by Tyler Cowen
on January 8, 2013 at 11:51 am
1. Barnes&Noble pessimism.
2. Fukuyama on Albert Hirschman.
3. We have a spending problem and a health care cost problem, and is Obamacare causing health insurance premiums to rise?
4. Carolabinder, new macro blog from Berkeley.
5. How penicillin boosted a sexual revolution (pdf), and why are thieves bartering so much laundry soap?
6. Roger Farmer on fiscal policy.
The use of liquid Tide for black market currency and widespread availability of cheaper detergents and used bottles implies that there should be a lot of fake Tide out there. As long as the viscosity and smell are about right, how many people would actually notice? For that matter, are there any criminals “counterfeiting” Tide bottles?
I thought the “using Tide as currency” thing got debunked as a myth. I’m too lazy to google it, though.
It was covered before on this blog. Skeptical comments included.
And let us quote from then –
‘Tyler Cowen March 14, 2012 at 9:27 am
People, it is only supposed to be true for one town in Oregon.’
You’re too something but I don’t know what. All you had to do was click on the actual link provided above to get an in-depth story about Tide and the fact it isn’t a myth. Instead, you went out of your way to link to a year-old post with woefully out of date information. Strange all around.
No, seriously, it was debunked as mere drug dealer bragodocio, thus the headline “Rising Tide Lifts All Boasts.”
From the story –
‘The call that came in from a local Safeway one day in March 2011 was unlike any the Organized Retail Crime Unit of the Prince George’s County Police Department had fielded before. The grocery store, located in suburban Bowie, Maryland, had been robbed repeatedly. But in every incident the only products taken were bottles—many, many bottles—of the liquid laundry detergent Tide.
Since then, the oddly brand-loyal crime wave has gone national, striking bodegas, supermarkets, and big-box discounters from Austin to West St. Paul, Minnesota.’
Oddly, no mention of a single town in Oregon, and if the article is to be trusted, this rising tide of Tide theft started in PG County, which would make it a local news item for anyone living in the DC area – in 2011.
This seems to be a story with legs. Probably because something along the lines of ‘organized groups of teens steal make-up’ or ‘hordes of graffiti artists steal majority of spray paint from America’s hardware stores’ would be laughably dismissed as boring. As I would have generally expected something along the lines of ‘thieves steal x to make money/barter for drugs’ where x is Tide, or car radios, or personal electronics, or jewelry, or, if you are creative enough, you can find something worth writing an article about. And you can spend much of that article’s length explorating a product’s marketing.
But try to avoid writing something like this –
‘Working from leads provided by inmates and parolees offering to share details about their own Tide dealings in exchange for a good word with their judge or parole officer, he and his fellow officers pieced together a loose network of middlemen—barbershops, nail salons, and drug houses that were taking in bottles to either sell on the side to their clients or at a deep discount to willing corner stores and pawn shops.’
Because personally, I have a very hard time imagining pawn shops involved in the Tide trade – unless things have really changed a lot in the last couple of decades for DC pawn shops. A pawn shop clerk involved? Sure – just as easy as to imagine a car mechanic involved, which wouldn’t make ‘car repair shops’ part of a willing place to sell stolen Tide to.
My brother saw a Tide robbery in Georgia. He told the story as if it was a funny thing that happened- ha ha, these people stole a shopping cart full of Tide (the currency angle blew his mind) so I doubt he was making it up. So I currently lean towards real thing.
It makes zero sense though, for the reasons albatross mentions.
What, did Ben Bernanke officially announce that it really was a myth?
NyMag (I forget how reliable they are) doesn’t even claim that it’s being used as currency. Just that thieves like stealing it.
The article does imply a currency-like usage, including the “liquid gold” phrase from “certain corners.” (I’ll admit I suspect the reporter pulled that phrase out of some corner of his own mind.) But this raises the question: Did the drug dealers/users previously do a barter economy? Actually, I recall there was a spate of small-time thefts in our neighborhood years ago, which abruptly ended when the cops arrested some people who apparently were actually running a barter economy–bring me a GPS, boom box, cellphone, etc., and I’ll give you some drugs. Perhaps the drug dealers have noticed the inefficiencies in a barter economy, and started stabilizing on a single medium of exchange? (On the other hand, I thought of the barter stolen goods for drugs idea as a clever cutting out of the middleman in many of those transactions, like Wal-Mart putting in a pharmacy so I only have to make one stop on my way home.)
There must be some (probably very small) added demand for Tide thanks to this usage, bidding up the price of Tide slightly because of its value as money. Could we say that part of Proctor and Gamble’s profit is basically seignorage?
Besides the fact that paper books wouldn’t make any sense at all if publishers priced the e-books rationally, the Nook is a lousy tablet compared to the iPad. And most books cost less at Amazon than they do at the B&N website, giving people no reason to use the B&N site unless they are locked into it because they own a Nook.
(1) I have to agree that B&N is on it’s way out (although I think it’s silly to say that his hometown will never have a book store again and it’s B&N’s fault. If B&N couldn’t handle the market, what would the small book store have done and if a small book store could have survived if not for B&N, why can’t a new one start up. “Forever” is a long time).
I recently got a friend’s old B&N Nook tablet. It’s great at a cost of $0. But if I were buying one myself, there’s no way I’d buy a Nook and be limited to Nook-only apps when I could get an Android tablet for the same price that has access to many more apps, including B&N’s e-reader app. I just don’t see how the business model for their tablets is supposed to work out for them.
I would forward the story and your opinion of the Nook to my mother-in-law, were she not my mother-in-law.
Anybody thought of selling books by the page? Then if you really like it you can buy the cover to display on your bookshelf.
Black-and-white e-readers (like my Nook) are awesome on my eyes. I don’t think there are any that allow lots of app installations.
I don’t know the difference between the color nook and the color kindle.
Yes, no backlighting + huge battery life are why I got a kindle instead of just using the ipad.
I forgot to add that I don’t see why people need a physical bookstore to preview a book before buying it on an e-reader when many e-readers allow you to download a preview of the book for free.
My thought exactly. “Showrooming” for an ebook?!
I believe the idea is that they are inspired to purchase by the essentially random encounter process of wandering in a book store / passing a store window, but that people do not engage in similar behavior online?
Well it’s not crazy to imagine that (1) there was a period of economic plenty when the town could handle the B&N but not the B&N plus an additional store, (2) the town currently cannot handle a store of the scale of a B&N but could handle one that is smaller, and (3) the current economic climate is chilly enough to dissuade potential small store investors.
I’m not suggesting that is necessarily true, but it’s not that hard to make a just-so story that could be consistent with it.
#6. The best comment was, “which leads to my second requirement of economists – if they don’t know what Krugman has said on a topic, then they should be punished”.
How does one best punish an economist? Make him the errand boy of an financially illiterate politician with strong views? Make him respond to each reader comment to his blog for a month?
Make him read Krugman?
I think that falls under the cruel and unusual punishment clause.
That’s only logical and fair. If they know what Krugman has said, they’ve already been punished.
#3: quoting from the article referred to as is Obamacare causing health insurance premiums to rise?
“What is known is that the industry-wide shift to part-time labor has very little to do with the Affordable Care Act, and is likely to proceed apace regardless of developments in the nation’s health care infrastructure.
The Bureau of Labor Statistics reports that about half of all fast food employees already work part-time, and that the number of Americans forced into involuntary part-time labor has been increasing since 2006 [PDF].
The trend precedes Obamacare by a few years, and the cost of the legislation to large businesses is in fact rather negligible—4.3%, according to the Urban Institute [PDF]. Meanwhile, fast food work is still the lowest-paying occupation in America, even as the profits of major fast food companies have increased since the 2008 financial collapse.”
forced into involuntary…labor?
These articles about insurance increases leave out the fact that the parts of the ACA that are designed to make care more affordable (mainly the individual mandate, and the independent advisory board) haven’t kicked in yet.
So only the portions of Obamacare that make healthcare more costly have taken effect, but wait and see, everything will turn out right when the good parts take hold?
Its too soon too tell, of course. My point is that when an article blasts the ACA for not controlling costs, but leaves out the fact that the cost controlling aspects haven’t started yet, that’s a pretty big omission.
As the saying goes, the road to hell is paved with good intentions. What has happened and can be observed is not working out so well. What will come is not yet measurable, but we are told will be good. I do not think so; I think this whole edifice, designed by lawyers (with some input from health care professionals, but not those favorable to markets),, will be a mess. I do not think that the architects really care – once the system is in place it would take a health care coup to overturn it. They get to tinker and promise to make it better, but we are trapped.
What are the chances that this top-down planning of what is commonly referred to a “one-sixth” of the economy will work well? One would think the disastrous experience of centrally-planned economies would make the Democrats cautious, but it certainly hasn’t.
Hmmm, how will the mandate reduce costs?
The mandate will bring young healthy people into the individual market (where it will be easier to comparison shop, thanks to the exchanges.) This should have the effect of lowering the premium (or at least slowing its growth) for everyone else. That’s the theory. We’ll see soon enough how this works. I’m sure Rich can tell us the many reasons it won’t. The point I was making was simply to the quality of the reporting. With even the “uber-liberal” NYTimes leaving out the fact that the cost saving measures haven’t taken effect yet. Besides the mandate and IPAB these include bundled payments, hospital pay for performance, accountable care organizations, and other measures to improve quality while controlling cost.
Hmm, it seems the theory not going to work. It certainly doesn’t work for the young healthy people.
As an aside I’m struck that requiring people to buy insurance is attributed to Heritage in 1990. Did people 20 years ago really not think of requiring people to buy insurance until some think tank thought it up? Ridiculous.
Anyway, you don’t need Rich to tell you, Google/Wiki works fine (if simple reasoning fails).
I’m picturing this scene in the bowels of the think tank. Some young whippersnapper runs up to the tank commander with a file folder. “Sir, I’ve been going over the numbers. And you know how we require healthcare service providers to provide care even if people don’t pay?” “Yes son, we are all aware of that. We’ve been racking our brains day and night.” “Well, what about this, what about requiring them to pay?” (V8 slap) “Son, go over that again for me, this could be big!”
God help us all.
Between the “$20 trillion or bust!” debt and “everybody in the pool” healthcare, I marvel at Obama’s popularity amonf young people.
Well, they’ve adulterated a common sense position, that the young probably shouldn’t free-ride on insurance and the requirement to provide and distorted it into siphoning money off the young and healthy who may very well be rationally eschewing healthcare in its currently extractive form.
Not that even that is going to “work,” by the way, because once insured, people will use more services.
So we are all agreed that the articles are omitting key cost saving features of Obamacare that have yet to kick in. Groovy.
Nah. Obama is a Lightworker who keeps magical unicorns in the White House. His works are magnificent. Ergo, Obamacare will be a boon to the people of America. We are lucky indeed to be living in these times.
As a rule, young, healthy people generally also have low incomes and so aren’t in a position to subsidize much of anything. What makes us thing that many of them won’t actually require an insurance subsidy themselves (especially once they have children) — let alone provide a funding stream to subsidize others?
Why stop at health care? We should make everybody buy everything. Then everything will have reduced costs. We could have the debt paid off in months.
You are all making a compelling case for single payer. I’m almost convinced.
“So we are all agreed that the articles are omitting key cost saving features of Obamacare that have yet to kick in.
Ummm. No. What are you talking about?
The mandate you refer to won’t cut costs. It might not even increase revenue appreciably. The other cost savings are questionable whether they will ‘kick in’ at all, probably the reason they weren’t front-ended in the first place.
# 5. Once again, high-g academics are baffled, and vaguely upset, that traditional mores aren’t meant for the benefit of their particular social class.
I mentioned that a year ago in this thread on Charles Murray.
Yes. That’s exactly the comment I was referring to. Apologies for failing to attribute.
From #1: “Back in the last century, I wrote a column attacking B&N for putting indie booksellers in Melville House’s birthplace, Hoboken, New Jersey, out of business with under-pricing, *as if selling books was like selling widgets.*”
The interesting part of #1 is the (I think correct) assertion that e-book sales will tank (and did suffer a significant drop when Borders died) once corporeal bookstores disappear because readers use bookstores for showrooms/reminders that books exist…
Personally, I don’t think publishers will survive on e-books alone, and readers will slowly leave a self-published/non-curated marketplace (especially when their e-readers play Angry Birds/Facebook. Books will never die completely, but I can see books having as much economic/cultural significance as, say, classical music.
But by this same logic, books should already be dead–or relegated to the status of classical music. Why buy books when you could watch tv or a movie, see a concert, go to the beach, read a newspaper, etc. There have always been things competing with books for out attention, long before there were e-readers with games on them.
Also, and this is just an empirical question, is there less money to be made from books? Are the profit margins lower on e-books? Did the big book publishers use sales on old books, which are in the public domain and often free as e-books, to make up for losses on newer books? Even as bookstores were going out of business, I was buying more hardcopy books than ever before, but just online. I see why the internet and digital audio formats made it less profitable to be in the music business–people were pirating. But is piracy going on in the e-book industry? And aren’t there still plenty of bands churning out new songs all of the time?
Anyhow, does anyone have data on book sales and the effects of the rise of e-books and online book sales?
But now we have competing distractions in the book (well, ebook/tablet) itself. I think Tom’s hypothesis goes something like this: (1) consumers purchase tablets/ereaders; (2) consumers substitute digital books for physical books; (3) the shift to digital books leads to the closing of most brick-and-mortor booksellars; (4) as people spend more time on their tablets/ereaders, the non-reading distraction (think Angry Birds, Netflix apps) will crowd our actual book reading, leading to an overall decrease in book ownership.
In short, books become just another app in the increasingly competitive app market.
I think Tom’s hypothesis goes something like this:…
Indeed, you are completely correct.
Are the profit margins lower on e-books?
Unfortunately, it’s the usual problem that people believe they’re paying for a tangible, when they’re really paying for the content. When a digital version comes along, they assume that now that tangible cost is essentially zero, the price should be near zero. It’s an easy mistake to make, but the point is it doesn’t matter. If people feel ripped off by book pricing, they won’t buy books even if they desperately want them. In real life, a successful market doesn’t have to exist.
As well, a lot of publishers were kept afloat by hardcover sales, which is where for a small increase in the cost of goods, you can charge a large difference in price. Of course, while consumers tell themselves they are paying for the hardcover, they’re *actually* paying for early access. (It’s why hardcover sales are generally near zero once the paperback comes out.) Again, the problem is that there isn’t the crutch of tangible good to allow the consumer to spend the extra money for early access without feeling ripped off.
So no, publishers are looking at a huge loss in revenue, tempered by some saving in production and inventory. And that’s before the problem of having essentially a single retailer (Amazon) having defacto control of the e-book market.
And aren’t there still plenty of bands churning out new songs all of the time?
Oh don’t worry, there’ll be *millions* of new books self-published each year. The catch is the vast majority of them won’t be good enough to warrant the time spent to read them. With no publishers to act as gatekeepers, you’ll have a generation of authors who do very well (as readers use their name recognition to keep buying their books), and large number of readers who after having tried the first two chapters of ten new books (probably for free, mind you) and giving up on all of them, decide it’s more fun to play Words with Friends on their e-book reader.
Publishers seem to have done fine monetizing ebooks. Seems to me that the bigger online threat is half.com and amazon resellers, where second-hand sellers undercut both new book sellers and ebooks. Which is insane to me – it is actually cheaper (often by several dollars) to have you ship a physical book from halfway across the country to my front door, as opposed to download a couple kb text file to my kindle? I do not understand how those economics work. I guess if there was a book I needed RIGHT THIS VERY SECOND I would download it, but I’m generally willing to wait the two days to have it shipped. The kindle is mostly for public domain stuff.
What’s even more amazing is that there are these things called public libraries, which as the name suggests is free. In these amazing places, if the book I want isn’t in physical inventory, oftentimes it can be borrowed – again, free of cost to you, friend! – from another library. Why pay for books, digital or otherwise?
Ohhh, sarcasm. How devastating.
Obviously there are different reasons for borrowing books and purchasing them. Maybe you want to read it more than once. Maybe you’re too lazy to go to the library, while Amazon delivers. And of course, not every library has every book. But none of this has anything to do with what I asked, which is why it is cheaper to purchase a physical book (shipped!) than an ebook.
Maybe, but it’s hard to believe that all that great a fraction of the Kindle and Nook and other e-reader sales have been from people browsing the shelves at the local bookstore, and then ordering the online copy to get it a dollar cheaper. (Though it’s probably not that uncommon for people to prefer the ebook version–I know I do.) Or that previously, a lot of people were doing that with online book sales, which is what put Amazon into the position of being able to push their own e-reader. Even in the days before online bookstores, it wasn’t uncommon to buy a book mainly on the basis of the author having written other stuff you liked, and you can sure do that online, complete with the preview. I’ve long assumed that the whole purpose behind the rise of series of books (often very long series) is to get a bigger version of this effect, and that’s probably not very susceptible to losing the bookstore browsing discovery process. But it is interesting to ask what might replace that process.
If publishers are killed by ebooks, my guess is that it will be for other reasons–for example, if (as with magazines and encyclopedias) the high end of amateur efforts end up being better than many of the pro offerings, or if Amazon ends up in a position to squeeze all the profit out of the transaction and puts the publishers out of business. Both of those seem possible–the best fanfiction is probably about as good as the low-end of published genre fiction in SF and fantasy, so the potential is there. Editing and slushpile-filtering and broader publishing expertise add a lot of value, and my intuition is that this is where publishers will end up making money, but maybe it will work out some other way.
6. But the only time it was unambiguously successful in the US was during WWII when government went from 15% of the economy to 50% in the space of two years.We could put all of the unemployed people into the army.
Those people were conscripted, and rationing was pervasive. As the song goes, “pretty perverse to call THAT prosperity.”
Will a big fiscal expansion cure the unemployment problem?
It’s a mistake to think unemployment is a problem per se. People don’t want to work, they want to consume. As we get more productive and more progressive, it gets easier and easier to consume at higher levels with less work (this is why we like higher productivity). In the 1950s, no one called it “funemployment” because going without food is not fun.
I really think economics in particular and public policy in general would be far better served by looking more at what happens to absolute standards of living.
” People don’t want to work, they want to consume. As we get more productive and more progressive, it gets easier and easier to consume at higher levels with less work (this is why we like higher productivity).”
Yet if a 40 hour workweek was good for the 1930s, why can’t we have a 20-hour or even shorter workweek today?
the high opportunity cost of leisure?
We can, if we are willing to accept lower living standards. Much of Europe has done something like this.
The optimal number of hours per week spent working is most emphatically not zero. (for a broad definition of “work” which would include what housewives do, and retirees who volunteer.) People do not want to ONLY consume. In other words, we get utility from our own utility.
Well, yes and no. Do people want clean houses? Yes. Would they prefer to have them without working? I think so, don’t you?
Volunteer work isn’t really work, for the purposes of this argument, because no one would pay you for it — it’s more of a leisure activity, like playing basketball.
I could not take the Barnes & Noble article seriously once I realized that the author described the (former) store in Greenburgh, New York as being in “rural upstate New York.” Yes, it’s a minor point, but the fact that the author made such an egregious error made me question his research. Or maybe I’m just being too picky.
[The former store location is in a very busy suburban area maybe 15 miles north of the city line, and less than a mile from the highrises of downtown White Plains.]
The article completely looks like from an ultra leftist. He/She indicates B&N closes out now because of bad karma (does not use the word but gives all indication) from they pushing independent book stores out. The author doesn’t know that its simple capitalism.
I find it hard to believe that a place can be called rural with the municipality having a population over 88,000.
Carola looks cute.
Carola’s writing is not cute. It’s clear and covers solid macro-finance-history topics. I would have thought that would be thing relevant thing to discuss.
So you don’t think I am being some preachy feminist…her photo was one of the things I noticed too. My reaction was probably a bit different though: well, clearly I am too old, too dull and not pretty enough to blog. Silly me, but it was a good reality check since I was all fired up about getting a story scooped in the blogs today that I had worked on months ago internally. Not surprisingly none of the comments at work noted my physical appearance…it was all about my writing and my economic analysis. So I am not complaining to myself anymore, thanks.
She is cute. And she clearly puts effort into looking cute. She’s advertising looks and brains, and I’d say the marginal utility of her choices is pretty high. Perfectly rational.
Get lord of lies over here.
She is not advertising her looks. There’s one little photo. The only other photo on the blog is her wedding photo. Not exactly a come hither for the blogo-boys. I have seen female blogs (with serious content) that put much more emphasis on their feminity. Why is this the only comment on her blog? It’s just a sign of how stupid blog comments are…posting anonymously and civility is out the window. And yes, mr. lies and his lovely blog is an excellent example.
To be fair, she is making a fairly ridiculous pose.
Serious question – is she Russian? The only women I have ever seen make that pose are Russian.
Also, as to the (entirely irrelevant) issue of whether she is “cute,” I can unambiguously state that she is certainly cute for a Georgia Tech grad.
She hasn’t written anything stupid but her blog is pedestrian. And she’s not particularly cute– she’s young. The pose is slightly ridiculous and not befitting a professional, IMHO.
Claudia, if you had a blog I would read it. And if you had a photo I’d ignore it unless you were a 2-sigma outlier in either direction. Can we talk about Orszag’s hairpiece now?
Anyway I once received some very wise advice not to visit blogs frequented by beautiful women. Or something to that effect.
With B&N gone, we can get indie shops back.
Bookstores are tough. Look up the story of Rupert LeCraw and Oxford Books in Atlanta.
I’ve often wondered why there isn’t a “bookstore” where I can go drink coffee, enjoy the atmosphere, sit in a quiet corner browsing excerpts helpfully downloaded to my device, and then hand my device over for somebody to download my purchases. I’d be willing to pay a little extra to support the experience. It would be a low margin business, like everything these days, but the owner wouldn’t be staring at shelves of expensive inventory with his stomach in knots.
Maybe somebody could make it work. Starbucks probably.
#5 I wonder, if a cure for AIDS were discovered, would that usher in another revolution of some sort?
I was once a good, loyal customer of B&N; I used to go to B&N in NYC, I remember they always had a discounted price stamped on the inside of a book. However, every since Amazon came on the scene and started selling Oprah’s books at 50% off, I learned from a local manager that B&N stopped discounting so they coulde match the few discounts on the Oprah books. I switched to shopping at Amazon. It’s sad for a book lover to see the demise of bookstores; my local B&N doesn’t appear to be going out of business anytime soon, it’s just being morphed into a Cheesecake Factory/toy store, with books contstantly being squeezed out.
@Tyler, please stop reposting from The Browser. We can read it there. Delve deeper into your comparative advantage.
Y’all are gonna feel silly when the trillion dollar coin turns out to be a bottle of Tide.
So Copernicus wreslted with monetary theory eh? So did Newton.
It goes to show you: monetary theory is, I don’t want to say harder, but a less fruitful field of study than real science.
So y’all shouldn’t feel so bad about the ongoing confusion.
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