“Nobody dislikes currency inflation more than strippers”

by on November 12, 2013 at 7:47 am in Economics, Games | Permalink

The link to the associated cartoon with that caption is here, from Tim Harford’s Twitter feed.

But is that claim true?  It depends on the margin.  Let’s say the standard tip is a dollar, and price inflation lowers the real value of that dollar.  A lot of customers won’t substitute into stuffing $1.43 into the stripper’s garments.  They might do two or three singles, but strippers will be shortchanged at various points going up the price pole.  There is something about handing out a single bill that is easier and more transparent, or so it seems.

Say inflation gets high, or runs on for a long time for a large cumulative effect.  At some point the customers switch to giving $5 bills.

Does it help strippers if the Fed issues lots of $2 bills?  Well, the leap up to the larger tip comes more quickly, but the customers also stay at the $2 tip level a long time before moving up to $5.

At some margins inflation is bad for current strippers, but good for some set of future strippers.  If the economy is close to the margin where individuals upgrade from a $1 tip to a $5 tip, then inflation is good for current strippers but bad for future strippers (for a while).

The answer also may depend on whether the Fed adjusts the ratio of $5 to $1 bills to keep in proper synch with the stripper customers.  If the Fed doesn’t increase the supply of fivers rapidly enough, future strippers may not get their deserved payoffs for a long time.

Let’s explore this assumption that handing out a single bill of a given kind is easier (admittedly there may be other ways to specify the assumptions).  And let’s assume that overpaying some strippers and underpaying others is less efficient for some reason, whether Benthamite or having to do with the unevenness of medium-run supply elasticities.

In that case tips may be more efficient, with ongoing inflation, at the $5 level than the $1 level.  Given that two dollar notes are rare, the step up from a one to a five involves a fivefold increase.  But the step up from a five to a ten is only a twofold increase, as is the step up from a ten to a twenty.  Even the switch from twenties to fifties involves a smaller multiple than from a one to a five.  So there are fewer problems with the non-convexities within the 5-10-20-50 range than within the 1-5 range.

Perhaps the sooner we get the strippers away from “the ones” the better — who needs those non-convexities?  Strippers sure don’t.

On the whole, therefore, strippers may prefer price inflation.  Of course once the $100 bill is the standard tip, the next notch upwards is again hard to come by, outside of the eurozone that is.

Anonymous November 12, 2013 at 7:58 am

….or $1 bills could be handed out at a higher rate per song.

Rahul November 12, 2013 at 8:02 am

……so back in 1950′s did people use nickels n dimes on stripper visits? Coins sound a bit uncomfy.

Anonymous November 12, 2013 at 8:53 am

Haha – Don’t make it rain, make it hail.

Z November 12, 2013 at 10:25 am

My goodness, that’s hilarious.

More Anonymous than Usual November 12, 2013 at 10:38 am

This is the real reason that dollar coins have always failed.

Less Anonymous than Ideal November 12, 2013 at 1:14 pm

And yet there are strip clubs in Canada. Currency finds a way.

Ryan Vann November 12, 2013 at 10:59 am

This is how I operate.

revver November 12, 2013 at 2:12 pm

Baller on a budget

Ted Craig November 12, 2013 at 8:05 am

Strip clubs have already solved this problem: “Strip clubs nationwide have started giving two-dollar bills as change, a noteworthy new trend because few places other than strip clubs order the bills from their banks.”

Read more: http://www.utne.com/politics/the-two-dollar-dance.aspx#ixzz2kR6fg7AE

Mark Thorson November 12, 2013 at 10:49 am

A friend of mine told me that some gun stores give $2 bills in change — symbolic of the 2nd amendment.

I’m also reminded of how large quantities of cocaine are traded in kilograms, smaller amounts in ounces and fractions of ounces, then it’s retailed in grams and fractions of grams. At each step of conversion between English and metric units, somebody is taking the roundoff.

Paul J. November 12, 2013 at 11:06 am

Rolls of $2 bills are also now featured prominently on the cover of many rap mix tapes, more evidence of the currency’s primacy in strip clubs.

Steve-O November 12, 2013 at 11:59 am

The strip clubs in the Castro neighborhood all circulate $3 bills

How are the strippers in Canada tipped? They have a little pouch attached to their underpants?

Bónapart Ó Cúnasa November 12, 2013 at 8:10 am

For strippers, read the Catholic Church. There was a lot of worry within the Church, in Ireland at least, prior to the introduction of the euro. Which euro coin would become the default for the collection plate instead of the Irish £1 – €1 (worth around £0.80), or €2 (worth £1.60)? A brief distraction from the complete collapse in attendance at Mass that was going on around them…

patrick November 14, 2013 at 7:29 am

After more than 10 years did they ever find out which it became?

Z November 12, 2013 at 8:26 am

They solved this by making the strippers smaller.

mofo. November 12, 2013 at 8:31 am

Win.

David C November 12, 2013 at 11:54 am

If you’re going to get less for your money, wouldn’t they actually be bigger?

Anthony November 12, 2013 at 2:37 pm

In part.

Boonton November 12, 2013 at 8:58 am

Or the club can offset by charging more for drinks and paying strippers a larger base pay. You’re essentially arguing that the club is providing 3 things, the dance, the drinks, and the ease of the transaction. Inflation makes the transaction less easy (i.e. it’s harder to tip $1.50 than $1). But this can be offset by shifting other aspects around to maintain the ease of the transaction.

If it’s really an issue, though, the club can issue it’s own token currency. You buy the tokens in front and tip with them. The tokens can be sold at a discount for large purchases so the dancers could have an incentive to take tokens rather than currency as tips plus patrons have an incentive to tip in tokens rather than currency.

What about counterfeits? How about digital tokens that expire every night? Any tokens you don’t use expire leaving the club richer. Patrons have an incentive to use the tokens up, dancers to grab as much as possible, and unused tokens every night pay for the system.

dsgntd_plyr November 12, 2013 at 9:27 am

This was a plot on the show “New Girl” last week. But the strippers still wanted cash.

bluto November 12, 2013 at 9:54 am

The show was a fine example of Gresham’s law.

Bob Holly Jr. November 12, 2013 at 9:34 am

Bob Holly cannot speak for strip clubs outside of my own small patch of PA, but the strippers that I know are not paid employees. rather, they are independent contractors who often have to pay the club.

Bob Holly likes your token ideas.

madanthony November 12, 2013 at 4:51 pm

Years ago, I was with a group of people visiting a different city and was looking for an ATM. We tried a strip club, which had an ATM… that only dispensed script. You put in money, you basically got “stripper dollars”. I suppose that would let you use a higher-denomination single piece of script to tip.

Rahul November 12, 2013 at 9:14 am

For a stripper, convexity adds utility only in selective domains.

Norman Pfyster November 12, 2013 at 9:19 am

Dear god, this thread is going to descend into the worst double-entendres ever.

But, LOL anyway.

twobeef November 12, 2013 at 9:44 am

Y’know, I wanted to leave an honest, no-entendre comment about sticky prices here, about how inflation doesn’t necessarily lead to downsides for consumers because McDonald’s and Wal-Mart are averse to price a $1.00 item up to $1.17 until they feel they really need to. But then I realized that you could probably find a double-entendre for “sticky wages” and dollar bills in a stripper’s costume if you thought about it for a moment.

Matt in Logan Circle November 12, 2013 at 9:46 am

I have worked as a male stripper. Strippers prefer cash and prefer tips to larger share of base pay. Taxes explain the first and strippers and customers have their favorites…you can make way more off a big tipper and it keeps your co workers honest about their level of effort.

R November 12, 2013 at 10:09 am

At least in New York, strippers make most of their money on lap dances for $20 each, not on the $1 stuffings they get while pole dancing.

In lap-dancing, $20 buys the patron one song. So the obvious solution is for the clubs is to shorten the length of the songs they play so that the per-minute wage remains constant. Has anyone studied whether this is happening?

More Anonymous than Usual November 12, 2013 at 10:37 am

Lap dance booths in certain US establishments accept money for a set period of time, so that song length is not a factor, but extra cash can bring better mileage or off-the-clock time. In Canada, song length did appear to be shorter.

S November 12, 2013 at 3:03 pm

Just as the pole dancing is only there to sell lap dances, so to are lap dances only there to sell dances in the back room. That’s where the real money is: N.B. the illusion is that something more is on offer back there but it rarely is.

Jesse Forgione November 12, 2013 at 10:41 am

This assumes that everyone adjusts at the same time, which of course they don’t. Some people would be the first to start spending the fives, and their number would grow as the inflation continued, smoothing out the transition. And of course different customers are spending different amounts as it is, so while some were taking their time getting from $1′s to $5′s, others would already be going from $10′s to $20′s.

Marc Roston November 12, 2013 at 11:42 am

Everyone thought it, but no one had the nerve to say it, so here it is:

Strippers need tips in real assets rather than currency so the tips maintain value. I suggest salami.

rvman November 12, 2013 at 11:46 am

This is a generic problem in the undefined pricing space – strippers, churches, any other charity, anyone else dependent on dollar-denominated tips (pizza drivers – when did the standard tip go from $1 to $2 to $3 etc., sandwich shops, barber shops, etc. Inflation may have partly killed the bell boy, and it is hard on maids and room-service attendants at hotels, too.) The higher inflation is, the worse for them, because there will always be a large segment of the population which is ‘behind’ in adjusting. (How many people still rant about how gas used to be $1? Now imagine if your job is compensated based on 20-year old memories of appropriate payments.)

Hunter Pritchett November 12, 2013 at 1:03 pm

“strippers will be shortchanged at various points going up the price pole”
No pun intended?

Jonathan Campbell November 12, 2013 at 1:38 pm

what’s a “non-convexity”?

Anthony November 12, 2013 at 2:40 pm

That part with the longest time exposure.

Assuming the strippers start in something like a bikini.

revver November 12, 2013 at 2:15 pm

Oh sweet, I love this game:

“…standard tip”, “…price pole”, “…notch upwards”, “…hard to come”

what’s my score Tyler?

Nick_L November 12, 2013 at 2:22 pm

I’m going to keep this one in my back pocket, in the unlikely event that I’m ever asked to do a graduate thesis on certain aspects of Berlin nightlife in the time of the Weimar republic. Now, move those demand curves, baby!

IdleMercutio November 12, 2013 at 2:44 pm

There is a signaling element here too. I don’t remember the source, but I read a discussion about this somewhere where someone maintained always give strippers singles. Typically strippers are working in a dark, semi-lit environment and given where the bills are being placed and the inconvenience of checking each bill for it’s value at the time of receipt, they work off the assumption that all bills provided are ones. The stripper won’t know that you just put a $5 or $20 in her garter, so you are not signalling extra value in placing those higher denominations there. Operating within this context reveals the element of truth within the claim above. I think it also illuminates why the initial two comments (higher frequency of tipping and rhetorical quesiton on tipping coins in the 50s) are both so pertinent.

Ronald Brak November 12, 2013 at 3:02 pm

An ipad could be placed on each table and people could tap out their tips. This would be much more hygenic than accepting physical notes from strip club patrons. But to me it seems the US is stuck in a bad equilbrium. Why are people tipping performers at all?
1. It’s unhygenic.
2. This form of reimbursment creates opportunities for free riding by non or low tippers.
3. It makes performer income unpredictable.
4. And surely the act of tipping must create opportunities for physical abuse? How is the golden rule, “Don’t touch the performers!” enforced?
But I can see how switching to a non-tipping model may be difficult for as with tipping in restaurants people may be paying for a sense of control rather than for the quality of the product they receive. But I suppose if performers are gradually replaced with robostrippers the problems will go away of their own accord.

Steve-O November 12, 2013 at 5:20 pm

The stripper likely can’t squeeze her breasts together to remove the iPad from your mouth.

Ronald Brak November 12, 2013 at 5:39 pm

They take money from people’s mouths? That’s pretty gross. And the US doesn’t even use germ resistant polymer notes yet. Are there places that autoclave your $1 notes for you in the US?

billb November 12, 2013 at 7:52 pm

Here in Portlandia we have a Vegan Strip Club…
anyway the owner solved this 1$ issue by only giving 2 dollar bills as change, which he dyed red for a lark. Needless to say the Feds came around and read him the riot act about defacing currency!

Comments on this entry are closed.

Previous post:

Next post: