with a bloody mary. Or it might be in additional utility, like napkins that come in handy dispenser packaging.

And, if you would have been willing to pay more than you did for the napkins or the cocktail even without the packaging or extra beer, the difference is your consumer surplus.

Popular Marxists—and their leftoid cousins—hold that consumer surplus cannot exist. Sellers and owners are out to squeeze customers for every nickel they can possibly extract. Any un-charged benefit to the consumer will be quickly eliminated by raising prices.

They’re wrong.

Here’s an example:
I have a computer with internet access to do work and earn an income. I would pay the same (be willing to pay the same) if I couldn’t use the equipment for pleasure and personal enrichment. I need to work.

But I can and do use the intertubes for pleasure. And my surplus often comes in unexpected forms. A link in the blogroll at Sippican Cottage caught my eye. I clicked on “Smoking Toaster”.

I particularly enjoyed the slogan for that site: “it’s powered by weasels…” An amusement surplus for me.

Looking through some posts there, I found some writing that inspired me:

Fronted by Brody Dalle, whom I would describe as a vocal reincarnation of the spiritual greasy spot left if Bon Scott and Christina Amphlett’s secret love child had walked in front of a Melbourne trolley car, The Distillers left a massive, shaking rift of wake turbulence as Brody scorched a path of burned earth and least resistance to an album deal sometime in 2000.
…
If you listen very closely, you can hear bloody, shredded pieces of her lungs and throat as they ricochet off her teeth and crash into the microphone.

Awesome. And additional surplus to me. But what did this voice really sound like? There was some embedded audio. Convenient, multimedia surplus.

The song rocked. More surplus.

Remember, I am getting all this pleasure and enrichment from my work tools. No way a farmer behind an ox could get this kind of surprise value from his plow.

So I looked up The Distillers on amazon. I was able to hear several more samples. I liked them.

And with a couple of clicks, I bought some music that twenty minutes earlier, I had no idea even existed. Cha-ching! Surplus for me, income for the musicians, and some revenue for amazon.com.

Now, if I decide that I do not like the music as much as I expect, there may be no consumer surplus on the purchase. But that calculation must factor in the convenience and security with which I was able to select and buy. Amazon.com is built on consumer surplus.

I get music, the joy of discovery, nice writing, and now the pleasure of sharing the experience, all for the same price as I would pay just to work.

The leftoid/marxist politicians see all this surplus as something to be taxed. They don’t seem to recognize that their foundational philosophy says the surplus cannot even exist. But they are willing to make it vanish (through transaction taxes and connection fees on the internet, for this example).

Commercial interests are commonly held to be evil and greedy. But they are one side of every transaction that creates consumer surplus. The truly evil are those who want to seize your surplus for their own purposes.