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Truck and Barter Where Sympathy and Hedonism Collide |
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Phone Users--Percent vs. Number
In a fascinating and vicious reply to Adam Thierer, Malcolm Wallop presents Tech Central Station readers with two seemingly different figures for two purposes. The first demonstrates that the Baby Bells are still monopolies in the provision of local telephone service:
Mr. Thierer argues unperceived that the Bells are no longer monopolies. In fact, since the passage of the Telecommunications Act of 1996, local competition has developed at a glacial pace and the Bell monopolies still control between 85% and 90% of the local markets. That's hardly a competitive environment, but why let a few inconvenient facts get in the way of a good argument.
I agree. The environment is not competitive. But later on Mr. Wallop uses a second figure to show that the policy requiring local telecom monopolies to interconnect and/or sell unbundled network elements has been successful:
In December of 2002, 22 well-respected national and state free-market organizations, urged the FCC to protect consumers from the Bell monopolies efforts to thwart competition by denying competitors access to their infrastructure. These organizations ... believed then that local competition would lead to lower prices, better service and superior quality for consumers. The marketplace has now borne out the wisdom of this pro-competitive policy: More than 19 million consumer and small business phone users are now served by competitors, and even the Bells themselves have been forced to lower prices and improve service to meet this competitive threat... where it exists.
I don't find Mr. Wallop persuasive at all, because these two statements of his are for the most part inconsistent. Let me summarize:
1. The Bells are still "monopolies", as evidenced by their 85% market share.
Mr. Wallop fails to demonstrate how a government policy that proceeds at a "glacial pace" can also be "pro-competitive". When he tries to prove that forced infrastructure sharing is effective competition (with point #2), he has already undermined himself with point #1.
Using both the number and percent variants of the same type of statistic (phone users) is not just confusing; I'm led to believe that it is intentionally misleading... but I'm no telecom expert.
2/27/2004 04:36:58 PM
XML at T&B
An infrequent reader wondered if T&B would provide an XML feed.
Providing too much consumer choice is what T&B is all about, so we'll provide two XML feeds. One is Blogger's own Atom
2/25/2004 01:37:22 PM
Some Politics
My exploratory and declaratory posts about gay marriage (I'm now in favor) at Kikuchiyo News have garnered some Vodka attention. My position (a liberty defense) is open to serious criticism, no doubt.
2/25/2004 09:58:57 AM
Britain's Laziest Woman
THE laziest woman in Britain is exposed by The Sun.
Bone idle Susan Moore has finally had her benefits stopped after an astonishing 16 YEARS on the dole.
Super-sponger Susan, 34, has not done a day’s work since dropping out of college in 1988.
But amazingly, she insists she isn’t lazy — and is appealing against the decision to stop her claiming £65-a-week Jobseeker’s Allowance.
Susan, who says she needs to RELAX at weekends, has never even been for a job interview — and turned down work at a supermarket because it was five miles away.
But yesterday she said: “I don’t see why I shouldn’t get Jobseeker’s Allowance. I’m not a scrounger, I want to work but nothing suitable’s come up.”
Via Dave Barry.
2/24/2004 04:45:43 PM
Long, Lost Jobs: Good Riddance
GMU Economics Professor Russell Roberts has a fine pro-outsourcing essay in Businessweek:
CREATIVE CYCLE. When an American outfit creates a call center in India or sends some of its software-design business there, it's able to do more with less -- more output with fewer workers, less capital, and fewer raw materials. Costs go down.
These savings come from different sources -- innovation and productivity changes, importing goods rather than making them, or using foreign labor for services that used to be done in-house. All of these allow companies to get more from less, which means America is more productive as a nation. The result is higher wages and a better standard of living for the average American.
That's the story of the last 100 years of the U.S. economy. In 1900, 40% of the country's work force was in agriculture. Today, the percentage is about 2%. That transition was driven by innovation, getting more from less. Prices fell. People spent less money on food. That freed cash to to be used on new products, and new companies could be created.
FEWER FACTORIES, MORE OUTPUT. During the transition, farm employment dwindled, but tens of millions of new, higher-wage jobs were then able to come into existence. The U.S. would be a lot poorer if the country had insisted on keeping those farm jobs. The change was hard on a lot of farmers, but it was good for almost every American. The children and grandchildren of those farmers enjoy the benefits today.
The same transition has happened in manufacturing over the last 50 years. Businesses have found new ways to get more from less. Some of those ways involve new technology or importing goods that were once made here. Both result in fewer manufacturing workers and greater output.
Thought Experiment: Let's look at some of the best jobs that have been lost to robots or foreigners. In 1913, Henry Ford instituted the $5 day for a 9 hour shift. These jobs were hard assembly line positions, but were extremely desirable work. With changes in technology, these jobs were lost.
But just how good were they? For their day, these jobs earned double the average manufacturing wage. But they are nothing special to speak of in today's terms. Deflating the $5 a day wage by the CPI-U (which is not really appropriate, but this is a blog post, not a dissertation) Ford's $5 a day is a wage of 5*(184/9.9)=$93 per day in 2003 dollars, or $10.35 per hour. The average Wal-Mart supercenter employee working in the grocery section--by opponents' accounts, some of the WORST JOBS EVER--makes about $10 an hour (page 25), not including benefits.
So some of the lowest-skilled service industry workers today are making as much or more than the best technically-skilled assembly line workers of Henry Ford's day. And that's because of outsourcing.
Hat Tip: Don Boudreaux
2/24/2004 03:57:22 PM
The Safety of Low-Cost Airlines
An interesting but light interview with Sepp Moser, author of the 1986 German language book "How Safe is Flying?" ("Wie sicher ist Fliegen?"), apparently updated and revised in February 2004.
The one aspect of his interview I want to focus on is the safety of low-cost airlines. They tend to have older tails than their high-cost foes, but are just as safe:
swissinfo: What kind of impact are low-cost airlines having on aviation safety?
S.M.: According to the statistics they don’t influence safety in any negative way.
In fact, low-cost airlines as we have them now are as safe as so-called high-cost or network airlines. Safety is a matter of culture and not about spending millions of dollars.
In Switzerland we had a safety audit after two accidents in this country. The audit came to the conclusion that the only low-cost airline we had at that time, [Crossair], was the safest.
So you can’t say that low-cost equals dangerous.
Mr. Moser insists that "safety is a matter of culture." I am inclined to defer to the experts, even if the BBC is not. Consumer Reports Travel Editor Bill McGee insisted in 2002:
[Low-Cost Airlines] have to meet the same FDA standards as the big carriers. Also, because they are smaller, they are generally able to incorporate new safety requirements quicker.
Noting the strong cultural stance and adamant regulatory requirements towards safety, several questions still remain for economists. What is the actual relationship between airplane accidents and the price paid by airlines for maintenance and upkeep? Do smaller airlines incorporate safety requirements quicker? If so, isn't that an indication that their maintenance, while low-cost, is also more efficient, and perhaps even better?
Have these issues been previously examined in detail?
2/24/2004 11:03:28 AM
The Recruiter's Dilemma; Or, What the IRS can teach the NCAA.
BY
Ian
So, there's this small story out of Colorado that a few of you may have heard about. That is, the one or two of you who pay attention to the national media.
2/22/2004 10:33:12 PM
Food for thought
Here is a link to an interview with Clayton Christensen from HBS. He is one of the firsts looking into what disruptive innovation is all about and according to Espen Andersen (one of my tech strategy proffesors and one of his Harvard buddies) he is famous for being called in the middle of the night by Intel's Andy Grove and questioned about his thoughts from then-latest book The Innovator's Dilemma
2/21/2004 06:23:08 AM
Just say No
I don't believe that advertising is evil or wasteful overall, nor do I think we consumers are supplied with too many choices. However, today my wife presented me with a data point that undermines both these beliefs. We're in the opthamologist's waiting room, when I notice a pack of advertising reply-to cards for American Baby offering a free subscription. I handed one to my wife, who erupted with laughter at the sight of the following options:
Apparently, if you don't want a subscription, you should check the box "No", fill in the information, and mail the card back. This is definitely a choice that consumers need not have...
2/19/2004 06:03:25 PM
From the Other Side of the Issue
BY
Ian
I try to keep down the number of times I point to other blogs and and chat about what they say there. This isn't because I see it as poor material; rather, I so rarely have something to say that others have not already said.
2/19/2004 03:57:16 PM
Got a strategy? Now make it happen
This is the title of an article from last week's HBR Working Knowlegde. I found some interesting similarities between an organization stuck in neutral when in need for implementing a strategy and the Romanian (business) environment - or society if you like.
"The lack of openness lies behind many failures to implement strategy. We've become convinced that the most powerful way for leaders to realign their organization is to publicly confront the unvarnished truth about the barriers blocking strategy implementation. Typically, this involves looking closely at the roles and decision rights of various parts of the business, as well as changing the behavior of people at all levels. Public, organization-wide conversations about such fundamental issues are difficult and likely to be painful. But pain contributes to a species' survival by triggering learning and adaptation; it can have the same effect on organizations. Businesses and the people inside them don't learn to change unless they have the courage to confront difficult truths."
This is what is happening in Romania right now, it isa semi-closed society and because most initiatives fail to uncover the truth, they lead to only superficial change (if that). Authors recommendation is society-wide conversations whereas all stakeholders are involved in honest communication. It is however the nature of the conversation that matters ("strategy is all about communication" one of my strategy professors used to claim all the time - he is a strong adept of Porter's ideas); as such, here are some ideas to be kept in mind and applied thereof by the Romanian leaders:
1. A conversation about strategy needs to move back and forth between advocacy and inquiry - communication is a two way street from top-down and from down to top. It looks like here it is only one way, messages like "don't bother, we know what we've got to do coz we know what's best for you" are quite frequent, be it from governemnt representatives or Parliament ones.
2. The conversation has to be about the issues that matter most -- identify the list of the most important strategic issues and then focus on discussing about it across the entire society level. Apparently they did identify, or so they claim, but it is not like I am seeing public debates about them too often.
3. The conversation has to be collective and public - that would help realigning the national strategy with the general consensus (see the obsessive EU integration - this is not necessarily a good example because EU integration must be part of a wider national strategy). However, the view is presenting only one side of the EU integration coin, the downsides are approached like "we'll deal with them when we'll face them"
4. The conversation has to allow employees to be honest without risking their jobs - people must be sure that openly talking about inefficient strategies or measures will not affect their lives - -this is what is NOT happening mostly in the public and administrative sector, where people are (still) comfortable with a work environment inherited from the 45 years of communism. They are reluctant to taste the change or even think about it, consequently the few that dare to challenge "the system" are either excluded or leave by themselves.
5. The conversation has to be structured. That is you will have to speak up what you have to say, there is this tendency to say what "domnul director" (that is the MD, or the minister or whatever leader) wants to hear or has on its agenda. This comes at the cost of the lack of spontaneity, and there is this general belief that "domnul director" is too busy to listen to my "small little things". Believe it or not, it is quite widespread on the Romanian society level. If you dare to speak up and honestly name things you are to be judged.
2/19/2004 12:23:36 PM
Focus on the Gross
I've got a problem with the outsourcing debate: both sides are economists. To be sure, outsourcing is based on certain economic premises and its effects are projected and measured in economic terms. But in ultimately, outsourcing isn't really an economic issue: it's a political one.
That's Simon, at Kikuchiyo News, who not only wants to shift the outsourcing debate away from economic theory towards political reality, but wants to focus exclusively on what politicians can do to ease the transitional burdens of job losses. I'm not willing to let him confiscate outsourcing just yet, as I think economists--in this debate, at least--need to examine more closely the microdata that is at their disposal. Simon continues:
But this is basically a political question: how the government... will respond to the demands of the jobless population.... If they are a growing constituency, then politicians have two choices: (1)If they think that the transition effects can be managed in the present climate, they can push for that. (2) If they think that the present state of the economy prevents effective management of job-displacement problems, they will attack outsourcing itself.
Political economists have a role here too. On the whole, I think economists need to take better care in distinguishing net job stagnation from the incidence of gross job gains and losses. While net job gains have been small, it is gross losses that initiate the transitional burden, and gross gains that may ease or terminate the burden.
However, the incidence of the gross gains changes the nature and makeup of the political constituency that Simon is concerned about. If the fruits of creative destruction are distributed as to create a large class of long-term unemployed (which, from the data about average duration of unemployment, hasn't happened), then politicians might find themselves more compelled to pander to the unemployed minority.
It seems to me that much of the political concern over net job stagnation hides exactly where the gross gains and gross losses are taking place, and perhaps we economists ought to look at them in detail before giving up either side of the discussion to noneconomists.
2/18/2004 09:52:35 PM
Giffen, is that you?
BY
Ian
Ok, so this isn't really an example of the ol' white whale of microeconomics (one of them, anyway), but I thought it was really interesting:
But what people are buying isn't half as interesting as why they're buying it. "There was the stock market drop and 9/11, and then all of a sudden we're in a long-term war," says Wendy Liebmann, president of WSL Strategic Retail, a consulting firm. Trying to gain control in a world that seems chaotic and unreliable, consumers are not waiting for the other Jimmy Choo to drop. "They're pushing back," says Liebmann. "They're saying, `I have to make choices today.' " For consumers, when it comes to buying luxury goods, special services, or even expand-your-horizons experiences, "don't put off till tomorrow" has become more than a homespun aphorism; it's become a way of life. It's not that the luxury goods have suddenly improved to the point where the price makes more sense than a cheaper alternative, it's simply that people are buying more expensive things because the shadow of the future is looming over them. In the face of this, how do people make judgements about the value of the luxury goods they're now consuming at higher levels? Would it be untoward to suggest that perhaps, as an indicator of value, they look at price? The lead character from the story is pictured this way: Karl Rutter used to buy $300 suits off the rack at Century 21, a discount retailer in Manhattan. But these days he pays more than twice that for Hugo Boss and Calvin Klein suits that he picks up at Saks. That's not all: He recently bought a $450 Louis Vuitton wallet, a $220 Mont Blanc pen, and a $245 pair of Gucci loafers. The brand names are mentioned for a reason. What makes Gucci loafers better than, say, Kenneth Cole? Is the stitching that much better? And even if it were, is Mr. Rutter really in the position to evaluate the differences? He very well might be (not knowing Mr. Rutter, I'll err on the side of saying he could well be a very savvy shoe-buyer), but that simply can't hold for the range of goods that are suddenly winding up in his (and others') shopping bags. It is, I must admit, a rather select group of people and under very specific circumstances that these goods with higher prices are being demanded in greater quantity than lower-price substitutes. But then, the group of people for whom some goods are demanded less when their income rises is limited at any one point in time, isn't it?
2/16/2004 04:44:45 PM
Efficient Speeding
Tyler Cowen writes about progressive fines for speeding:
Legality and constitutionality surely do not favor this idea in the U.S., but how about efficiency? I say no. Richer individuals on average have higher valuations of time... Equal dollar fines are consistent with the rule of law... True, efficiency is unlikely to suggest strictly equal dollar fines, but if the choice is equal dollar fines or discretion I will prefer the former.
I'm inclined to agree with him as a practical matter, but pure theory tells me something different. To me equity of outcomes (desiring that the poor speed as much as the rich) suggests progressive fines, but I think efficiency requires that the marginal costs should equal the marginal benefits--meaning that an instance of speeding should be permitted (or mandated?) when its expected social costs are lower than its social benefits. The social costs include (and, I think, are dominated by) higher expected accident costs; the social benefits are the increased product from, on average, highly productive people. Shouldn't the fine be set at the level of expected social costs divided by the probability of being caught while speeding? If so, the rich will then speed more than the poor.
2/16/2004 12:50:50 PM
Official vs. Unofficial
The official urban unemployment rate for China at the end of 2002 was about 4% (time-series here), but unofficial estimates range from 10% to 20% with rural estimates much higher.
Are there any anonymous surveys of what Chinese economists think of the National Bureau of Statistics?
2/16/2004 11:58:21 AM
Linking as Perquisite
Alex Rodriguez is headed to the Yankees, and the deal was closed with some interesting additions:
They offset that reduction in value by giving Rodriguez a hotel suite on the road (an old players' perk) and allowing him to link his Web site to the Yankees' Web site (a new perk).
The Rangers, who will work out Rodriguez's New York State tax payments, agreed to purchase Rodriguez's house in Texas (he is so eager to flee the Rangers that he will not be going back anytime soon) and his suite at the American Airlines Arena.
I don't follow baseball much anymore, so perhaps some reader can fill me in as to why on earth Mr. Rodriguez needs the Yankees permission to link to their web site.
2/16/2004 10:38:37 AM
Romania for sale
Here is a very interesting link: someone had the idea of having Romania as a country for sale at Ebay. The ad says:
2/15/2004 03:29:47 AM
Wal-Mart Does Provide Health Insurance
The false idea that WM doesn't provide health insurance appears to be common knowledge to many reasonable people. In fact, I encountered commenters at Businesspundit and Knowledge Problem who thought WM was slacking in health insurance provision.
In the comment sections to those posts, I referred people to page 23 of this study and page 25 of this report, which state that WM pays 2/3 of healthcare premia, requires employees to pay range of medium to high deductibles, and has no coverage limit on catastrophic care. Also note that approximately 90% of WM associates have coverage either through the WM plan or through a family member's plan, but employees must pay for dependents in full.
However, a far more readable source of information is Dan Weintraub's--"Health care for Wal-Martians":
[WM] does offer benefits, and it says that about half of its workers subscribe to them, which is about average for retail operations in America... A company VP quoted in the piece says Wal-Mart typically covers medical bills exceeding $100,000 for at least 800 employees a year, and 20,000 cases cost the firm more than $10,000 each. Wal-Mart has paid for more than 300 organ transplants in the past five years, each costing more than $1 million... The idea of health insurance, after all, is to prevent unexpected medical bills from bankrupting and devastating an individual. In this regard Wal-Mart’s coverage might be on the cutting edge. While it leaves individual workers responsible for routine expenses, Wal-Mart’s coverage steps in when things get serious and then covers everything, forever. Doesn’t sound so bad.
2/12/2004 04:12:23 PM
New To Me;
Or, "Now that I've met you, would you object to never seeing each other again?"
A lot of the econ related blogs I read make reference to various and sundry modelling tools/software/websites for things like macro issues and more. While all that's well and good, isn't there something out there for us game theory fans?
2/10/2004 11:31:00 PM
The Rationality of Terror; Or, Bitter? Who, me?
It's a good thing no one around T&B knows me personally. If they did, they would have long since grown tired of me rehashing a particular story from one quarter of school. I'll save the details and leave it at this, a paper I produced for a class was given what was, by my standards, a low grade. The only commentary on the paper was that my theory was unsound; no mention was made of the process by which I argued my point.
2/8/2004 01:12:15 PM
When Wal-Mart Attacks its Suppliers
Just Procrastinating picks up on my Wal-Mart story below, and comments:
In my job I do some work with the folks at Wal-Mart and while they are generally nice people, you basically have to do whatever the fuck they tell you to, and quickly. They are so big that they are in a position to bully their suppliers, which they do.
This is a common--and entirely accurate--perception by a lot of folks of the way WM deals with suppliers. Since this method has led to outsourcing of manufacturing jobs, many people think WM should be stopped. A reasonable commenter on that post pointed out a FastCompany article I missed, The Wal-Mart You Don't Know by Charles Fishman, as an example of evidence of how Wal-Mart kills communities.
I think the article is informative, well-written, and perceptive about the WM pressure mechanism, but completely incorrect in its macroeconomic conclusions. I see little in the article which relies on accurate data. However, many people disagree with me. Many bloggers--
PixelShatter,
Toast and Tea,
The Black Hole,
Deckchairs on the Titanic,
Joe Hill,
Blab-o-Rama,
Sleep not Work,
leekangkoog--are fascinated by the power of WM, and most of these sympathize (in the main) or completely agree with the article's normative analysis. Here, in short, is the core thrust of the article:
[Wal-Mart] is, in fact, so big and so furtively powerful as to have become an entirely different order of corporate being.
Wal-Mart wields its power for just one purpose: to bring the lowest possible prices to its customers. At Wal-Mart, that goal is never reached.
From this everything else follows. The article notes that there hasn't been a retailer this dominating since A&P had 80% of the grocery market. My big problem with the article is that the author doesn't seem to realize he's hit upon the source of economic growth, and insists on treating the admittedly costly and messy process of economic growth as "high cost":
To survive in the face of its pricing demands, makers of everything from bras to bicycles to blue jeans have had to lay off employees and close U.S. plants in favor of outsourcing products from overseas.
In other words, Wal-Mart's pressure made specific producers realize that they could produce some low-quality goods more cheaply if they were made elsewhere. This is a direct cost to those who lose their jobs, but how much is that loss? The author relies on the probably true and very compelling stories--not hard data, and he fails to follow up on what happens to all those Americans after they lose their manufacturing jobs. 1 or 5 or 10 years later, are they better off or worse off? Is American capital earning a higher or lower rate of return? The author answers:
But there is no question that the chain is helping accelerate the loss of American jobs to low-wage countries such as China.
The canard about China stealing US manufacturing jobs appears to be false, as the number of manufacturing jobs in China has also fallen. If this is true, then where are all the factory jobs in China going? Nowhere--more goods are produced by fewer people--in the US, China, and everywhere else.
"But you can't buy anything if you're not employed. We are shopping ourselves out of jobs."
This is undeniably true--in the same exact way we "shopped" ourselves out of farm jobs and into factory jobs by buying cheap food, we are now "shopping" ourselves out of factories and into services by buying cheap goods. Some of those jobs lost are making bicycles, blue jeans, and of course, pickles:
The gallon was hoisting Vlasic and hurting it at the same time...[WM said,] 'We want the $2.97 gallon of pickles. If you don't do it, we'll see if someone else might.' I knew our competitors were saying to Wal-Mart, 'We'll do the $2.97 gallons if you give us your other business.' "
WM figured out that pickle companies were not competing vigorously enough with one another, and forced the issue by helping Vlasic become the market leader, which it willingly choose to do, rather than let a competitor take its place. For all I know the pickle market could have been perfectly competitive, but WM realized that there was a cheaper way to produce and distribute pickles, and compelled its pickle supplier to meet that standard. How could it possibly force a company to lose profits? Under threat that it would lose even more. As a result, once WM forced the price down, profits dropped for Vlasic--but they dropped even more for its competitors.
Wal-Mart is legendary for forcing its suppliers to redesign everything from their packaging to their computer systems. It is also legendary for quite straightforwardly telling them what it will pay for their goods.
Of course WM could just purchase firms that are operating inefficiently, and integrate vertically. But if it were to do this too extensively, like automobile firms once did, it probably would be considered an antitrust violation.
In the end, the business bloggers tell me that the "big fear" of business is having their products become indistinguishable commodities. Brand Mantra writes extensively on this subject, and insists the brands that folded to WM were the ones that were on their way to becoming commodities already:
So WalMart is commoditizing brands? I don't think so. They're simply determining who's willing to be a commodity brand and who isn't. Levi's is prostituting itself to WalMart because it had already lost its brand value. Leaders who know the value of their brands, who know they're delivering value and that their brand has a loyal following, will not succumb to the WalMart commodity-confirming machine.
2/6/2004 06:40:41 PM
The Public makes a Choice
Election time in Oregon. This headline and article from Astoria is too precious to pass over. It appears the public has again made a choice. The frustrating part - for many voters - is that they'll be back next year.
2/5/2004 11:27:55 AM
Mises Akbar!
I just received notice that I have passed both the Public Choice and Law and Economics field exams. (No, I did not bribe the committee members.) Celebrations, featuring a selection of Georgian semi-sweet wines, will be in order tonight.
2/4/2004 04:53:21 PM
BY
Kevin
Some Little Noticed Protectionism In his post "Three Centuries of India-bashing" Dutch blogger Ivan Janssens discusses the impact of the new US federal law (incorporated into the omnibus proposal signed by President Bush on Jan 23) that prohibits the international outsourcing of A-76 jobs, a relatively small subset of jobs currently done by federal workers that must be put up for competitive bidding.
The India Times is all over this one (read this, and follow the links at the bottom). A very balanced Dayton Daily News editorial criticizes Sen. George Voinovich of Ohio, one of the amendment's sponsors, and notes that U.S. business and Indian government leaderhip takes this as a very bad indication of future policy :
2/4/2004 03:09:54 PM
BY
Kevin
Going Places T&B congratulates GMU Economics Ph.D. candidate Scott Beaulier on joining the Economics faculty of Mercer Univeristy.
2/3/2004 07:08:28 PM
BY
Kevin
When Wal-Mart Attacks...
In contrast to The Washington Post, T&B believes that people living inside the City of Los Angeles have diverse and conflicting voices; it is the ruling class who has the power and desire to tell Wal-Mart to get lost. In particular, it is the city government that wants to ban Wal-Mart Supercenters; we have little idea what the people outside of government actually want. The distinction between government and governed is critical in this context, and should not be ignored--even for a good opening line. The LA City Council is proposing a law that will require special permission for Wal-Mart to open up Supercenters--permission that will then never be granted by the government. It is clear that those supporting the ban have many prior beliefs but little empirical evidence to support their contentions that 1) a majority of LA residents don't want WM Superstores in LA, 2) such stores will be hurtful to a broad swath or a critical minority of residents, 3) healthcare costs to the city will increase, or 4) healthcare coverage of workers will decrease.
In other words, WM Supercenters are to replace union grocers and Mom-and-Pop stores, destroying good jobs, and decreasing the share of workers with health coverage. All because stupid consumers will not see that it is against their own interests to shop at supercenters. What does the science of economics have to say about the ordinance effectively banning supercenters? What do expert economists forecast? Where are the voices of reason and sanity? LA is facing a delicate political situation, and the dirty details of politics always create major problems for economic analysis. In this case, there are dueling economic impact statements--one, funded by the city council (The Rodino Report), says WM big boxes cause a net decrease in jobs, the other, funded by Wal-Mart, predicts a net increase in jobs. Who needs a two handed economist when there are boatloads of one-handed economists ready to prostitute themselves? The results are truly pathetic:
This calls for a reminder: Governments are not populated by truth-seekers. It is absurd to suggest that the study funded by the government is not biased in favor of the city council board members who approved its funding, while Wal-Mart's study is biased because its corporate board members approved that funding. In fact both studies are long on "potential" results and short on "actual" data. We have reason to believe that both are equally biased, and it is only with careful thought that we accept anything presented in either document. Read the reports. The city council is driven by ideological preconceptions about the impacts of big-boxes, and Wal-Mart is driven by an unsatiated desire for profit. However, I find Wal-Mart's report more convincing in general, mainly because of this sensible overall assessment (page 33):
The Rodino report tells a different, and to me, less compelling set of stories. All the following are declared possible, without any inference about liklihood:
Whomever is correct, the WaPo tells us that Wal-Mart will find out whether voting citizens think it is in their own interest to shop in big boxes,
So here's what I think will happen. If Wal-Mart superstores open up inside LA, my best guess is that it will 1) increase employment (with lower wages and benefits compared to union grocers, and similar wages and higher benefits compared to Mom and Pop stores), 2) drive other grocers out of business, 3) decrease food and other consumer goods prices, 4) increase traffic in some areas, decrease it in others, 5) be a net wash on healthcare and city budget issues, 6) decrease the power of the LA City Council. If the ordinance passes, then Wal-Mart tells us precisely what it will do, and what will happen (page 39 of its report):
UPDATE: More on WM in my post When Wal-Mart Attacks its Suppliers.
2/3/2004 05:53:13 PM
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