First, company stores flourished in many parts of the USA, especially in the coal regions and other places with many isolated work sites, long before any legal minimum wages were put into effect. Second, Alchian is right that the workers understood perfectly how these stores worked (how could they not have when the stores were so common?): they provided basic consumption goods — flour, bacon, beans, kerosene, matches, cotton cloth — at the work-and-living site on credit, as advances against the workers’ future pay. Yes, the prices were higher than in, say, the closest towns. But the closest towns were often much too far away to allow the workers or their wives to go there easily, frequently, or cheaply. So, what the stores actually did was to reduce transaction costs for the workers, who otherwise would have been unlikely to accept employment in remote, isolated places far from stores.
Robert Higgs, letter to Don Boudreaux, 2016-11-06.
September 11, 2018
QotD: Debunking the “company store” story
May 12, 2018
Grocery stores as visible indicators of economic progress
Steven Horwitz sings the praises of the ordinary grocery store (in North America, anyway):
I have written much about the extraordinary increase in living standards that Americans have enjoyed over the last century, and especially in the last forty years. For me, one of the best indicators of this incredible progress can be seen in the evolution of the grocery store. A great treatment of this evolution is food writer Michael Ruhlman’s recent book Grocery.
The grocery store is in many ways a metaphor for the increase in American living standards experienced by both rich and poor. Those of us who remember the 1970s have perhaps the best sense of this evolution, as we can remember what even good grocery stores were like back then. Stores were generally small, not well lit, not always clean, limited in the variety of goods they stocked (especially fresh produce), and lacking in the prepared foods we take for granted at most grocery stores today.
The 21st century American grocery store, by contrast, is a marvel of higher quality, lower cost, and expanded variety. There is simply no comparison between the quality of the produce, meats, and bread available at even a large middle-market chain like Kroger today and what was available anywhere in the 1970s. Measured in terms of labor hours required for purchase, food has generally never been cheaper. We see that today, as poverty in America is far more likely to be associated with obesity than with being underweight.
The growth in the variety of products available in the market in general is an excellent, if underappreciated, indicator of economic progress, reflecting as it does the Smithian insight that the division of labor is limited by the extent of the market. With growth comes more wealth and larger markets that enable producers to have a market for more finely differentiated products.
An example from the evolution of the grocery store illustrates this point. In the 1970s, there were maybe five or six kinds of potato chips (regular, barbecue, sour cream and onion, ruffled, tortilla chips, and the stuff in the can). Today, the typical grocery store has a potato chip aisle that offers dozens of differentiated products along numerous dimensions. This increase in variety allows consumers to satisfy their preferences more precisely, increasing their subjective well-being. You want your gluten-free, lactose-free chocolate chip cookies? You can probably find them. You want your throwback taco-flavored Doritos? They’re there. The expansion of variety in the typical grocery store has dramatically increased the subjective well-being of American consumers in ways that macroeconomic measures like GDP cannot capture.
Toys Were Us – Now Let’s Build Something Better!
Foundation for Economic Education
Published on 10 May 2018Don’t get nostalgia goggles stuck on your face. The closing of retail stores will be a net win!
April 25, 2017
Shopping for capers
An old post at a seemingly abandoned Tumblr site called F*k You, Broccoli is called “Capers, Satan’s little BBs” (NSFW tag is for language, so it’s below the fold):
February 15, 2016
QotD: Staying in touch with the everyday
Posted something at the work blog today about these apps that help you do things you previously did with low-tech means, like assembling grocery lists. One of the comments praised a grocery app that gave you turn-by-turn instructions in your store. I never, ever want to hear my phone say “You have arrived at frozen breaded chicken patties.” The idea of people walking through a store, pushing a cart, staring at the screen to see where the coffee is located — as opposed to looking up for the word COFFEE — is the sort of thing from a comedic dystopia. Then: story in the WSJ the other day about someone else starting a service that delivers groceries to your house. The predicate for the business: “no one likes to go grocery shopping.”
I love to go grocery shopping. I went grocery shopping tonight; hit four stores in 90 minutes. Explain to me how it is possible to have an understanding of modern American culture without going to the grocery store. Someone who grocery-shops weekly has a better grasp on our civilization than somoene who spends four years getting a doctorate in Marketing. If they offer such things. I suspect that anyone interested in marketing gets out there and markets as soon as possible, and a doctorate would be useful only for teaching other people about Marketing, which you’ve never done, but studied.
It’s like Journalism school. Saying you understand Journalism because you went to Journalism school is like saying you have a command of the basics of Dentistry because you used a pencil to black out the teeth in a picture of someone’s head.
James Lileks, The Bleat, 2015-01-15.
February 11, 2016
QotD: Dissing Wal-Mart as a cultural signalling device
There’s no sign of it here in Magnolia, Ark., but the boycott season is upon us, and graduates of Princeton and Bryn Mawr are demanding “justice” from Wal-Mart, which is not in the justice business but in the groceries, clothes, and car-batteries business. It is easy to scoff, but I am ready to start taking the social-justice warriors’ insipid rhetoric seriously — as soon as two things happen: First, I want to hear from the Wal-Mart-protesting riffraff a definition of “justice” that is something that does not boil down to “I Get What I Want, Irrespective of Other Concerns.”
Second, I want to turn on the radio and hear Jay-Z boasting about his new Timex.
It is remarkable that Wal-Mart, a company that makes a modest profit margin (typically between 3 percent and 3.5 percent) selling ordinary people ordinary goods at low prices, is the great hate totem for the well-heeled Left, whose best-known celebrity spokesclowns would not be caught so much as downwind from a Supercenter, while at the same time, nobody is out with placards and illiterate slogans and generally risible moral posturing in front of boutiques dealing in Rolex, Prada, Hermès, et al. It’s almost as if there is a motive at work here other than that which is stated by our big-box-bashing friends on the left and their A-list human bullhorns.
What might that be?
Kevin D. Williamson, “Who Boycotts Wal-Mart? Social-justice warriors who are too enlightened to let their poor neighbors pay lower prices”, National Review, 2014-11-30.
January 29, 2016
QotD: Summing up the Wal-Mart fortunes
One of the obvious points being made, as is now traditional, concerning the great wealth of the Walton family, those inheritors of Sam Walton’s cash and stock. It’s not actually all that difficult to get people riled up about a store paying an average of $8.80 an hour (for non-supervisory staff) when the people who own the company have some $150 billion in wealth. However, that’s not actually the correct response. And insisting upon a change in public policy so that some of that wealth is paid to those workers, or that it should be taxed away in some manner, would be very much the wrong answer. For, you see, those Waltons actually deserve that $150 billion: we should be absolutely overjoyed that they have it in fact.
[…]
So, we get $250 billion a year and the Waltons, the inheritors of the man who started it all off, get $150 billion. We get more than they do: that sounds like a pretty good deal really. Except that is of course to grossly overstate what they are getting. That mountain of cash they’ve got is not an annual figure: that’s the capital value, their wealth, not the income from one year. Our benefit is what we save in one year. That value of WalMart stock is the net present value of everything that WalMart is expected to make in profits from now until eternity (although obviously we use a discount rate so that something 40 years out is given less importance than something next year). So we need to adjust our $250 billion figure in the same manner to make the two numbers comparable.
The easiest way to do that is simply to ignore discounting and to also impose a 20 year time limit. Neither assumption is correct but it’ll give us a nice rough and ready guess at the capital value to us all of those annual savings. And the answer if we do it that way is that the current value of WalMart’s existence to the rest of us is $5 trillion. That’s the number that is comparable to that $150 billion family fortune. They’re both the net present values of future income streams which does indeed make them comparable even if that value to us is calculated in a much simpler manner than the way the stock market values WalMart.
At which point it looks like we’re getting a massive bargain. We get $5 trillion and the people who made it happen only get $150 billion? Why aren’t we cheering in the streets over this rather than demonstrating in them about how awful it all is?
Tim Worstall, “The Waltons Deserve Their Hundred Fifty Billion; The Rest Of Us Gain $5 Trillion From Walmart’s Existence”, Forbes, 2014-11-29.
November 15, 2015
QotD: Shopping in Germany
The shopkeeper in Germany does not fawn upon his customers. I accompanied an English lady once on a shopping excursion in Munich. She had been accustomed to shopping in London and New York, and she grumbled at everything the man showed her. It was not that she was really dissatisfied; this was her method. She explained that she could get most things cheaper and better elsewhere; not that she really thought she could, merely she held it good for the shopkeeper to say this. She told him that his stock lacked taste — she did not mean to be offensive; as I have explained, it was her method; — that there was no variety about it; that it was not up to date; that it was commonplace; that it looked as if it would not wear. He did not argue with her; he did not contradict her. He put the things back into their respective boxes, replaced the boxes on their respective shelves, walked into the little parlour behind the shop, and closed the door.
“Isn’t he ever coming back?” asked the lady, after a couple of minutes had elapsed.
Her tone did not imply a question, so much as an exclamation of mere impatience.
“I doubt it,” I replied.
“Why not?” she asked, much astonished.
“I expect,” I answered, “you have bored him. In all probability he is at this moment behind that door smoking a pipe and reading the paper.”
“What an extraordinary shopkeeper!” said my friend, as she gathered her parcels together and indignantly walked out.
“It is their way,” I explained. “There are the goods; if you want them, you can have them. If you do not want them, they would almost rather that you did not come and talk about them.”
Jerome K. Jerome, Three Men on the Bummel, 1914.
August 9, 2015
Toronto-area supermarkets of the past
At BlogTO, Chris Bateman digs up some old photos of some Toronto-area supermarket chains that have faded from the scene over the years:
Today, a trip to the supermarket in Toronto more than likely means shopping at a brand belonging to one of a small number of corporations. Loblaws owns No Frills, Valu-mart, and T&T; Metro owns Food Basics, while FreshCo, Sobeys, Price Chopper are part of the Canadian conglomerate Empire Company Limited.
In the mid 20th century, before the first of several major acquisitions and mergers, shoppers had more of a say where their grocery dollars ended up. In those days, independent chains like Power, Dominion, and Steinberg wowed customers with gleaming self-serve supermarkets, ample parking, and space age foods.
Here’s a look back at five supermarket chains that have vanished from Toronto.
My family moved to the Toronto area in 1968, but I didn’t know about some of the chains (but I recognized the distinctive architecture of this one):
Grand Union
Grand Union’s most famous Toronto store was at the Parkway Mall at Victoria Park and Ellesmere in Scarborough.
The U.S.-based company built the store with its distinctive arched roof in 1958, just five years after entering the Canadian market with the purchase of Carroll’s, a grocery chain based out of Hamilton.
Just months after opening its flagship Scarborough location, Quebec-based Steinberg’s […] bought the company’s Canadian stores and rebranded the Parkway Mall location. It was later a Miracle Food Mart and a Dominion. Today, it’s a Metro. In 2009, the store became the first supermarket to be listed on the City of Toronto’s Inventory of Heritage Properties.
January 3, 2015
“Secular Stagnation and Cast-Iron Frying Pans”
At the wonderfully named Worthwhile Canadian Initiative blog, Frances Woolley looks at some of the ordinary human cussedness that prevents wonderfully clear and understandable economic theories from working quite as efficiently as their formulators expect:
1. Economies grow when people buy stuff.
2. Over time, people accumulate more and more stuff.
3. People can only handle so much stuff. Sock drawers get full of socks. Cupboards get full of cups. Bookshelves get full of books.
4. It’s hard to get rid of stuff. Economic models typically assume disposing of unwanted things costs nothing. But life isn’t like that. Sorting out stuff that can be tossed from stuff that is worth keeping takes time and effort.
5. People are “loss averse”. Throwing things away — clothes that don’t fit, vinyl LPs — hurts psychologically.
6. There’s no need to replace perfectly good stuff. True some stuff, like mobile phones, only lasts a year or three. But other stuff, like cast-iron frying pans, lasts for decades.
Taken together, observations 2 through 6 imply that, as people get older, they buy less and less stuff. Combined with observation 1, these observations explain why countries with aging populations experience lower rates of economic growth.
My only quibble is with the final sentence of point 3: bookshelves don’t get full … you just run out of immediate book storage options. Bookshelves are never really full, they’re just temporarily over-booked.
December 31, 2014
The (awful) people of Whole Foods
Many years ago, when we lived on “the Danforth”, we were occasional patrons of “The Big Carrot”, an early retail store for the self-consciously “alternative” set. If you wanted gluten-free, or dairy-free, or fair-trade, they were almost the only game in town in the late 80s and early 90s. The selection may not have been great at times, but they did try to provide a variety of foods that you couldn’t get at the mainstream supermarkets of the day. The employees seemed to be mostly good, helpful folks, but almost to a person the customers were incredibly self-centred, self-righteous, arrogant, and intolerant. I don’t know how the staff put up with the constant childish antics and unending whining from the customers. Whole Foods is a much bigger enterprise than Toronto’s Big Carrot … and they seem to have attracted exactly the same customer base:
The problem with Whole Foods is their regular customers. They are, across the board, across the country, useless, ignorant, and miserable. They’re worse than miserable, they’re angry. They are quite literally the opposite of every Whole Foods employee I’ve ever encountered. Walk through any store any time of day—but especially 530pm on a weekday or Saturday afternoon during football season — and invariably you will encounter a sneering, disdainful horde of hipster Zombies and entitled 1%ers.
They stand in the middle of the aisles, blocking passage of any other cart, staring intently at the selection asking themselves that critical question: which one of these olive oils makes me seem coolest and most socially conscious, while also making the raw vegetable salad I’m preparing for the monthly condo board meeting seem most rustic and artisanal?
If you are a normal human being, when you come upon a person like this in the aisle you clear your throat or say excuse me, hoping against hope that they catch your drift. They don’t. In fact, they are disgusted by your very existence. The idea that you would violate their personal shopping space — which seems to be the entire store — or deign to request anything of them is so far beyond the pale that most times all they can muster is an “Ugh!”
Over the years I have tried everything to remain civil to these people, but nothing has worked, so I’ve stopped trying. Instead, I walk over to their cart and physically move it to the side for them. Usually, the shock of such an egregious transgression is so great that the “Ugh!” doesn’t happen until I’m around the corner out of sight. Usually, all I get is an incredulous bug-eyed stare. Sometimes I get both though, and when that happens, I look them square in the eye and say “Move. Your. Cart.” I used the same firm tone as Jason Bourne, with the hushed urgency of Jack Bauer and the uncomfortable proximity of Judge Reinhold. From their reaction you’d think I just committed an armed robbery or a sexual assault. When words fail them, as they often do with passive aggressive Whole Foods zombies, the anger turns inward and they start to vibrate with righteous indignation. Eventually, that pent up energy has to go somewhere, and like solar flares it bursts forth into the universe as paroxysms of rage.
December 20, 2014
Repost – Induced aversion to a particular Christmas song
Earlier this year, I had occasion to run a Google search for “Mr Gameway’s Ark” (it’s still almost unknown: the Googles, they do nothing). However, I did find a very early post on the old site that I thought deserved to be pulled out of the dusty archives, because it explains why I can — to this day — barely stand to listen to “Little Drummer Boy”:
Seasonal Melodies
James Lileks has a concern about Christmas music:
This isn’t to say all the classics are great, no matter who sings them. I can do without “The Little Drummer Boy,” for example.
It’s the “Bolero” of Christmas songs. It just goes on, and on, and on. Bara-pa-pa-pum, already. Plus, I understand it’s a sweet little story — all the kid had was a drum to play for the newborn infant — but for anyone who remembers what it was like when they had a baby, some kid showing up unannounced to stand around and beat on the skins would not exactly complete your mood. Happily, the song has not spawned a sequel like “The Somewhat Larger Cymbal Adolescent.”
This reminds me about my aversion to this particular song. It was so bad that I could not hear even three notes before starting to wince and/or growl.
Back in the early 1980’s, I was working in Toronto’s largest toy and game store, Mr Gameways’ Ark. It was a very odd store, and the owners were (to be polite) highly idiosyncratic types. They had a razor-thin profit margin, so any expenses that could be avoided, reduced, or eliminated were so treated. One thing that they didn’t want to pay for was Muzak (or the local equivalent), so one of the owners brought in his home stereo and another one put together a tape of Christmas music.
Note that singular. “Tape”.
An ad from the year of Trivial Pursuit (via OSRcon)
So, Christmas season was officially open, and we decorated the store with the left-over krep from the owners’ various homes. It was, at best, kinda sad. But — we had Christmas music! And the tape was pretty eclectic: some typical 50’s stuff (“White Christmas” and the like), some medieval stuff, some Victorian stuff and that damned “Drummer Boy” song.
We were working ten- to twelve-hour shifts over the holidays (extra staff? you want Extra Staff, Mr. Cratchitt???), and the music played on. And on. And freaking on. Eternally. There was no way to escape it.
To top it all off, we were the exclusive distributor for a brand new game that suddenly was in high demand: Trivial Pursuit. We could not even get the truck unloaded safely without a cordon of employees to keep the random passers-by from trying to grab boxes of the damned game. When we tried to unpack the boxes on the sales floor, we had customers snatching them out of our hands and running (running!) to the cashier. Stress? It was like combat, except we couldn’t shoot back at the buggers.
Oh, and those were also the days that Ontario had a Sunday closing law, so we were violating all sorts of labour laws on top of the Sunday closing laws, so the Police were regular visitors. Given that some of our staff spent their spare time hiding from the Police, it just added immeasurably to the tension levels on the shop floor.
And all of this to the background soundtrack of Christmas music. One tape of Christmas music. Over and over and over and over and over and over and over again.
It’s been over 20 [now 30] years, and I still feel the hackles rise on the back of my neck with this song … but I’m over the worst of it now: I can actually listen to it without feeling that all-consuming desire to rip out the sound system and dance on the speakers. After two decades.
October 6, 2014
Winners and losers when Wal-Mart (and Amazon) came along
William Shughart refutes the “dark side of Amazon” meme by pointing out what it was like before Amazon and Wal-Mart:
Before the advent of Wal-Mart, rural America was a retail desert. Small shops, limited product availability and, yes, “hometown service”. But the prices of most items were high because the only alternative to shopping locally was to drive to the nearest city or order through the Sears or JC Penney catalog and depend on timely delivery by the US mail in, it was to be hoped, an undamaged package. The downside of local retail shops (limited options and high prices) fell most heavily on low-income households, which may not have had an automobile or could not afford to take time off work to shop at larger urban retailers or even at local merchants, which typically closed at 5 p.m. Wal-Mart solved both problems in one fell swoop.
Sure, local retailers suffered losses of business and some were forced into bankruptcy, but consumers (the only group whose welfare matters in a free market economy) won big-time. Amazon has generated benefits for consumers many times larger than Sam Walton ever dreamt of.
But what about the jobs that disappeared in local retail outlets as Amazon and Wal-Mart drove costs (and prices) down by inventing markedly more efficient distribution networks and negotiating lower prices with manufacturers and other suppliers on behalf of millions of consumers with little bargaining power of their own? An economic system’s chief purpose is to create prosperity (wealth), not jobs. Creating jobs — at the point of a gun, as Josef Stalin proved, or as FDR did by drafting millions of men to shoulder arms against the Axis powers — is easy; creating wealth is not. Prosperity materializes only if existing resources (land, labor and capital) can be utilized more efficiently, squeezing out “waste” and redundancy so that resources can be released from current employments and redirected by alert entrepreneurs to the production of new products that consumers may not even know they want (an iPhone ten years ago, for example) until they become available.
Hightower bemoans the working conditions in Amazon’s warehouses, a few of which literally become sweatshops during hot summer months. I am willing to bet, however, that if the people employed in one of Amazon’s “dehumanizing hives” (his phrase) were asked whether they wanted to quit their jobs, not one hand would be raised, especially so in an economy with an unemployment rate still hovering around six percent and a rate of underemployment twice that figure.
April 2, 2014
People are less inclined to shop or bank online after NSA surveillance reports
Among the side-effects of government surveillance revelations, ordinary people are deciding to be a bit less involved in online activities, according to a new Harris Poll:
Online banking and shopping in America are being negatively impacted by ongoing revelations about the National Security Agency’s digital surveillance activities. That is the clear implication of a recent ESET-commissioned Harris poll which asked more than 2,000 U.S. adults ages 18 and older whether or not, given the news about the NSA’s activities, they have changed their approach to online activity.
Almost half of respondents (47%) said that they have changed their online behavior and think more carefully about where they go, what they say, and what they do online.
When it comes to specific Internet activities, such as email or online banking, this change in behavior translates into a worrying trend for the online economy: over one quarter of respondents (26%) said that, based on what they have learned about secret government surveillance, they are now doing less banking online and less online shopping. This shift in behavior is not good news for companies that rely on sustained or increased use of the Internet for their business model.
[…]
Whether or not we have seen the full extent of the public’s reaction to state-sponsored mass surveillance is hard to predict, but based on this survey and the one we did last year, I would say that, if the NSA revelations continue – and I am sure they will – and if government reassurances fail to impress the public, then it is possible that the trends in behavior we are seeing right now will continue. For example, I do not see many people finding reassurance in President Obama’s recently announced plan to transfer the storage of millions of telephone records from the government to private phone companies. As we will document in our next installment of survey findings, data gathering by companies is even more of a privacy concern for some Americans than government surveillance.
And in case anyone is tempted to think that this is a narrow issue of concern only to news junkies and security geeks, let me be clear: according to this latest survey, 85% of adult Americans are now at least somewhat familiar with the news about secret government surveillance of private citizens’ phone calls, emails, online activity, and so on.
January 3, 2014
Virginia Postrel on “first world problems”
I’ve heard the term many, many times (and used it more than a few times as well), but as Virginia Postrel points out, it didn’t just happen by chance that there are “first world problems” we can mock-sympathize over:
Third world conditions are defined not merely by economic misery but by unreliable services. “At the age of fourteen I had experienced a miracle,” writes Suketu Mehta in Maximum City, his critically acclaimed 2009 book on Mumbai. “I turned on a tap, and clean water came gushing out. This was in the kitchen of my father’s studio apartment in Jackson Heights [New York]. It had never happened to me before. In Bombay, the tap, when it worked, was always the first step of a process” taking at least 24 hours to produce drinkable water. Mehta’s family lived an affluent life but with third world problems.
By contrast, in a developed country, barring a major natural disaster, you can count on uninterrupted electricity, hot and cold running water, sewage disposal, garbage pickup, heat (and in hot climates, air conditioning), telephone service, Internet access and television. The roads and bridges will be in decent repair; the elevators will work; the ATMs will have cash; and you’ll be able to find a decent public toilet when you need one.
These things aren’t necessarily free, but they’re cheap enough for pretty much everyone to enjoy them. Most significantly, they’re ubiquitous and reliable. Even when natural disasters strike, we can expect heroic efforts to get things back to normal. Under normal circumstances, we can depend on these services to be there consistently and to work as promised. We can make plans accordingly. That’s a first world privilege.
[…]
It took years of sustained efforts by online retailers and delivery services to make overnight orders realistic. It also took dissatisfaction: insanely demanding companies working to please insanely demanding customers — or, in some cases, to offer customers services they hadn’t even thought to ask for — as each improvement revealed new sources of discontent.
“Form follows failure,” is what Henry Petroski, the civil engineering professor and prolific popular writer, calls the process. Every step forward begins with a complaint about what already exists. “This principle governs all invention, innovation, and ingenuity; it is what drives all inventors, innovators, and engineers,” he writes. “And there follows a corollary: Since nothing is perfect, and, indeed, since even our ideas of perfection are not static, everything is subject to change over time.”
Rising expectations aren’t a sign of immature “entitlement.” They’re a sign of progress — and the wellspring of future advances. The same ridiculous discontent that says Starbucks ought to offer vegan pumpkin lattes created Starbucks in the first place. Two centuries of refusing to be satisfied produced the long series of innovations that turned hunger from a near-universal human condition into a “third world problem.”
