A story. Off the coast of some fantasy country are a thousand tiny islands, owned by a thousand owners. On each island was a single shop selling t-shirts, each one with a different message: "I came to Tikka Moa and all I got was this lousy t-shirt" or "I came to Tima Takkoa and all I got was this lousy t-shirt". Each t-shirt costs $1. The shop owner on each island owns the single ship which takes you from the mainland to the island. Return tickets vary from $1,000,000 to $10,000,000. When you arrive, along the path to the shop you are offered a series of increasingly costly admittance tickets and legal proofs each of which entitles you to move on up the path. You then hand over your pound for the t-shirt and make your way back, again enduring a costly series of checks and duties.
You get to hear about the islands only by virtue of being a member of one of a small number of exclusive members clubs which have high entry fees. These island owners employ a vast number of quasi-policemen on the mainland who vet and confiscate and pursue anyone who tries to wear one of their t-shirts without the appropriate documentation.
The t-shirt operates as some kind of ridiculous Veblen good. Well, assuming you take the total cost of the the transaction, and not the sticker price. The sticker itself is also sold with the t-shirt, at a cost of $100.
At a rough approximation, the cost of the t-shirt is neither here nor there, yet still you need to be a millionaire to pay for all of the ostensible transaction costs. In short the full price is nothing but the transaction costs. How would the story change economically if the seller had rolled up everything into the t-shirt cost, making all the so-called transaction costs seemingly 'free'. Well, not much. The members' clubs would probably not be so exclusive. There would be a lot more phony trips. But a simple 'show me the money' rule could cut most of that out.
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