Making Things More Expensive Might Make Us Less Safe: Lessons From Brazil

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This costs nearly two racks in Rio de Janeiro. (William Tung/Flickr)

The internet has not only facilitated the instantaneous spread of information around the world, but it’s also internationalized the consumer goods market. Corporations can no longer silo products in different regions with their customers none the wiser. More importantly, they can’t keep regional price differences a secret either.

This new reality is why word that the Brazilian retail price for Sony’s PlayStation 4 will be a robust $1,845 became an international news story. It seems like an awesome console, but more awesome at the $400 price tag the product will carry in the United States. Sony itself said the pricing is “not good,” but such is life in Brazil, where high taxes and import tariffs make almost everything surprisingly expensive for a country that doesn’t exactly pay Luxembourg wages.

The Economist recently reported on Brazil’s “appalling value for money,” describing a country where “large domestic appliances and cars cost at least 50% more than in most other countries. For everyday items such as toothbrushes and children’s toys the difference is often a lot more.”

Its extra costs come from a combination of taxes and import tariffs that are out of line with comparable countries. Charging $1,845 for a Playstation 4 in Brazil is not protecting imaginary Brazilian game console developers. It is not going to be the catalyst for a Brazilian video game console industry to rise up and challenge Sony. What it will do is provide another reminder of how hard it is to get ahead in Brazil when common consumer goods are priced so ridiculously.

Brazil is also notable among big powerful countries for its high murder rate, 21 per 100,000 in 2010, according to the UN Office of Drugs and Crime. The U.S. checked in at 4.2 per 100,000. Most of Western Europe was around 1 per 100,000. As it is in most countries with high levels of homicide, Brazil also has a lot of armed robberies. It is very common to see businessmen accompanied by armed bodyguards when traveling to Brazil for meetings.

Gun violence tends to occur at a high rate in areas where teenage boys and young men (who are the shooter cohort) are not well off and are in a sense estranged from the social order. The latter helps explain why we see almost no gun violence even among poor Utahns, as the overwhelming influence of the LDS church provides order and a safety net.

So what does this have to do with the price of PlayStations in Porto Alegre? Brazil’s high tariff structure inflates the value of the potential booty that can be taken in an armed robbery, which makes committing the crime that much more lucrative, particularly when wages are low to begin with. The tariff is making products artificially expensive to protect jobs that don’t exist. Protectionist policies are not my cup of tea, but they’re more understandable when there is actually something to protect. Brazil’s consumer goods pricing is just screwing ordinary people and turning tourists into ATMs.

Just for fun, I used Google’s amazing Public Data tool and threw together a quick chart comparing selected countries by their weighted mean tariff rate. Here it is:

Now, here are the 2010 (or if not available, most recent) homicide rates for each country in the chart:

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Obviously, Jamaica is more violent than France for a multitude of reasons aside from the tariff rate, but it’s interesting to compare similar countries. South Korea has a murder rate more than five times that of Japan. Both countries suffer from an inordinate amount of young men isolating themselves, but they turn violent much more in South Korea.

It would make sense that the type of society that would put up barriers and high hurdles to competition, despite being rich, would lead its young men to feel more desperate and marginalized. It’s obviously silly to draw any sort of definitive conclusions from this, but maybe getting ripped off in life and getting ripped off at gun point are more intertwined than we think. Raw poverty has a strong correlation with gun violence. Why wouldn’t a manufactured lack of affordability have a similar effect?