Ever have absolutely irrefutable and definitive evidence that you are, actually, being ripped off? 

And here, via Phil (imagine me doing a David Attenborough voice now) we see the craft beer nerd in its natural environment, attempting to convince themselves, on a blog, that paying seven quid for a small bottle of beer is a sensible and even a highly intelligent act. This is accomplished by the "Revealed Preference No Harm No Foul Theorem", whereby the simple fact that someone paid a price means that the commodity was "worth it to them", therefore they weren't ripped off. I do not agree. It's not quite as much a state of denial as the people who went to the Sex Pistols "Only In It For The Money" tour, but …let me tell you a story …

What we need here is a paradigm example of a market in which the customers are being ripped off.  What would you say if I told you there was a company which ripped off its customers, had a specific policy of selling them goods for a thousand times what they were worth, agreed that it was doing so, and had periodic negotiations with representative groups of those customers over the exact extent to which they would be ripped off? Paradigmatic enough?  Tough crowd.

Ladies and Gentlemen, the Royal Mail, and the philatelic market for stamps.  Philatelists are the perfect market for post companies because they buy 60p worth of mail delivery services and then don't use them.  It's a form of seigniorage not unlike that time RBS used its note printing privileges to run up a bunch of "commemorative" fivers with Greg Norman on them, and stuffed them in the tills of the Open Golf Championship one year.  Good times.

The philatelists are aware that they are paying absurdly over the odds for stamps.  But what can they do?  Well yes, but what can they do while remaining philatelists?  Not a lot.  The Royal Mail doesn't have anything approaching a monopoly on small sticky bits of paper with pictures on them.  It doesn't even have a monopoly on stamps - they're pretty much intrinsically an internationally traded commodity.  What the Royal Mail has a monopoly on is an intangible commodity called "The Ability To Think Of Yourself As A Person Who Buys Every Set Of Stamps Issued By The Royal Mail".  It's like owning an awards ceremony, and the ownership of a good awards ceremony can be a real old money spinner - ask Institutional Investor magazine, or for that matter the Press Gazette, which was kept going for years beyond unprofitability and irrelevance by the profitability of its awards ceremony.

The price of the Royal Mail Completist product is set by the Mail, and they do so by controlling the number of new editions of stamps they put out each year.  Regularly, the philatelists complain that the RM is making a mockery of the whole hobby by proliferating too many new editions.  They protest, and they are listened to fairly respectfully.  And then they go on buying.  The job of calculating precisely how much piss-taking the philatelic market can bear is one that takes up roughly half of the working time of a thirty-something middle manager in the marketing division - I know this because I happen to know someone who used to do it.  You also get the title of "President of the Stamp Bug Club", which comes with a once-yearly appearance on Blue Peter and the consequent award of the badge.

So yes, anyway.  Everyone involved in British philately in any serious way is aware that the whole thing is basically a rip-off.  From the philatelists' point of view it's just about worth hanging in because the game is worth the beating, but it's clear to both sides that what has happened here is that the hobbyists have created a piece of intellectual property for the Royal Mail, which then charges them rent for using it.

And thus, craft beer.  The reason why I gently and lovingly mock this subculture (and avidly lurk on their blogs soaking up the delicious squabbles and politics, OK I do that, are you happy now) is that they're trainspotters acting like connoisseurs.  Audiophiles are very similar.  The pleasure that they are consuming is the intellectual property, not the stuff in the glass.

After all, think about the economics.  I know why Premier Cru Chablis costs what it does - it is intrinsically limited in supply because it can only be made from the agricultural output of a surprisingly tiny area of France.  It also has a lot more capitalized interest expense in the aging time than nearly all beers.  But beer is a mass production product, made out of commodity inputs in an industrial process.  If someone is charging St-Emilion prices for something that can be mass-produced, then you can be pretty sure that the difference is accounted for by the intangible assets, not by the costs of inputs.

And what are those intangibles?  Well, it could be "you are paying for vast amounts of research and development, to the extent that for every bottle you see, three or four have been discarded".  But it isn't.  It might be "you are paying the market price for expertise, in the sense of culinary and brewing skill".  But this would very much raise the question of whether, since this is an entirely new market segment, the skill and intellectual capital concerned really is greater than any that has existed before - ie, that American craft brewers are literally the greatest of their kind that have ever existed.

On the other hand, it seems very likely indeed that you are paying for the intellectual capital in the marketing department, just like the guys licking the stamps and bemoaning the number of things and people that are capable of being commemorated.  The secret input into craft beer that makes it possible to charge twelve quid a throw for it is "the brewer's ability to identify a smallish but economically viable hobbyist market that will buy the product no matter what it costs", combined with that vital ingredient of "very much more willingness than the everyday businessman to take the piss".

I don't judge.  No really I don't.  In many ways, my aim in teasing the beer nerds is to get them to come off their high horse and admit that they're spotters, rather than compiling completely screwed-up concepts like "Beer/Food Matching", or doing that American thing where you literally say that the beer is better because there are lots of different bottles in the supermarket.  I don't think one has to go all the way into the philatelic depths and literally say that completism is all there is to it.  But … birdwatchers seem to have a pretty healthy relationship with the two aspects of their hobby, very few of them would ever pretend that they're only up at dawn because of the sheer beauty of birds, although the beauty of birds is obviously the major motivator.  I originally thought of "We're Only Here For The Beer" as a title for this post, but they aren't.