Month: April 2004

Facts about dollar stores

Perhaps you think that dollar stores were a quaint anachronism, surviving only through sales to immigrants. In reality dollar stores are the fastest growing retailers in America. Here are a few facts:

1. More than 4000 new dollar stores have opened in the last three years, an increase of thirty-four percent.

2. The dollar store sector accounts for $16 billion a year, larger than the recorded music industry.

3. Dollar General, a very large chain, will add 625 stores this year.

4. Dollar stores compete on price and convenience, most of all parking and easy access to the goods. The “big box” superstore is proving vulnerable to dollar stores, just as centralized shopping malls are proving vulnerable to the big boxes.

5. Dollar stores offer no frills and spend nothing on marketing.

6. Families earning $70,000 and above are the fastest-growing group of customers for dollar stores. Dollar stores are beginning to lose their dowdy image.

7. Dollar stores are starting to attract name brands on the shelves.

8. Wal-Mart, feeling the competitive heat, is experimenting with “dollar store” sub-sections in some of their superstores.

My take: For me it is all about easy parking. I am starting to get the hang of dollar stores, it is the easiest way to replenish a dwindling supply of toothpaste.

The above facts are from the 10 May issue of Business Week, “Out-Discounting the Discounter.”

Facts about Sweden

1. No new net jobs have been produced in the Swedish private sector since 1950.

2. “None of top 50 companies on the Stockholm stock exchange has been started since 1970.”

3. “…well over 1 million people out of a work force of around four million did not work in 2003 but lived on various kinds of public welfare programs, such as, pre-pension schemes, unemployment benefits, sick-leave programs, etc.”

4. “Sweden has dropped from fourth to 14th place in 2002 among the OECD countries (i.e., affluent industrialized countries) in terms of GDP per capita since 1970.”

Here is a more complete summary. Here is the paper itself. Here is Nils Karlson, the author of the relevant essay. Here is some debate on whether Sweden is richer than Mississippi and Alabama. Admittedly Sweden has a higher quality of public goods and offers more leisure time.

My take: I’m willing to take the Swedish model seriously. I’ve been to Stockholm several times and loved it. That being said, how attractive will this model remain when it offers only half of the per capita income of the United States?

This is a real question, not a rhetorical one. On one hand, freer societies will reap especially high benefits in an era of rapid technological change. On the other hand, the innovations of the United States, and other countries, indirectly subsidize Swedish government spending.

Sports economics puzzle of the day

I very much enjoyed my visit this week to the University of Western Ontario. I had an especially good time trading micro puzzles with one of my hosts John Palmer. John is an economist, an artist, and founder of the Philistine Liberation Organization.

We quickly hit upon the old sports chestnut: why is soccer not a major professional sport in America?

It seems easy enough to add commercials when the ball goes out of bounds. And we have plenty of land for soccer fields. Maybe soccer is too boring on television, but hey (no brickbats please) what about baseball? Could it be that soccer is too hard to describe on radio, noting that this medium drove the initial popularity of baseball?
I have the vague intuition that soccer is too “working class” for the non-unionized United States, but it is hard to go far with this hypothesis.

My best shot at an answer was the following: Americans prefer professional sports where they know (or feel) that they are the best in the world. This applies to baseball, football, and basketball, the major professional sports in the United States. At tennis we are no joke. Chess became massively popular, but only briefly, when Bobby Fischer defeated Boris Spassky.

The implicit prediction, of course, is that basketball will decline in popularity.

Addendum: Perhaps a country can only fit so many sports. Thanks to Scott Cunningham for the pointer. In another direction, Bob Crosby writes the following:

“Both soccer and hockey have problems gaining US audiences for similar reasons.

Both games make it very difficult for the best players to fully exploit their skills. Put differently, they are games where the difference between the great players and the mediocre players is minimized.

In hockey, (a) the unwillingness of the refs to call hooking, slashing and holding penalties and (b) the ridiculously small size of modern rinks mean that the value of speed and skill is reduced. The wide disparities in skill levels that naturally exist are reduced or eliminated.

In soccer, the off-sides rule has the same effect. It acts as a speed break. And speed breaks help slower, less talented players.

In short, the difference between the best players and the worst players is structurally minimized in those sports.

Football, basketball, baseball or golf do not have similar problems. In those sports, wide disparities in talent are encouraged and immediately and easily discernable by fans.”

No free speech on the Metro

A couple of years ago it was discovered that the Office of National Drug Control Policy was secretly paying television producers to insert anti-drug messages into shows like ER, Chicago Hope and Bevery Hills 90210.

MJNow we learn that not only do the Feds want to put people in jail for using marijuana, they also want to stop people from talking about reforming the marijuana laws.

Change the Climate, a group advocating reform, wants to place the ad at right on the Washington Metro. The Metro accepts all kinds of political ads but if it accepts any ad arguing against drug prohibition it, or any other transit authority, will lose all of its Federal funds.

In one way or another, the Federal government has its hand in everything, including the schools, the universities, and the airwaves. If the government can withdraw its funds from anything associated with arguments it doesn’t like then free speech will be very expensive.

Is the EU a tax cartel?

Germany yesterday threw cold water on the festive mood ahead of this week’s European Union enlargement by telling its eastern neighbours that low corporate tax rates used to attract foreign investment were unacceptable.

Speaking only days before 10 new member states join the EU on May 1, most of them from eastern Europe, Chancellor Gerhard Schröder said tax rates, often less than half those in Germany, were “not the way forward” in a united Europe.

Here is the full story. Here is a good article on the European tax cartel.

Germany does have a valid complaint that it sends subsidies to these lower-tax nations. Would any of you care to guess my vision of “the way forward”?

What’s in a name?

Not much, if you are the small island of Tuvalu, population 11,000. The country planned to get rich by selling Internet domain addresses. It was thought that the “.tv” suffix would prove immensely appealing, most of all to entertainment companies:

Tuvalu had a 12-year contract to share revenue from .tv registrations to be marketed by a start-up company called DotTV, which was backed by $50 million from California high-tech incubator Idealab. Now you can buy one here.

Tuvalu expected a windfall. DotTV predicted every entertainment company would want a .tv address. At the time, its executives cited examples such as, and – the last for India’s Zee TV network.

This being the era when people talked of initial public stock offerings before a company’s bathroom needed its first replacement roll of toilet paper, DotTV anticipated a big IPO. The company even said it would create a .tv portal.

Of course, in 2000 the dot-com bubble blew apart, and the value of Web addresses dove like a pelican after a fish. No .tv boom ever happened. Today, is a dead end, is for sale, and bounces to, the Web site of Southeast Asian television entrepreneur Sheeraz Hasan.

Are you shocked to discover that the CIA thought the domain address sales would turn the island’s economy around?

And how do things look now?

1. Despite the “.tv” suffix, the island has no broadcast TV station.

2. The prime minister works in a two-bedroom house.

3. Subsistence fishing and farming are the major economic activities.

4. One thousand Tuvaluans are guest workers in the neighboring island of Nauru, which is going bankrupt.

5. The islands are fifteen feet above sea level and are expected to vanish under the sea in a few decades’ time. Tuvalu, however, will remain a sovereign nation under international law. It will retain its rights to all domain names.

By the way, here is the most popular “.tv” website currently in existence.

The most dangerous jobs

Timber cutters come in first place, here is the longer list. Being a timber cutter is 26 times more dangerous than the average American job (the link has wage data as well). Here is one morbid description of a timber accident; here is another detailed account.

By the way, delivering pizzas is one of the most dangerous occupations as well. Being an Alaskan pilot is especially hazardous although it does not count as a separate occupation. In a thirty year career you have a one in eight chance of dying; flying into a mountain during bad weather is the most common boo-boo. If you look at absolute numbers only, more truck drivers die on the job (808, in 2002) than any other occupation.

Thanks to Eugene Volokh for the original pointer.

Becker on the FDA

In the latest Milken Institute Review, Nobel laureaute Gary Becker argues (sign up required) that the FDA should permit drugs to be sold once they have passed a safety standard, i.e. a return to the pre-1962 system. He writes:

…a return to a safety standard alone would lower costs and raise the number of therapeutic compounds available. In particular, this would include more drugs from small biotech firms that do not have the deep pockets to invest in extended efficacy trials. And the resulting increase in competition would mean lower prices – without the bureaucratic burden of price controls…

Elimination of the efficacy requirement would give patients, rather than the FDA, the ultimate responsibility of deciding which drugs to try…To be sure, some sick individuals would try ineffective treatments that would otherwise have been prevented from reaching market under present FDA regulations. But the quantity of reliable health information now available with only a little initiative is many times greater than when the efficacy standard was introduced four decades ago.

Dan Klein and I have written extensively on this issue at our web site,, and in our latest paper Do Off Label Drug Practices Argue Against FDA Efficacy Requirements?


Recently Killington voted to secede from Vermont and join New Hampshire. Some people find this desire quixotic since Killington is smack dab in the middle of Vermont. The classic Tiebout argument says that voting with one’s feet helps to discipline government and provide a better match between government and citizen preferences. But why should the dissidents have to pack their bags? It’s the Vermont taxes that the residents of Killington want to escape not the skiing. Wouldn’t it be less costly to switch governance rather than citizens?

Does such a system sound crazy? Perhaps, but it is essentially the same supra-competitive federalism that has worked well for corporate law, so maybe we ought to give it a try.

And remember, if at first you don’t secede, try, try again.

Will Google be overpriced?

Read Brad DeLong, who says yes. I agree, while admitting upfront I won’t have the guts to sell short. Here is an earlier MR post on why Google is so vulnerable in its key markets. Here is an earlier MR post on adverse selection and Google’s IPO.

Addendum: “Of the 10 IPOs with the biggest first-day pops since 1975, not one ever returned to the price it reached its first day, according to an analysis of data from Jay Ritter, professor of finance at the University of Florida.”

Your imaginary girlfriend, or markets in everything

I thought long and hard before choosing the “economics” category heading for this post. So what is an imaginary girlfriend?

This is a service provided by a real life girl where she will pretend to be your long distance girlfriend by sending you personalized love letters, emails, pictures, leave phone messages (if you want), and provide other girlfriend-like services. This relationship appears real to others that may see these things, but it is not. There will be no actual real life meetings or relationship between you and your Imaginary Girlfriend other than that specified in your order.

There is more:

What happens when the time is completed?

When the stated time period is over, you can break up with your Imaginary Girlfriend for any reason you wish. She will write you a final letter begging you to take her back. Of course you can continue your “relationship” by renewing, or start over and find a new Imaginary Girlfriend of your choice!

The suppliers note: “Anyone who has difficulty distinguishing reality from fantasy should NOT use this service.” At the same time, they write: “Perhaps you are wondering what it’s like to have a long distance girlfriend?”

Here are some of the available (imaginary) girlfriends.

Thanks to Rich for the pointer. Maybe some people do this for fun, but I suspect this is one of the more brutal installments of “Markets in Everything.”

Addendum: Let’s outsource this to India!

Second addendum: Rich has an excellent home page.

Is the shopping mall dead?

More and more large department stores are moving out of centralized shopping malls. Consumers prefer big stand-alone boxes.

Why might this be? Consider a few reasons:

1. A stand-alone store has better retail focus. It can target its marketing, direct mail, and advertising more effectively.

2. People like to park right in front of their destination.

3. You go to malls to browse and shop; you go to off-mall stores to actually buy things. Competing entertainment sources have lowered the importance of shopping as a leisure activity.

It is less clear whether a shopping mall is likely further from where you live. On one hand, a mall is probably centrally located. On the other hand, a mall is harder to place because of its size. You can splatter a bunch of Best Buy stores around a suburban area, but you could not do the same for the Mall of America in Minneapolis.

What about good ol’ introspection?: I prefer the big boxes. My reasons are simple. I am a man and I prefer buying to shopping. And I hate parking garages, which are common in malls. I am also willing to let these foibles determine where I shop. By the way, here is a previous MR post on the socialist origins of the shopping mall concept.

Why isn’t Brazil a first-world country?

I love Brazil, and there are few places where I feel more at home. That being said, the place can be a mess. Here is one reason why:

Unlike the United States, Brazil has chosen to collect most of its taxes through corporations. Thus today, taxes paid by corporations in Brazil are almost twice as high as in the United States. However, that’s not the right comparison. We should be making a comparison with the United States in 1913. That’s when the United States had the same GDP per capita as Brazil today. In 1913 the U.S. government spent only 8 percent of GDP. Thus, as a percentage of GDP, the corporate tax burden in Brazil today is seven times that of U.S. Corporations when the United States was at Brazil’s current GDP per capita.

Here are formal details on Brazilian corporate taxation. But the document does not stress the reality that half the firms shirk their burden and the more efficient firms must pay far more than they ought to.

It gets worse:

Brazil’s government spends about 11 percent of GDP on the government-run pension system compared with 5 percent in the United States today and close to zero in 1913. The government contribution to the pensions of Brazil’s government employees is 4.7 percent of GDP compared with 1.8 in the United States today….Brazil clearly has government employment it can’t afford.

Here is an article on Lula’s partial success in reforming Brazilian pensions, here is more detail.

The quotations are taken from William Lewis’s interesting The Power of Productivity.

To be continued…