Exhuming Malthus

Here we go again.

Slate has a good article on the forever-interest in the ideas of 18th century economist Thomas Malthus, particularly in the realm of fiction, specifically with regard to Jonathan Franzen's Freedom. To describe Malthus' central idea on one foot: human population grows exponentially, while natural resources grow arithmetically. The former will eventually outstrip the latter, leading to a population bomb that will detonate and obliterate us all.

No matter how many times Malthus is refuted, his ideas linger. Ultimately, Malthusians of all stripes are defined by their suspicion, if not hatred, for civilization. Malthus was in the news recently, thanks to the Neo-Malthusian nut who took hostages at the Discovery Channel earlier this month. His inspiration? A novel: My Ishmael, by Daniel Quinn.

It almost makes you miss the influence of Karl Marx.

I Think I Need a New Eyeglass Rx...

...because I just read this:

President Obama said Friday that if the midterm elections become a referendum on which political party has the most effective agenda to improve the economy, rather than a decision on its current state, "the Democrats will do very well."

And if the midterm elections become a referendum on which political party has the juiciest sex scandals, it will be a Republican landslide. Unfortunately for the Dems, the midterm elections will be a referendum on three economic issues: the financial and auto bailouts (this being the first election since), the stimulus bill (ditto), and unemployment. Oh, and health care.

Also, this is funny:

Obama highlighted several new economic proposals this week, including business tax breaks for research and investments, that Republicans have said are designed chiefly to appeal to voters this campaign season.

Republicans, please. Targeted tax breaks that purchase discrete and organized blocs of voters? Your lily-white consciences must be scandalized by the very notion.

(Mirrored from 100MC.)

The Death and Life of the Great American Bookstore

I once worked at a flagship book "superstore" here in D.C. (and at a lesser location in South Florida, which is, not coincidentally, scheduled to close in a month-and-a-half). For nine years, I witnessed firsthand the once-nascent problems that are now bankrupting the two major bricks-and-mortar book chains, Borders and Barnes and Noble. Borders has been on the ropes for years, and Barnes and Noble, the nation's largest book chain, is now up for sale. Neither could prevent the rise of the internet, the primary cause of their fall. Still, there are four ancillary causes, listed below, that have accelerated the superstores' demise.

Superstores have become for-profit public libraries.

Borders and Barnes and Noble superstores are inviting places that encourage customers to browse for hours without purchasing anything. Welcoming customer service, plush leather comfy chairs, plenty of tabletop space, premium coffee shops, community events like book groups and open mic nights, and regular national events featuring famous authors and musicians, the very amenities that were meant to make these stores "destinations," turned for-profit businesses into open access public goods.

Here's an excerpt from a recent article in the NYT, on the closing of a Manhattan Barnes and Noble:

Ms. Kelly said she visited the store at least twice a week, usually heading upstairs to read magazines and to pick up a sandwich and cup of Starbucks coffee.

“They’re getting business out of me, I suppose,” she said. “Even though I’m sitting there reading magazines for free.”

When I worked for my former employer, patrons like Ms. Kelly were our regulars. Like my co-workers, I knew most of these regulars by name, and would affably chat with them daily. They were dedicated, yes, but hardly our bread and butter. More perpetual browsers than customers, they would spend hours camped out in the aisles with piles of books and periodicals. In return, they would spend a meager average ticket of around $2.00 a day. It would take at least 5-10 labor hours after closing to clean up after the campers, not to mention the time spent during operating hours dedicated to reshelving their messes -- time spent away from providing excellent customer service and actually selling books.

So, bookstores became libraries. It wasn't uncommon for parents to come to the information desk with school assignments and we, the over-educated booksellers, were responsible for locating their needed materials (this would often involve a good deal of book sleuthing usually reserved for a Master of Library Science). Later, we'd inevitability find the same teetering towers of books in a corner, left unpurchased. Older college students were more self-sufficient, yet the result was the same. They would come in and use our product to complete their homework, with their only purchase being a refillable mug of coffee ($1.75).

During the heyday of hard-copy book and multimedia buying, the customers who came in with the sole purpose of purchasing merchandise were able to subsidize the campers, the needy parents, and the college students. Nowadays, post-Kindle and iTunes, this business model is no longer tenable. The high overhead of a Borders or Barnes and Noble superstore cannot be covered by the sales of tall lattes and blueberry scones.

The superstore's massive footprint is an albatross.

Borders pioneered the superstore model in the mid-1990s. Before then, most bookstores were found in malls, and were the size of the European History section of your local superstore. Stand-alone stores like classic Barnes and Noble locations were larger, and included cafes (which conspicuously did not allow-in unpaid merchandise). However, their focus remained on books and the common "sidelines" found in most bookstores (e.g., calendars, book lights, and inexpensive tchotchkes). Borders changed everything. A typical Borders superstore had a book department that could easily swallow an entire Barnes and Noble. It, too, had a cafe (which conspicuously allowed-in unpaid merchandise), and, unlike the Barnes and Noble of the time, had a gigantic multimedia department. (Barnes and Noble followed suit, but their superstores were conservative by comparison. They basically beefed up their book sections, made their stores vertical, and added marginal multimedia sections.) The sheer size of a superstore, and the diversity and quantity of its merchandise, called for large back room areas for receiving and plenty of office space for administration. This meant that even lower volume stores took up a lot of space, which resulted in hefty rents and high payroll costs.

Again, all well and good during flush times. However, the very nature of the industry changed permanently in the early 2000s, thanks to Amazon and iTunes. The multimedia section in an average Borders store used to be about 2/3 the size of the book section. Today, most Borders stores no longer even carry catalog music; their "music sections" are merely two "browser" fixtures of new releases. The highest volume stores continue to carry a limited number of catalog titles (about the same as a Best Buy's backlist), but it's a far cry from the days when jazz and classical alone took up rows and rows of fixtures. Now that the demand for hard-copy music has dwindled, superstores are left with more floor space than they can use. Those former multimedia sections now look like graveyards, filled with the tombstones of empty retail fixtures. A depressing sight for customers and employees alike.

Deep discounting further undercuts the superstore's profitability.

One of the best perks of working at a superstore was the employee discount, which used to run between 25% and 33%, depending on your full-time/part-time status. Even better, once or twice a year we were treated to "employee appreciation days" that gave us a whopping 40% off of most of the merchandise we sold. Employees readily took advantage of the munificent discount, and would often spend hundreds of dollars on a single purchase (usually on gifts, since this occurred in December).

Today, 40% off is the norm. I get weekly e-mail coupons from Borders, and I'm surprised when the discount is less than 40%. The harsh reality for superstores is that more and more hard-copy book and music consumers are shopping at Costco, Walmart, and Best Buy, chains that often price these items at a loss to drive traffic. With the aforementioned online juggernauts, Amazon and iTunes, added to the mix, superstores have had to slash their margins to a hair's breadth to remain competitive. Theoretically, Borders and Barnes and Noble could have "made it up in quantity," but the weak aggregate demand of the recession economy has only made matters worse for superstores.

The superstore suffers from a confusion of purpose.

I remember the nadir of my bookselling career. I was merchandising a table of "summer items" at the front of the store, the highest-valued real estate of any retail firm. Working from my planogram, I carefully arranged cans of meat rubs, sets of barbecue tongs, jars of four different barbecue sauces, and -- the afterthought of the table -- some books on grilling. One of the stacked glass jars of barbecue sauce fell to the floor and broke; its thick and pungent contents splattered wide on the carpet. I may be making too much of this, but, at the time, the sight of a puddle of barbecue sauce in front of fixtures displaying the bestselling works of McEwan, Chabon, and Atwood was a disheartening wake-up call. What exactly are we selling here?

A common joke among the employees of my store was that we were only weeks away from selling cigarettes and lottery tickets. It wasn't too far from the truth. During my tenure, we sold gardening spades, video games, t-shirts, manicure sets, sushi-making kits, wallets, Dean and Deluca spice racks, board games, hand creams, fake eyelashes, $200 Star Wars lightsabers, and the classics of the Western canon. One of these things is not like the others. Which of them belong in a bookstore?

Our buyers had an admirable goal in mind, to make our stores places for one-stop-shopping. Ultimately, most of the above-listed items ended up being marked down to $1.00, since they were almost always left unsold and were non-returnable to the distributor. In retrospect, this lack of focus, on the corporate level, of the business' identity led the chain down a number of blind alleyways. There are many retail stores that conveniently offer one-stop-shopping experiences, namely big box stores like Target and Walmart. I doubt barbecue sauce and fake eyelashes top the shopping list of the average booklover entering a Borders or Barnes and Noble store. That said, I'm not a professional book buyer. What do I know?

My guess is Borders will go out of business in the next year, and Barnes and Noble will eventually return to its original model of modestly-sized bookstores that cater to a small population of book consumers. Ironically, the clear winner here is the once-beleaguered independent bookstore, the scrappy underdog that never lost sight of what it was selling. After all, with eBooks on the rise, purists (like me) who stubbornly enjoy browsing non-digital bookshelves will need bookstores to patronize, super or otherwise.

UPDATE: From Bloomberg.com:

Borders Group Inc., the second- largest U.S. bookstore chain, will start selling items from Build-A-Bear Workshop Inc., relying less on books for sales as more people use electronic reading devices.

Most of Borders’ more than 500 stores will create sections next month dedicated to Build-a-Bear, the maker of kits kids can use to craft stuffed animals, Chief Executive Officer Michael Edwards said in an interview. The new areas also will feature books and DVDs tied to the brand.

Emphasis mine. The excerpt speaks for itself. (HT Kelsey Pince.)

Results Without Cost

No surprise here, from an NYT poll:

Overwhelmingly, Americans think the nation needs a fundamental overhaul of its energy policies, and most expect alternative forms to replace oil as a major source within 25 years. Yet a majority are unwilling to pay higher gasoline prices to help develop new fuel sources.

All we have to do now is figure out how to have cake and eat it, too.

Who's Afraid of Wal-Mart?

The most readily accepted myth propagated by the enemies of Wal-Mart is that the superstore drives out mom and pop grocers when it moves into a new town. It's a myth that plays well with anti-corporate leftism, as well as America's general romance with small business over "the big guy." Even those who consider themselves "pro-business" often lament the destruction of a scrappy David at the hands of the smiley-faced Goliath of Bentonville. Yet, as economist Russ Roberts has noted, it's not the mom and pops who suffer when a new Wal-Mart opens -- it's other Goliaths, namely large supermarket chains.

The WSJ has an illuminating article that reveals the extent to which these large chains use feel-good populist channels to keep out competition:

As Wal-Mart Stores Inc. has grown into the largest grocery seller in the U.S., similar battles have played out in hundreds of towns like Mundelein. Local activists and union groups have been the public face of much of the resistance. But in scores of cases, large supermarket chains including Supervalu Inc., Safeway Inc. and Ahold NV have retained Saint Consulting to block Wal-Mart, according to hundreds of pages of Saint documents reviewed by The Wall Street Journal and interviews with former employees.

Saint has jokingly called its staff the "Wal-Mart killers." P. Michael Saint, the company's founder, declines to discuss specific clients or campaigns. When read a partial list of the company's supermarket clients, he responds that "if those names are true, I would say I was proud that some of the largest, most sophisticated companies were so pleased with our success and discretion that they hired us over the years."

Supermarkets that have funded campaigns to stop Wal-Mart are concerned about having to match the retailing giant's low prices lest they lose market share. Although they have managed to stop some projects, they haven't put much of a dent in Wal-Mart's growth in the U.S., where it has more than 2,700 supercenters—large stores that sell groceries and general merchandise. Last year, 51% of Wal-Mart's $258 billion in U.S. revenue came from grocery sales.

This phenomenon of economically interested parties hiding behind a more politically palatable cause is not new. Clemson economist Bruce Yandle famously named this tactic "Bootleggers and Baptists" in his 1983 article in Regulation Magazine. The name comes from his example of criminal bootleggers who quietly support religious groups in the enactment of blue laws, which increase the demand for their services by restricting the legal sale of liquor. What's fascinating (and disheartening) about the WSJ article is the emergence of firms, in this case the oh-so-perfectly-named Saint Consulting Group, who facilitate and profit from the maneuver:

Mr. Saint, a former newspaper reporter and political press secretary, founded his firm 26 years ago. It specializes in using political-campaign tactics—petition drives, phone banks, websites—to build support for or against controversial projects, from oil refineries and shopping centers to quarries and landfills. Over the years, it has conducted about 1,500 campaigns in 44 states. Mr. Saint says about 500 have involved trying to block a development, and most of those have been clandestine.

For the typical anti-Wal-Mart assignment, a Saint manager will drop into town using an assumed name to create or take control of local opposition, according to former Saint employees. They flood local politicians with calls, using multiple phones to make it appear that the calls are coming from different people, the former employees say.

They hire lawyers and traffic experts to help derail the project or stall it as long as possible, in hopes that the developer will pull the plug or Wal-Mart will find another location.

"Usually, clients in defense campaigns do not want their identities disclosed because it opens them up to adverse publicity and the potential for lawsuits," Mr. Saint wrote in a book published by his firm.

No doubt they don't. The type of person who makes opposition to Wal-Mart a badge of moral virtue would find it awkward to discover his bedfellow is actually a big bad corporation like Safeway, Giant, or Supervalu -- not the lovable corner grocer.

Private Discrimination, Continued

Commenting on my post on private discrimination, restaurant refugee writes:

The comparison between discrimination based on attire and that based upon race is a false construct. One chooses attire, one does not choose that latter. I understand that the author was making the point that the owners of the establishments cited in the post were practicing a de facto sexism and racism. However that ignores the larger point that business owners have a legitimate interest and prerogative to mandate attire and norms that contribute to the experience of all guests. Does the author similarly take issue with restaurants that require jacket and tie? Tennis clubs that mandate one dress is tennis whites? What about pools that limit swimming attire to that which was designed for that purpose?

I apologize if I was unclear. I support the right of private establishments to set the standards of decorum within their four walls, be it jacket and tie, tennis whites, or no high heels. My point was that some of these standards could be inspired by racism and sexism, and still remain perfectly legal. I return to the example of my former employer, the gay club that didn't allow high heels in the club. The purpose of that rule was never in doubt: it was meant to keep women out. And it worked.

I don't deny refugee's larger point: "One chooses attire, one does not choose [their race or gender]." But the discrimination involved in barring the former rather than the latter is a difference of degree, not of kind. That many women wear high heels to clubs is undeniable, as is the fact that many young black men come to Adams Morgan on a Friday night wearing Timberland boots and baggy clothing. Club owners are counting on the fact that violators of their dress codes will be unwilling to conform to their rules, that they'll just shrug and go somewhere else.

Refugee continues:

The Title of the Civil Rights act the author finds objectionable deals with “public accommodations” and provides that no business that provides such accommodations may discriminate. The author makes the libertarian position on the matter clear: discrimination is immoral but government should not prohibit private business from doing it. Let us suppose that the author is right. So when I hang a sign in my restaurant that says “Whites not served here,” I would be within my rights. If a white person enters in spite of that sign, I ask him/her to leave, s/he refuses, what then? Shall I call the police? Am I authorized to forcibly remove him/her? Shall the police arrest that person for trespassing? Shall we spend government monies to prosecute people in the aid of racism?

My answer to refugee's hypothetical is an unequivocal yes, it would be within his rights as the owner to keep white people out of his establishment. If the white person in question refused to leave the restaurant, refugee could call the police to remove him (just as an Adams Morgan club owner could for someone flouting their dress code). The question is, why would anyone want to patronize an establishment that openly discriminates against them? And would there not be a public backlash against any business that was so openly racist or sexist?

As for the expenditure of "government monies to prosecute people in the aid of racism," those monies are in part provided by the racist business owners via their taxes. I know it's hard to swallow, but even despicable individuals have the right to the protection of their property rights and the standards of trade they see fit to enforce.

All trade entails certain conditions between both parties, be it buyer or seller. A wacky homophobic landlord has the right to not rent me his apartment if he (likely) suspects I'm gay, and I have the right to deny him my business if I catch a whiff of homophobia from him. I'm better served to not be legally protected from his homophobia and have to suffer the subtle hostilities that would surely come later. Likewise, it would have been better if my former employer had posted a "no women allowed" sign in front of the club. I've witnessed the hostility the few women who made it into the club faced from some of the bar staff (and the male patrons). The reaction of those turned away by the "no high heels" rule tended to be some form of "fuck you." And rightly so. Had the women who managed to gain entry to the club known the spirit of the rule, I suspect their reaction would have been similar.

Finally, I never said the government is "inherently evil," nor did I mean to imply it. Within its proper scope, government prevents a civilized society from devolving into barbarism and chaos. Government isn't evil. It isn't even a "necessary evil." The proper function of government is unquestionably good. I don't think this contradicts my position that the government should have no authority to protect us from the private discrimination of troglodytes. Unfortunately, troglodytes have rights too.

Legislation Can't Stop Discrimination

Liberals have declared open season on libertarianism ever since Rand Paul (not the namesake of Ayn Rand) said he disagreed with the parts of the Civil Rights Act of 1964 that made illegal private discrimination based on race.

Bryan Caplan clarifies the standard libertarian position as such:

1. Government discrimination should be illegal.
2. Private discrimination should be legal.
3. Private discrimination is immoral.

I agree with all three points, but I want to make an additional point: you can't legislate away odious behavior; you only make odious individuals more crafty with their discrimination.

I used to work at a gay club that refused entry to anyone wearing high-heeled shoes. Ostensibly, the rule was for the safety of said patrons. The club has a couple of steep staircases, the managers claimed. People could get hurt. In reality, the rule was intended to keep out women, something many gay establishments quietly encourage. (The staff's general animosity toward the fairer sex always made me bristle.) Tellingly, even though the club actively enforced the rule, it was overlooked with regard to drag queens, who tend to wear the equivalent of skyscrapers on their feet. The club kept out women without having to post a sign saying "women not allowed." (It has since dropped that rule. Not coincidentally, more women can be seen on a Friday or Saturday night.)

Dress codes are used to discriminate against race, as well. I live in the Adams Morgan neighborhood of D.C., which contains a handful of popular bars. A few have "strictly enforced" dress codes posted in front that state anyone wearing the following will be denied entry:

• Timberland boots
• Hats
  
• Baggy clothing
• Long white t-shirts
• Logos
  
• Labels
• Hoods
  
• Jerseys
• Athletic wear
• Tank tops
  
• Camouflage
• Ripped clothing
  

In other words, the attire typically associated with rap culture, i.e., black male youth (ripped clothing being the only exception). The establishments don't say they won't allow young black men to enter, but their dress codes effectively do so.

Of course, there's more going on here than just outright hatred for women and black men. If asked, I'm sure the proprietors of the Adams Morgan bars with these dress codes would claim most people, black or white, who wear the above listed items tend to be more rowdy. I can attest to the fact that some of the young women who happened to wear high heels at the gay club tended to get loud and boisterous. (We saw a number of bachelorette parties come through on a regular basis.) Still, most women were barred entry by the high-heels rule, not just the minority of rowdy ones.

My point isn't whether these dress codes are right or wrong. The point is, they keep a specific subset of the population out, legally. Still, most establishments don't have these rules, since it's not good business to prevent customers from patronizing them. Besides, the most ubiquitous dress code,"no shirts, no shoes, no service," seems to skew white.

Racism, sexism, all the pernicious isms, can't be wiped away by legislation, like the swipe of some Utopian magic wand. The onus is on patrons, to support or withhold their business. My previous employer decided to remove the high-heels restriction, and business improved. Further, anyone is free to boycott or protest any business that has discriminatory policies. Private individuals have the right to be (or merely appear to be) horrible people, but they don't have the right to be protected from the economic consequences of their actions.

Freedom, Yesterday and Today

In honor of Tax Day, and the debate that has been raging through the blogosphere, I've been thinking about our relative liberty today compared to the 19th century. The gist of the debate is whether Americans were more free in the 19th century, the apex of laissez-faire, given the fact that women, black people, and gays had little political freedom (by modern standards). Bryan Caplan leads the charge pro-Gilded Age, arguing that despite the lack of explicit political freedoms, women had more de facto liberty than they do today. His detractors abound.

It's undeniable that minorities (including women) today are more free qua minority than they were in the 19th century. But it's a moot point. The lack of political freedom for women, black people, gays, etc., was a fact of life across the globe before the 20th century. Sexism, racism, and homophobia were the standard, the status quo of human history. The 19th century was radical because it unfettered the economic activity of a huge portion of individuals (in this case, white males), whose subjugation was the norm throughout history. Yes, the 19th century was far from perfect. Still, name me a country from that era that exhibited our modern standards of equality.

The point that everyone seems to be missing is that America (and the U.K.) were the freest nations on earth, given that bigotry was the norm. Today, bigotry has largely been eliminated from the political sphere, but as a whole we are less free than the freest (straight white) men who existed in the Gilded Age.

The Health-Care Death Spiral Realized

The Boston Globe reports on the shape of things to come:

Thousands of consumers are gaming Massachusetts’ 2006 health insurance law by buying insurance when they need to cover pricey medical care, such as fertility treatments and knee surgery, and then swiftly dropping coverage, a practice that insurance executives say is driving up costs for other people and small businesses.

In 2009 alone, 936 people signed up for coverage with Blue Cross and Blue Shield of Massachusetts for three months or less and ran up claims of more than $1,000 per month while in the plan. Their medical spending while insured was more than four times the average for consumers who buy coverage on their own and retain it in a normal fashion, according to data the state’s largest private insurer provided the Globe.

The typical monthly premium for these short-term members was $400, but their average claims exceeded $2,200 per month. The previous year, the company’s data show it had even more high-spending, short-term members. Over those two years, the figures suggest the price tag ran into the millions.

Other insurers could not produce such detailed information for short-term customers but said they have witnessed a similar pattern. And, they said, the phenomenon is likely to be repeated on a grander scale when the new national health care law begins requiring most people to have insurance in 2014, unless federal regulators craft regulations to avoid the pitfall.

“These consumers come in and get their service, and then they leave because current regulations allow them to do it,’’ said Todd Bailey, vice president of underwriting at Fallon Community Health Plan, the state’s fourth-largest insurer.

The problem is, it is less expensive for consumers — especially young and healthy people — to pay the monthly penalty of as much as $93 imposed under the state law for not having insurance, than to buy the coverage year-round. This is also the case under the federal health care overhaul legislation signed by the president, insurers say.

Portraits of Creative Destruction

NPR has a lovely slideshow of jobs made obsolete by innovation (HT Russ Roberts). It's an evocative reminder of how the dynamism of capitalism improves our lives.

What's in a Name?

Karl Marx, archenemy of the free market, gave capitalism its name. It was a smear; but it was a smear that stuck, a smear that denotes a specific politico-economic system. Unfortunately, it also connotes, as Professor Bryan Caplan writes, "a system of rule by capitalists for capitalists," while its antipode, socialism, connotes, "a system of rule by society for society." In other words: capitalism bad, socialism good. Should those who are outspokenly pro-free market, those like me, adopt a new name for the system we advocate, purely for clarity's sake?

My answer, in short: no way.

It's true, many may equate any country apart from North Korea or Cuba, like the United States since the 1890s, as capitalist. Yes, the waters have been sufficiently muddied. But as Professor Caplan notes, the alternative only leads to further cognitive disarray.

There are no capitalist countries and, apart from the aforementioned extant communist economies, no socialist countries left on Earth. We only have gradients of mixed economies: from China to the USA. What's a free-marketer who demands clarity to do? Modify. Call it laissez-faire capitalism. Those who know the term will understand. Those who don't, don't matter anyway.

Saved by the Market

Writing to the Washington Post, Don Boudreaux explains why Chile's death toll was a fraction of Haiti's:

You report that experts give much of the credit for the relatively low death toll of Chile’s recent earthquake to “the nation’s enactment and enforcement of stringent building codes” – codes that were largely absent in Haiti (“Chile reels in aftermath of quake, emergency workers provide aid,” March 1).

With a market-oriented economy, per-capita income in Chile is more than ten times higher than is per-capita income in Haiti. One result is that Chileans demand and can afford better-constructed buildings – buildings designed by more-skilled architects, made of stronger materials, and erected (and maintained) by better-trained and more highly specialized workers.

Chile has – and enforces – tough building codes because it can afford them. Building codes of equal stringency in Haiti would be dead letters because Haitians simply cannot afford the level of safety that Chileans now enjoy.

Credit Chile’s low death toll not to what its politicians do, but rather to what they don’t do: meddle excessively in the market.

The Tyranny of Convenience

In an otherwise good article about Wal-Mart's move toward providing relatively inexpensive locally grown produce (and the threat it poses to high end supermarkets like Whole Foods), The Atlantic's Corby Kummer writes:

In an ideal world, people would buy their food directly from the people who grew or caught it, or grow and catch it themselves. But most people can’t do that. If there were a Walmart closer to where I live, I would probably shop there.

I suspect Kummer, and most readers, would find this paragraph benignly true. But the first sentence represents what may be the two most pervasive economic fallacies accepted by the public: middlemen (which Wal-Mart is in this context) do not provide a real service, create no "social" value; moreover, self sufficiency is a high ideal toward which we all should all strive. For an extensive explanation of why they're twin fallacies, I refer you to two EconTalk podcasts: one with Duke's Mike Munger on middlemen, and the other, an excellent monologue by GMU's Russ Roberts (who normally hosts) on comparative advantage.

The second and third sentences of Kummer's paragraph reveal why the first is so fallacious. Indeed, most people can't "buy their food directly from the people who grew or caught it, or grow and catch it themselves," not because they are incapable of going to a farmers market to purchase their produce, or because learning the rudiments of horticulture or hunting and fishing would be too difficult, but because doing so is extremely costly. Costly, not only because farmers markets tend to charge higher prices, but because time is man's most precious resource.

What Wal-Mart and (to a lesser degree) Whole Foods provide is convenience, places where consumers can purchase their locally grown produce and other goods they need (in Wal-Mart's case, goods as diverse as sunglasses, Wii games, and towels), thus saving them time (and cash). Even in an "ideal" world where we're all immortal beings with no regard for time, the gloriously austere self sufficiency of growing one's own arugula requires effort that would be akin to drudgery for many. A moral failing on their part? Maybe Marx would say so.

Some people enjoy going to farmers markets. That's fine. Some take pride in the bounty of their backyard gardens. That's great, too. But these activities are enjoyed as ends in themselves, as hobbies, or for the warm-and-fuzzy feelings they provide. Ask a single working mother if she would prefer waiting until Sunday to buy her family carrots from a farmers market, or to grow them herself, rather than driving to the local Wal-Mart or Whole Foods after work. Her answer is why Wal-Mart and Whole Foods provide a genuine service, why they create value, and why they should be celebrated, not vilified.

Democracy, Good and Hard

Democracy is the theory that the common people know what they want, and deserve to get it good and hard. -- H.L. Mencken.

Slate's Jacob Weisberg laments the schizophrenic, contradictory, opinions of the American public:

In trying to explain why our political paralysis seems to have gotten so much worse over the past year, analysts have rounded up a plausible collection of reasons including: President Obama's tactical missteps, the obstinacy of congressional Republicans, rising partisanship in Washington, the blustering idiocracy of the cable-news stations, and the Senate filibuster, which has devolved into a super-majority threshold for any important legislation. These are all large factors, to be sure, but that list neglects what may be the biggest culprit in our current predicament: the childishness, ignorance, and growing incoherence of the public at large.

Anybody who says you can't have it both ways clearly hasn't been spending much time reading opinion polls lately. One year ago, 59 percent of the American public liked the stimulus plan, according to Gallup. A few months later, with the economy still deeply mired in recession, a majority of the same size said Obama was spending too much money on it. There's nothing wrong with changing your mind, of course, but opinion polls over the last year reflect something altogether more troubling: a country that simultaneously demands and rejects action on unemployment, deficits, health care, climate change, and a whole host of other major problems. Sixty percent of Americans want stricter regulations of financial institutions. But nearly the same proportion says we're suffering from too much regulation on business. That kind of illogic—or, if you prefer, susceptibility to rhetorical manipulation—is what locks the status quo in place.

I could be elitist and say that these contradictions stem from the public's lack of basic economic knowledge, of cost-benefit analysis, of the seen and the unseen; they want results (health insurance for all!), while ignoring the costs and means involved (higher taxes?!!). But I won't. Read Bryan Caplan's Myth of the Rational Voter. He does it for me. The public gets what it wants, good and hard. Just ask a Californian.

The Blizzard and Off-Brand Goods

Bryan Caplan ponders:

A blizzard is about to hit DC. As reports of its magnitude spread yesterday, people unsurprisingly rushed to grocery stores to stock up. Stores unsurprisingly failed to raise prices to cope with this sudden demand shock. By the time I got to the grocery store last night around 11 PM, many of the shelves were unsurprisingly empty.

Many, but not all. They were out of milk and bread, but there was still plenty of cheese and chocolate. That was easily explained - people knew they could shop again in a few days, so they only needed to stock up on staples. But the more I looked around, the more puzzled I was.

Here's what I noticed: For any given type of product, the most popular brand always sold out first. There were no Eggo waffles, but plenty of Wegmans brand waffles. All the national brands of hot dogs and sausages were gone, but there were plenty of obscure sausages still on the shelves. If you broadened the categories, the pattern remained. In produce, all the bananas were gone, but there were still plenty of apples.

You might say, "What's the puzzle? Of course the most popular stuff sells out first." But that's a feeble explanation. After all, if X is ten times more popular than Y, then you'd expect stores to simply carry ten times as much X as Y. Why would X sell out faster in a blizzard if stores have already taken its greater popularity into account?

I think the answer to Professor Caplan's question is that grocery stores keep up with demand by using the just-in-time inventory system -- as inventories run down, they replace them. As long as trucks can bring in more shipments to replenish the most popular goods, the system works well. But, given severe weather, a grocery store's inventory remains static. Thus, the most popular items run out first, leaving only off-brand supplementary goods. And plenty of cheese and chocolate.

When there's enough notice, like with an impending hurricane, stores often stock up on the most popular wares, like bottled water, bread, and canned goods. But the severity of this year's blizzard was only evident just before it hit. Thus, Professor Caplan was stuck with Wegmans brand waffles, instead of Eggos.

Americans Love Free Enterprise, Capitalism (Sorta)

Gallup has conducted a poll of Americans' opinions on capitalism, socialism, and other ideological buzz terms (HT Hit & Run). Note: Gallup did not provide definitions for the terms. Some noteworthy findings:

• 86% of Americans are pro-free enterprise, yet only 61% are pro-capitalism.
• 58% of Americans are anti-socialism, while 33% are anti-capitalism.
• 4% of Americans are anti-small business. (Fat Cat CEOs, I suppose?)
• Americans are split on big business (49% pro and con).
  
  

When broken down by ideological identification, there are some more bizarre findings:

• 60% of liberals are pro-capitalism and 61% are pro-socialism. What explains this apparent ambivalence?
• 87% of liberals are pro-free enterprise!
• 20% of conservatives are pro-socialism. No surprise there.
• More liberals are pro-capitalism/free enterprise than moderates. What?
  

Both Sides of the Coin

Writing about the recently-departed Howard Zinn, GMU economist Donald Boudreaux makes the simplest, most fundamental, argument for limited government:

Were Zinn still alive, I would ask him why the very same government that he believes scurrilously, cold-bloodedly, and deceptively sends young people off to die in unjustified wars is to be trusted on the home front with the task of rearranging America’s own economy and society.

Seems to me that an evil brute pointing guns at foreigners remains an evil brute when he turns ’round to point those guns at fellow citizens.

Business Cycle Hip Hop

This is brilliant. Kudos to GMU economist Russ Roberts and creative director John Papola.

The Tyranny of Surplus!

Clay Shirky, being more-than-a-bit ironic, half-laments the advent of the interwebs:

The Internet has been in majority use in the developed world for less than a decade, but we can already see some characteristic advantages (dramatically improved access to information, very large scale collaborations) and disadvantages (interrupt-driven thought, endless distractions.) It's tempting to try to adjudicate the relative value of the network on the way we think by deciding whether access to Wikipedia outweighs access to tentacle porn or the other way around.

Unfortunately for us, though, the intellectual fate of our historical generation is unlikely to matter much in the long haul. It is our misfortune to live through the largest increase in expressive capability in the history of the human race, a misfortune because surplus always breaks more things than scarcity. Scarcity means valuable things become more valuable, a conceptually easy change to integrate. Surplus, on the other hand, means previously valuable things stop being valuable, which freaks people out.

To make a historical analogy with the last major increase in the written word, you could earn a living in 1500 simply by knowing how to read and write. The spread of those abilities in the subsequent century had the curious property of making literacy both more essential and less professional; literacy became critical at the same time as the scribes lost their jobs.

Of course, Shirky is being glib; the internet is a great boon. (After all, he published his musings online.) Shirky is illustrating the Schumpeterian reality that widespread access to publishing on the internet has reduced the absolute value of the (now) simple act of publishing. What's left? Quality, duh. It's not enough to have your voice heard. Your voice must hold some kind of value to matter.

(HT Tyler Cowan)

NBC's Bad Bet

In what's become a bit of a scandal for NBC, the fourth-place network has reversed course and is giving Jay Leno his 11:35 time slot back, pushing Conan O'Brien's Tonight Show back 30 minutes to 12:05. From the NYT:

The announcement on Sunday, which followed several days of private negotiations inside NBC, is an embarrassing retreat for NBC, which had heralded Mr. Leno’s 10 p.m. show as transformational because it could be produced for far less money than expensive dramas that had been in that hour. The program had its premiere just 17 weeks ago.

Separately, the network announced an aggressive slate of pilot programs, and said it would scrap its early spring “infront” presentations for advertisers, instead opting for a traditional upfront in May.

Mr. Gaspin said the 10 p.m. experiment with Mr. Leno was “working financially” for the network. But it was not working for NBC’s affiliate stations. Many of the stations saw the ratings for their 11 p.m. newscasts drop precipitously after “The Jay Leno Show” debuted last September.

“The audiences that were watching the show were smaller than we anticipated, and they were not staying for the late news,” said Michael Fiorile, the chairman of the NBC affiliates board.

In some cities — including Indianapolis, at Mr. Fiorile’s station, WTHR — the NBC stations that had been No. 1 in the ratings at 11 p.m. were suddenly No. 2 for the first time in many years.

“It was a problem at 10, it was a problem at 11, it was a problem at 11:35,” Mr. Fiorile said.

According to the Associated Press, “some affiliates told NBC in December they would go public soon about their complaints if a change wasn’t made, or even take Leno’s show off the air.”

The only reason why this move is worthy of note is the colossal failure of NBC's strategy for programing its prime-time line up. The original plan was for Leno's cheaper talk show to replace the expensive scripted dramas that are typically shown at 10:00, thus providing the network a wider profit margin. It's an example of Schumpeter's concept of innovation. Not all innovations work. Autonomy always remains with the consumer. No matter how much NBC hoped Leno's star power would change the preferences of its viewers, it didn't work. Creative destruction demands that bad bets will result in failure. It's unclear how this change of course will affect NBC, but it's quite possible that one misfire will lead to another.