why are consumers more liable to be cheated ins capitalist economy?

Answer 1

They are more apt to be cheated because a much larger percentage of the available consumers have access to and can afford a much much larger array of consumer goods.

In a capitalist economy most consumers are driven to buy the cheapest brand of a particular item, which in turn drives some companies to make and deliver that item at the cheapest price which negatively affects the quality of the item

In a communist economy consumers are just happy to be able to get what little they can get.

Answer 2

I would dispute that assertion actually. My suspicion is that it is strongly reversed. While there are circumstances where the structure of the reward encourages criminal or tortious behavior, research shows the level is actually quite low overall. One of the more interesting questions in economics is why so few people commit crimes in our society.

Socialist societies cheat consumers in more profound ways. I live in a state of the union which is unfortunately very socialist and it costs about $21,000 in hidden losses per family to have the degree of socialism we have. However, the cheating occurs in ways that are less obvious. My state, inadvertently, passed a maximum wage law for taxi drivers. In order to reduce accidents, the state passed safety regulations to limit driving time.

Sounds good correct?

Well, accidents and fatalities from taxi drivers are catastrophically up, number of drivers are down, available rides have fell catastrophically, and wages are down.

What happened?

Taxi drivers work very long hours and so rest in those hours where demand is low, when not regulated.

By limiting their driving time they must get all of their work done in fewer hours. This limits upper income so the highest and best performing drivers choose other occupations. The worst drivers, who couldn't find an alternative employment stay. They have fewer hours to do more work in, so they rest less and regulated fairs prohibit the higher costs and the demand load from being passed on as higher prices.

Has the consumer been cheated?

Absolutely, fare hours are radically down forcing people to buy cars or take buses. Unemployment is up. Net state wages fall because taxi drivers can buy fewer things and taxi riders must divert income to less efficient uses of their money.

Everyone involved was cheated, but it was done by the legislature and so people cannot see what happened. Capitalism tends to make cheating obvious and in the public eye so it creates an incentive to not cheat. You just see it more when it happens. The press reports it, people tell their friends and so forth.

When it occurs under governmental control, it is hard to trace, politicians try and bury it and everyone just feels worse off, but no one can tell you why.

Answer 3

One of the problems with capitalism is the potential abuse that can occur as a result of capitalism's major "negative externality" (if you will): the fact that economic incentives, the most powerful of all incentives, to take advantage of other people are created.

In capitalism, it is "every man for himself." While basic thinking might lead you to assume that a world would be chaos in this economic system, with everyone only thinking of himself and not of others nor society as a whole, this line of thinking turns out to be incorrect; capitalism has been philosophically and practically proven to have the ability to make society better off as a whole: trade is always mutually beneficial (if both sides didn't think they were getting a good deal, why would it happen?).

It is difficult to come up with a reason why "consumers" are likely to get cheated in capitalism. When you say "consumers" you are implying a producer supplying a product to a consumer for a price. If the consumer thinks the price is too high, he will not pay for it and will not get it. That's why many of the arguments by people about "oh prices are too high" for products that they continue to buy are bogus. If you thought gasoline prices were too high, then stop driving and stop buying gas. Oh, you need to drive? Then you'll need to pay for gas. Perhaps what you "need" to do should be re-evaluated if you want to truly save more money.

Now, clearly consumers are worse off (as in less than optimal) in the case of a market scenario such as a monopoly. However, monopolies do not force you to buy anything, they are simply pricing their product at a higher level to maximize profits. They do not need to worry about other businesses undercutting them (which is possible because the price is much higher than the marginal cost of production) because, by definition, they are a monopoly. Consumers are "cheated" only in the sense that not all of the consumers that would pay the market equilibrium price are now willing to pay the higher monopoly price for the product. Thus less of the product is sold for a higher price, but still consumers are buying it if they think it's still worth it.

The bad thing about monopolies, then, is that society overall is worse off. Because less product is produced and fewer people buy it, society is not at its optimal levels. Monopolies are a transfer of payments from consumers to monopolists (relative to the social optimum), except the amount that producers gain is less than what consumers lose, and so society is worse off.

The true avenue that capitalism opens up for people to be cheated comes in the form of public policy. Every time the government decides to subsidize an industry or tax something specific, it creates incentives for third parties to lobby the government to make themselves better off at the cost of taxpayers. It is a way for taxpayers, who are consumers, to be cheated.

It is important to note that, especially when dealing with public policy, consumers can be "cheated" in any form of economy. Capitalism creates incentives for the third parties to cheat them, but other economic systems just change who has the incentive to take unfair advantage of the citizens.