Why does popcorn cost so much at the movies?

Everyone probably knows that the answer to this question is the standard answer to every economics question, supply and demand. The demand for popcorn is high and the supply is limited, thus the price is high. But why is the supply limited? In a normal market when there is a high demand for a product and the price is high there is a very large incentive for new business to move into the field in order to take advantage of the high profitability. This influx of new business increases supply and the price begins to lower. The price continues to fall until it reaches a point where it is no longer lucrative enough for new investment, and the price equalizes at its correct level. It should be apparent however that this cannot be the case at the movie theatre. It certainly would be a great investment for an entrepreneur to open up a popcorn stand in the theatre and start charging 50 cents less for popcorn, he would make a killing. But the theatre would never allow it! This is the key issue. Because the theatre can keep competition out they can charge what they want.

Now what does this have to do with real life? How many of us have wondered why gas prices can be so high? There are certainly many answers being given by politicians: greedy big oil, greedy Saudis, greedy speculators, etc. These answers are appealing to people because they get to blame things that 'everybody' hates, e.g. anything big, rich, or successful. But who is the real culprit? The example that started this post provides the answer. No, movie theatres are not the cause of high gas prices, but rather they are a small example of the process that causes high prices. If popcorn costs so much because the movie theatres won't let in competition, who won't let in competition in the oil field? There is only one entity which has the power to do this, the government. The government has closed the field to new development in oil. What is the result? Limited supply and high price, just like with popcorn at theatres. There is of course a simple solution to the problem. Just like opening up a popcorn stand in the theatre would drive prices down, if new concerns where allowed to enter the oil field, or if present ones where allowed to actually go after more supply, the price would naturally fall. It may be comforting to blame the greed of the rich as the source of our problems, but in reality it is that very greed that would be the force that drives prices down. Consider your average rich greedy man. Would he pass up an opportunity for easy profits, as are currently available in the oil industry? Of course he wouldn't! He would take his money and invest in a new oil company knowing he would reap great rewards. All the new companies flooding the field would greatly increase the supply of oil. This would greatly lower the price until it was at a level low enough that it was no longer extremely profitable for new investment. So what is stopping the greedy rich men from doing this? It is illegal for them to do it! Consider that the majority of U.S. oil is located in off shore fields. It is illegal to drill off shore. The second largest reserves are in Alaska. It is currently illegal to drill in ANWAR. There are huge shale oil deposits all throughout the west, but they are not open for exploration either. Even the few places that the government does allow oil companies to explore are severely regulated. Oil companies have to go through an excruciating process of getting dozens of permits from dozens of agencies who grant or deny their permits on purely subjective grounds. They are forced to deal with power hungry bureaucrats; they have to bribe them, schmooze them, use all the political 'pull' they can muster just to be allowed to do their job. And then the same bureaucrats turn around and blame them for high gas prices, and demand a windfall profits tax be levied on them to suck away the fruits of all their hard work. Under these circumstances how could any sane man want to enter the oil industry? And thus we are in the state we are in. So when you go to the pump and are hit with $50 a tank, just remember who brought it to you.

What's this all about?

I have debated with myself the wisdom of including an 'introduction' to my blog. Would it be too contrived and formulaic, or would it be a useful tool for people trying to understand whats going on? In the end the pro-intro side won the debate. So let me explain briefly what I envision for this blog: I plan to think out loud. I don't expect many readers, and that is fine with me. Truly I just need a place to work out some of the complex ideas that are swirling around not fully integrated in my mind. Let me note however that I do not subscribe to the 'stream of consciousness' school of writing, i.e. regurgitating whatever random thoughts surface in ones mind with out any logical connections. When I say that I will think out loud the emphasis is on thinking. Thought requires a rigorous logical process, and this is what I hope to present. Through the process of presenting my thoughts I hope to be able to fully concretize them for myself.

So what kinds of thoughts will I think out loud about? Mostly philosophical thoughts. Before you fall asleep or flee in terror however consider this: every human being lives by some philosophy or another which guides all of his actions and shapes the outcome of his life. You cannot escape the need for some form of philosophy. But how many people have taken the time and mental effort to consciously examine the philosophy that directs them? Very few I would venture to say. So what then guides them? Random bits and pieces of various philosophies picked up here and there. Slogans, vague generalities, and trite bromides are heard in passing conversation, at school or work, picked up in books and movies, or invented on the spot, etc. Lacking any conscious effort to digest these ideas, the subconscious is forced to take them and mash them together into a mongrel philosophy. This Frankenstein of a philosophy becomes the guide of ones life, directing how one thinks, acts, and lives. But are the ideas that are guiding you true, i.e. consistent with reality? Do the principles you have accepted contradict each other? Where do the guidelines you subscribe to lead you when they are followed to their logical conclusion? Do you even know how to draw a logical conclusion? If you have not consciously thought through your philosophy then you cannot know the answers to these questions. How risky is it to let the thing that guides your entire life to be left up to chance! We generally look down on the fool who goes to Vegas and bets the house on the roulette wheel because he feels lucky, but then many of us are willing to bet our very lives that the random ideas we've been exposed to will serve us just fine and bear no further thought.

I am digressing however. My object is not to convince you that philosophy is important, but rather to explain my reason for my subject matter. I do hope you take the opportunity to think about the questions I write about, and you may agree with me or not, that matters little. In fact, as I have already written this blog is mostly for myself and my process of self examination.

A few disclaimers:
-I will not present an entire philosophy from beginning to logical end here. I will write as questions come to me and elaborate on principles when I think it is relevant. One should never accept an idea, however, without understanding the underlying principles and premises it relies upon. Therefor if you are interested in understanding the philosophy that guides me it is called Objectivism and was created by the great author and thinker Ayn Rand. I refer you to her work which is much more qualified to present the full basis of her philosophy.
-I am writing for myself so forgive me if sometimes I sound preachy or condescending. I will do my best to not be overly long winded, and I intend to severely edit myself to make my writing readable, but I am who I am and my style is how it is. Sorry in advance.