Would shoplifting create jobs?

by on August 23, 2011 at 6:48 am in Economics, Uncategorized | Permalink

Matt says yes.  Having fewer goods on the shelves prompts retailers to replenish their inventories, which spurs economic activity.  You don’t even need to break any windows!  But there’s more to it than that.  As Matt points out, a key question is what storeowners expect to be the future rate of shoplifiting.  If a lot of shoplifting is expected, costs of supply go up and output will shrink, with some offsetting employment boost in the security guard sector.  In other words, the shoplifters who do the most good are those who don’t get caught and who in fact leave no trace.  If you are caught shoplifting, insist that you have no compatriots or allies and that you are a fully atypical individual and therefore that no Bayesian updating should go on about the likelihood of future retail crime.  Don’t dress or talk like a shoplifter!  (Be creative.)  Similarly, it is best if the invading aliens insist that they too are bothered by the Fermi paradox.

If it’s a durable good monopolist, the shoplifter is destroying/restricting output, benefiting the shop owner, raising prices, and helping the economy only in the strangest of the liquidity trap models.  The benevolent shoplifter will seek out the more competitive markets or perhaps grab ripe strawberries, put down those hardcover books.

1 Sonic Charmer August 23, 2011 at 6:57 am

In other words, if shoplifters and storekeepers behave in highly unnatural ways and conform to wholly artificial assumptions about their behavior and beliefs (but note that manufacturers and transporters have to simultaneously hold the opposite beliefs to the storekeepers about the future rate of shoplifting!), then one could imagine a thought-experiment society in which shoplifting creates some jobs. If not, then not so much.

2 Lou August 23, 2011 at 9:07 am

And if shopkeepers have unlimited money to replenish their inventories.

3 Kinch August 23, 2011 at 3:10 pm

This is perhaps Tyler’s best writing in a bit, enjoy the humor and the cleverness people.

“put down those hardcover books”

“Similarly, it is best if the invading aliens insist that they too are bothered by the Fermi paradox”

“The benevolent shoplifter will seek out the more competitive markets” etc.

4 Thedude August 23, 2011 at 7:00 am

Spoken like a true ecomomist, no a businessman. Grocery stores operate on razor thin margins with heavy cash flow needs. increased shoplifting would reduce their margin and make some businesses already on the edge out of business or cause investors to look elsewhere for better returns.

5 david August 23, 2011 at 7:16 am

Liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate, and liquidate grocery stores… it will purge the rottenness out of the system!

6 Andrew' August 23, 2011 at 9:08 am

I’m about to liquidate all over that old strawman.

7 Matt Waters August 23, 2011 at 11:37 pm

Not that much of a strawman in my experience. Many on the right really believe that, both during the Great Depression and today. They don’t seem to understand that in a liquidity trap, Kroger going under does not mean Safeway gets more investment money. Unlike in normal times, investors hold onto cash instead of looking for good investments.

8 Silas Barta August 23, 2011 at 9:56 am

I facepalmed on reading the post for exactly that reason: stores don’t take increased shoplifting sitting down: they reduce investment (i.e. less variety, less floor space as they rent out parts of their stores to coffee shops or something) and/or raise prices.

Their current arrangment (of relative amount spent on floor space, security, markups) is based on expectation of a certain shoplifting level. (Compare stores in the suburbs vs. ghetto.) Change the expectation of shoplifting, you become worse off, not better.

People who don’t understand this probably have a problem with Newcomb-like problems in general, so it doesn’t surprise me Tyler_Cowen and Matt get tripped up on it.

9 Dean August 23, 2011 at 10:09 am

That was the whole point of the post.

10 Beefcake the Mighty August 23, 2011 at 12:16 pm

Was it? If so, then it’s yet another example of Tyler talking out of both sides of his ass.

11 asdf August 23, 2011 at 10:11 am

Indeed. Yglesias’ post and Tyler’s response are really emblematic of why our political class is utterly incompetent. Without having ever run so much as a fruit stand, they don’t have any understanding of how micro connects with macro, and how the vast majority of macro that they’ve learned is complete gibberish.

Truly an embarrassingly stupid pair of posts, but also useful, in that one can link both this one and the Yglesias one as a reductio ad absurdum of center-left/center-right contemporary thought. That is, the center-left today maintains that stealing from producers always increases prosperity; the center-right courageously maintains that it only does so some of the time. Usually this theft is hidden in the form of taxes and inflation, also known as “fiscal policy” and “monetary policy”, wherein the government either seizes money or dilutively prints money.

But in this particular circumstance Messrs. Yglesias and Cowen are admirably forthright about what’s actually going on. For taxation/inflation is just as involuntary a seizure of your assets as the youth sprinting down the street with his stolen TV…only on a larger scale.

12 Beefcake the Mighty August 23, 2011 at 12:16 pm

+1

13 Slocum August 23, 2011 at 7:14 am

Obviously it’s a silly thought experiment, but…what? Is he really suggesting that businesses that are shoplifted will take the empty shelves as a sign of robust sales and order more (and that they have no other, better way to track their business — like, say, cash register totals)?

“In other words, the shoplifters who do the most good are those who don’t get caught and who in fact leave no trace. ”

But the missing goods (which will be discovered when an inventory is taken if not sooner) ARE the trace. So shop owners raising future expectations of shrinkage in response to increased shoplifting is inevitable regardless of whether or not the shoplifters look the part or are caught in the act.

14 E. Barandiaran August 23, 2011 at 7:19 am

Tyler, please remind me why the additional looting of present and future taxpayers by government in the past 3 years has failed to restore growth.

15 Neil the Ethical Werewolf August 23, 2011 at 7:30 am

I like how you guys consider counterfactuals. Reminds me of my business.

16 Neil the Ethical Werewolf August 23, 2011 at 7:31 am

On the other hand, I dislike my inability to use comment systems properly.

17 Brent Wheeler August 23, 2011 at 7:33 am

I was under the impression that Henry Hazlitt knocked off this problem in “Economics in One Lesson”, chapter 1 some 65 years ago. The short answer is “no”.

18 E. Barandiaran August 23, 2011 at 7:37 am

Tyler, I’m puzzled. Please explain me when an economist becomes an idiot and when an idiot becomes an economist. I couldn’t find the answers in The Complete Idiot’s Guide to Economics

http://www.amazon.com/Complete-Idiots-Guide-Economics/dp/0028644921

but you may have some good references.

19 Jim August 23, 2011 at 10:31 am

Headline of the year, from Mark Steyn the other day:

“It’s the Stupidity, Economists”

20 Pat August 23, 2011 at 7:41 am

So stealing a window from a window store is good for growth but breaking a window is bad.

Embarrassing post.

21 terenuri inchiriat August 23, 2011 at 7:45 am

You encourage shoplifting? Because it’s good for profit? How? Let’s say you have a shop and i will shoplift from you cause your business is going down, how would be that ?

22 Ryan August 23, 2011 at 7:45 am

I don’t think the commenters here are very good and reading the tone of Tyler’s posts.

23 Ken Rhodes August 23, 2011 at 7:58 am

Oh, Ryan, don’t be a spoilsport.

24 Slocum August 23, 2011 at 8:26 am

But exactly who is in on the joke? Because if breaking windows is good for escaping from ‘the paradox of thrift’, then stealing windows must be even better (the shop-keeper has to replace the window either way, but in the shoplifting case, no value is destroyed — win, win). Given the other ‘broken windows’ post that Matt links to, he clearly *does* think that window-breaking can be good for the economy under the right conditions — so, again, if breaking is good, shoplifting is even better. Now, is Tyler making fun of Matt by pretending to take him seriously? That does not seem to be consistent with Tyler’s respectful treatment of Matt recently.

25 Andrew' August 23, 2011 at 8:34 am

Steal the T-shirts and bury them underground in bottles.

26 Sonic Charmer August 23, 2011 at 10:23 am

My theory is that Tyler (and some other bloggers) pretend to take Matthew Yglesias seriously out of some tacit pact, to which the rest of us are not privy. Nothing else really makes sense.

27 Polyester August 23, 2011 at 10:55 am

Sonic, I’d advise for you to improve your metacognition.

28 Tom August 23, 2011 at 9:21 pm

I agree, Charmer, I would think it’s like an inside joke. And Ezra must really be a hoot.

29 Sean August 23, 2011 at 8:09 am

Wow… I just… This is one of those ridiculous moments in life. Like where one person, accused of being a socialist, says “How offensive. But, really, I would, in fact, support wealth redistribution and regulations on income inequality by the government if the issue came up.”

Grover Norquist came up with the most ridiculous example he could think of (Keyensians think shoplifting creates jobs), and Matt agreed that he thinks so. At least in his “Bastiat was wrong” example, he included the government spending on replacing those windows. With this, I don’t know how he’s not essentially agreeing with Tyler’s writing above.

30 Andrew' August 23, 2011 at 8:36 am

At this point, I think people would sit around and ponder if we really needed windows and T-shirts after all. Maybe they weren’t such a good idea.

31 asdf August 23, 2011 at 10:03 am

Matthew Yglesias has a huge number of incredibly stupid posts of this kind. Your smarter variety of liberal would splutter and deny that Norquist’s hypothetical had any explanatory relevance, without actually ever engaging it on the merits. Yglesias, being a special needs child, didn’t have the smarts to do that.

32 Andrew' August 23, 2011 at 8:12 am

No sense of humor.

33 joshua the postlibertarian August 23, 2011 at 8:19 am

From Matt’s post, the main point: “Of course we need to distinguish a temporary surge in shoplifting from a permanent increase in the level of shoplifting. The latter would merely increase retailers’ costs and depress the economy.”

Implied is that it would be difficult to stop an artificial campaign for a temporary surge in shoplifting from leading to a permanent increase in the level of shoplifting. Like many things, theoretical short-term solutions are not truly solutions because they have an inexorable way of becoming untheoretical long-term problems.

34 Sonic Charmer August 23, 2011 at 10:23 am

You and I know this would be difficult to distinguish. It is not evident that Yglesias does.

35 Andrew' August 23, 2011 at 8:27 am

If the kids are going to go around breaking windows, maybe you can placate them with free T-shirts. Maybe an Anarchy logo. Then when you wash them they say “get a job.”

36 Indy August 23, 2011 at 9:04 am

I look forward to seeing the extension of this argument in his upcoming mini-book, “The rent is too DAMN high”. Rent Control is so WWII, now we’ll have an official policy encouraging unexpected unnoticeable rent-free squatting on vacant excess housing inventory using strange legal procedural delaying tactics and …. wait a minute …

37 gVOR08 August 23, 2011 at 9:10 am

Cowen–Matt got you. You could be gracious and admit it. Of course a little temporary shoplifting would boost production. Your argument, and peoples casual acceptance of it, are a good example of the conservative inability to think logically without loading moralistic baggage onto everything. Your argument really amounts to, ‘Shoplifting bad, increased production good. Good thing not come from bad thing. Look Cheetah, there Jane.’ This is a variation on the standard Republican, ‘Tax cut good, deficit bad. Bad thing not come from good thing.’

38 Slocum August 23, 2011 at 10:18 am

Of course a little temporary shoplifting would boost production.

Seriously? You’re assuming retailers are, in general, hoarding cash, which seems a very dubious. There are always retailers on the edge of closing stores (if not shutting down entirely — e.g. Borders), and this is especially true during an extended downturn. A shoplifting binge would surely push some over the edge, driving future orders to zero. And even those not closing might order less stock in response to inventory losses and lowered revenues (or delay or abandon plans for expansion).

39 Sonic Charmer August 23, 2011 at 10:29 am

To summarize your argument: ‘of course’ ‘temporary’ shoplifting would boost production (because, ‘of course’). And also we are stupid-heads.

Stunningly, this is even worse as an argument than the one Yglesias proferred (at least he tried).

If you wanted to try to actually rescue Yglesias’s argument – scratch that, if you wanted to actually make an argument at all – you could start by explaining just what exactly ‘temporary shoplifting’ is, and why the shopowners are all going to axiomatically perceive shoplifting as ‘temporary’ whereas the manufacturing/transport sectors, stupidly, are not and are thus going to add to head count out of a (mistaken, by hypothesis) belief that the spike in orders will continue indefinitely. In the real world, this is a probability-0 event, which makes Yglesias’s post pointless at best. I don’t know what to say about your post.

40 Pat L August 23, 2011 at 4:12 pm

Well, no one is actually advocating an increase in shoplifting in the first place. It’s a terrible analogy originally put forward by Grover Norquist, of all people. He’s just arguing that an anomalous reduction in inventories would tend to increase capacity utilization.

41 Sonic Charmer August 23, 2011 at 5:10 pm

He’s saying, based on a poor argument, that shoplifting would have an effect that it will not have, namely to ‘create jobs’. If you think it will have that effect, feel free to advance an argument of your own.

Whether he (or you or anyone) are ‘advocating’ shoplifting is irrelevant to how wrong he is (answer: quite wrong) about the effect it would have.

42 Pat L August 23, 2011 at 6:17 pm

So… we’re all arguing about shoplifting because we’ve suddenly taken an abstract interest in determining the full economic repercussions of a hypothetical anomalous or non-anomalous surge in shoplifting that no one is advocating seriously, base on, among other things, speculation about the psychological perceptions of shopkeepers. Great. I was worried we might be discussing anything whatsoever of consequence.

43 Sonic Charmer August 23, 2011 at 7:32 pm

Matthew decided to take up the subject, in response to some Grover Norquist twitter joke or something. If you’re saying he shouldn’t have you can take it up with him. If you have a beef with people like me who are pointing out that Matthew’s logic in doing so was nonsensical….I don’t understand why. But, ok.

44 Pat L August 23, 2011 at 10:09 pm

It depends which aspects of the shoplifting scenario we choose to accept as stipulated. If you accepts Matt’s point as being somewhat stylized, and accept that yes, this requires that the shoplifting is anomalous and the stores have sufficient savings or credit to replace the lost inventory, then the shoplifting does push towards higher employment and greater velocity of money.

Obviously, if you don’t accept those stipulations, then the scenario becomes quite a bit more complicated, and may well. But this is a thought experiment, not a policy proposal. The shoplifting is temporary because it is stipulated as temporary.

And Grover Norquist can go drown in a government bathtub for all I care.

45 MikeP August 23, 2011 at 9:12 am

Due to Patterns of Sustainable Specialization and Trade, the shoplifters need to make sure they steal something that unemployed people can make. Stealing iPhones won’t do. They’ve got to shoplift houses.

Along the same lines, banks have been stealing money from the Fed now for years. How much has that helped the economy?

46 Andrew' August 23, 2011 at 9:20 am

I was thinking bury the T-shirts under houses. Tell everyone that T-shirts are buried under houses, just don’t tell them which houses.

47 Eric Falkenstein August 23, 2011 at 9:17 am

And broken windows would help the glaziers, which via the multiplier more than pays for the broken windows. QED.

48 Andrew' August 23, 2011 at 9:22 am

People just don’t understand improvisation.

49 E. Barandiaran August 23, 2011 at 10:17 am

You mean this sort of improvisation:

http://www.slate.com/id/2081469/

50 Rob August 23, 2011 at 9:23 am

Tyler also failed to configure into this economic hypothesis the odds of getting caught, and the resultant cost of prosecuting and jailing these shoplifters. Even if the jails were private, the money has to come from the state to pay for it, and hence the taxpayers face the same burden. So a more complete scenario might produce a better idea as to whether or not shoplifting would improve anything. I wonder if he’s asked anyone in Tottenham whether this is true or not?

51 jac August 23, 2011 at 9:39 am

as a referente 4 whatever it may be worth: here in spain there is a big advertising campaign by a security services company for homes. their ads mention that summer is the time when most household robberies take place and even farther they say that recently the worst is when they come into your house and you are there, cause in those cases reports show people are also harmed. so if the news begin to tell about home robberies we will see an increase of demand…

52 Radford Neal August 23, 2011 at 10:07 am

Nobody here seems to have thought that if shoplifting increases, the shopkeeper will expect lower future sales. Some people won’t have to buy stuff because they’ve already stolen it. Nothing in the example would lead to an increase in total consumption of goods, and so there’s no reason to think that there will be increased production.

Of course, all the common “what will create jobs” arguments are fundamentally naive. You first have to figure out why there aren’t enough jobs for everyone to start with, which is the default expectation in a functioning market. Only after you’ve identified the particular reason for there to be a shortage of jobs at the moment does it make any sense to think about what might cause this to change.

53 AndrewL August 23, 2011 at 10:08 am

if everyone shoplifts, then who is left to pay for the goods? you know, produce the actual economic activity that you want to spur…

54 The Libertarian August 23, 2011 at 10:14 am

There’s no difference between private shoplifting and government taxation cum redistribution. Both have negative effects, if carried on. I object to both activities.

55 Pat L August 23, 2011 at 4:15 pm

Oh, right, THIS is why we’re seriously debating Grover Norquist’s hypothetical pro-shoplifting agenda.

56 UserGoogol August 23, 2011 at 8:48 pm

Shoplifting has both positive and negative effects. I mean, even if you set aside the macroeconomic argument it should be pretty obvious that there are positive benefits for the shoplifter, and it’s a difficult question to decide which is worth more, the benefit to the shop owner or the shoplifter. The problem with shoplifting isn’t that it’s always harmful, but that letting people shoplift whenever they feel leads to chaos. Instead, shoplifting should be done carefully, only after a fair deliberation which allows both the shop owner and the shoplifter to voice their arguments. Which is to say, democratic government.

57 The Libertarian August 23, 2011 at 10:16 am

Or, to put the point in another way, the only difference between Prince John and Robin Hood is who got the spoils. They were both hoods.

58 TA August 23, 2011 at 10:29 am

Why go to all this trouble? Why not just hijack the 18 wheelers on their to market?

59 TallDave August 23, 2011 at 10:49 am

I am proud to report my wife took many strawberries from the cafeteria at work.

Production ho!

60 Silas Barta August 23, 2011 at 11:34 am

That’s not a nice thing to call your wife!

61 TallDave August 24, 2011 at 10:10 am

Heh, I knew I walked into that a minute after I posted it.

62 youcefm August 23, 2011 at 10:56 am

In the mall near where I live, Kmart is closing. They have been liquidating inventories for weeks and are hiring continuously for that purpose. Job creation? Probably not in terms of total number of hours over the physical capital useful life.

63 The Anti-Gnostic August 23, 2011 at 11:11 am

London’s problems are solved!

64 k August 23, 2011 at 12:03 pm

“Having fewer goods on the shelves prompts retailers to replenish their inventories, which spurs economic activity”

I don’t understand this.

65 Steve J August 23, 2011 at 12:17 pm

should we applaud the british rioters then? i mean at least while theres excess capacity in britain

66 Tomasz Wegrzanowski August 23, 2011 at 12:17 pm

It’s not just theoretical situation – London looters did exactly that – one-off massive shoplifting. Do you expect this to increase British GDP?

67 Yancey Ward August 23, 2011 at 12:31 pm

I think stealing Yglesias’ air conditioner might be a good economic policy in the short term.

68 Jameson August 23, 2011 at 3:42 pm

This kind of thing is why more people need to read The Fatal Conceit.

69 Sean Brown August 23, 2011 at 3:42 pm

But, uhh…doesn’t someone take a loss here (either the shopkeeper or the insurance company)? And don’t retained earnings get reinvested in expansion, or get paid to owners as dividends and lead to consumption?? Seems like it would be a wash at best and likely net-negative due to 1) LT insurance costs increasing without profits anywhere going up and 2) extra costs (deadweight loss) of installing security systems/hiring guards. Yeah, might increase GDP in the short term but there are many ways to juice GDP that lead to long term decreases in REAL societal wealth.

70 Matt Waters August 24, 2011 at 12:02 am

“doesn’t someone take a loss here?”

This question is one the basic fallacies used against Keynesianism, the assumption that *every* economic proposal has to be zero-sum. Inflation or Fiscal Stimulus have to just take from somebody to give to somebody, right? Inflation takes from savers and gives to irresponsible borrowers, right? Same with good, honest taxpayers giving to those on the dole.

Well, the issue is more AD in a liquidity trap is definitely positive-sum due to sticky wages. When AD decreases, unemployment increases even though it shouldn’t according to classical models. Higher unemployment means lower real production and wealth, as well as less bargaining power for those currently employed. Yes, by that I mean “REAL societal wealth.” Unemployed people do not create wealth.

Shoplifting is a crude example, but Matt Y’s correct over the short run. More shoplifting would create more jobs, if not more real wealth. The same way broken windows would create more jobs for making windows, if not more wealth. But that’s why stimulus is not done by digging ditches and filling them back up. If the demand comes from wealth-creating spending, either private spending induced by monetary policy or public spending on infrastructure, then the society has more jobs and more wealth than staying in a liquidity trap.

71 minderbender August 23, 2011 at 4:09 pm

Matt’s problem is, he wants it to be one way. But it’s the other way.

72 Dr G August 23, 2011 at 5:58 pm

Thanks guys for giving good material to set my students arguing this year on criminology courses at undergrad and postgrad levels (nothing like a bit of simulation modelling to help, too). And thanks too for challenging ‘the ontological emptiness of the concept of crime’ 😉

73 Micah F. August 23, 2011 at 8:02 pm

Speaking of creating jobs, I would be interested what people think about this idea:

http://jpobst.blogspot.com/2011/08/my-naive-plan-to-put-america-back-to.html

74 Benny Lava August 23, 2011 at 8:12 pm

I’m disappointed that no one took this thought problem through to the logical conclusions. If shoplifting increased what happens? Well, stores won’t simply absorb the loss. They will pass it on to the consumer. In this case the people that actually pay for things. But demand has elasticity. Some things will get more expensive and people will still buy because they feel they need it, like milk, eggs, butter, etc. Some things will get more expensive and people will not buy because their demand elasticity, like books.

So if the price of books increases sales will decline by a rate that is greater than the decline in sales of eggs because the demand for eggs is inelastic.

The greatest money transfers will therefore be the theft of the most elastic items. Which is why Tyler rightly suggests that hardcover books have less elasticity and will be less effective transfers.

75 Matt Waters August 23, 2011 at 11:52 pm

I have to say how disturbing it is that so many commenters (and people in general) truly, honestly do not understand the first thing about Keynesian economic theory.

If Classical Economics were correct that prices were always at equilibrium, then we wouldn’t have 10% unemployment. If demand for oil goes down 10%, then oil’s price can go down until the oil in inventories clear. If the nominal demand for labor goes down 10%, the price for labor does not go down 10%. More likely, 10% of workers take 100% wage cuts. Those 10% of workers do not create anything, hurting the real wealth of the economy.

From the reality of sticky wages, you can get into some very nonintuitive conclusions about how to maximize wealth. You can disagree with those conclusions, but it helps to know what the Keynesian arguments actually are. Unfortunately, Norquist and others would rather take Keynesianism at its most simplistic more government=more jobs dogma than understand the logic behind it.

76 eddiebear August 24, 2011 at 12:26 am

http://www.nationalreview.com/corner/275414/somebody-please-tell-me-joke-kevin-d-williamson

Between Yglesias wanting shoplifting to boost the economy, and (apparently) Krugman disappointed the DC Earthquake wasn’t bigger, in order to boost the economy, you really do have to wonder what is going on (if anything) in the minds of leftists.

77 Amit Patel August 29, 2011 at 12:56 am

Isn’t shoplifting a strange form of price discrimination? To the majority of people the stores are selling a product at a certain price. To a small group of people the stores are “selling” the product at zero price (plus a chance of jail time, which is an externality not accounted for). Increase the shoplifting, and some of the regular customers become shoplifters, and the remaining customers pay a higher price. Whether the higher price compensates for the increased loss is unclear to me. Price discrimination may lead to higher efficiency in some cases, but I don’t have a good sense of what happens with stores and shoplifting.

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