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Personnel economics working in the supermarket
Yesterday I outlined my supermarket job from ages 16-18 in suburban New Jersey. I did know plenty of economics at that time, including Adam Smith and Paul Heyne and most of classical economics, and here are some of the observations I made. Please note this is all n = 1 or n = 2, these may or may not be generalizable. Here goes:
1. Mockery was the relevant incentive at the margin, and the “enforcer of first resort.” If you did something wrong you were mocked, sometimes mercilessly. My first night on the job I put too many fruits and vegetables in the refrigerator, relative to expectations, and so I heard about that multiple times on my next appearance. The jokes at my expense were funny.
2. There was strong competition to win overtime hours. Working Sunday 12-5 was a prime slot, and not hard work either because customer demand was slow that day. Saturday 1-9:30 had extra payoffs as well. These labor supply curves definitely sloped upwards. And allocation of overtime hours served to keep the better workers around.
3. My sense was that the demand for labor was pretty inelastic in the following sense: once you were soundly established as someone who would show up, complete your list of tasks, and not steal too much, they really were not looking to fire you. You were “a keeper,” and in principle they would pay you more in response to a minimum wage hike, rather than firing you.
4. My sense was that the demand for labor was quite elastic in the following sense: the lower-tier workers were given a lot of luxury hours. For one thing, if you didn’t get an average of at least fifteen hours a week, you might leave for another job. Second, and more importantly, a lot of the night hours were optional. Did they really need you back there that Tuesday night after 6 or 7 p.m.? Well, maybe yes, maybe no. There was a sense that if customers came by with questions, it was useful to have someone around to help them. But if the produce department was not making a lot of money, they would cut back on these hours quite readily. In slow times I didn’t get the 5-10 p.m. slot a whole lot.
5. Department managers, including in produce, were paid an “efficiency wage time profile” of returns, a’ la Eddie Lazear. That is, in early years they would pay you below marginal product, but pay you above marginal product in the later, outer years. That schedule would keep you in line, because you needed to avoid getting fired to reap the high later returns. That said, in the outer years you would end up getting canned, because the prescription is not entirely time consistent. Why keep someone around who is getting paid above marginal product? It was called “getting busted.” At that point you would typically start all over again with another supermarket. (I did understand this all at the time, though I hadn’t yet read Lazear and a lot of the work hadn’t yet been published.) A minority of department managers ended up promoted to store managers, but that was hard to pull off, especially without a college degree.
6. There was plenty of employee theft, though never from me. Things disappeared off the back of trucks, and in this time there was no CCTV. At a smaller scale, to be caught eating or taking food without a receipt was considered a fireable offense, though if you were a good worker and kept it to brief snacking within limits they did not try too hard to catch you. They didn’t want to have to fire you, yet they did want to keep the rule in place. Collusion between male line workers and female cashiers sometimes was a problem, as it meant some people would just take foodstuffs home.
6b. Shoplifting was rampant, though much more in the meat department than in produce. Overall, the customers and workers were less honest than the bosses.
7. Correctly or not, the line workers typically were cynical about the union. You paid dues to it, and you were told it gave you higher wages, but otherwise it had no presence in your life. People saw the dues that left their paycheck, but were not convinced they were getting comparably high wages because of the union.
8. Due to gas prices and commuting costs (you had to keep your car in OK shape, which took competence as well as money), there was a modest degree of monopsony. Still, everyone understood that a higher cost of labor meant fewer hours and in the longer run fewer hires. No one thought that allowing vastly more shoplifting would lead the company to hire more labor, which is in fact what the more radical monopsony models imply. Nope, it wasn’t monopsony of that sort.
9. The store manager, and in turn the department manager, would be terrified when the regional boss would do a store walk-through, and typically that happened by surprise. That was when they really wanted you to scurry and have everything looking spic and span.
10. Workers had various personality types, and within a given type only so much motivation was possible, no matter what the rewards. All rewards were seen as temporary, and to be followed by an eventual firing or demotion. Slackers were slackers, and you had to accept that and work around them accordingly.
Thursday assorted links
1. “Work on things that aren’t prestigious.”
2. Patricia Lockwood on Ferrante.
3. How to get cancelled in Iceland, alternatively what not to look for in your supermarket’s PR director.
4. What do jobless men do all day? And the undermotivated apostate.
5. Vitalik on prediction markets, smart contract risk, epistemic humility, and more. Like most Vitalik, it is too good to excerpt.
6. Ezra Klein on work and child allowances (NYT). I agree with some but not all of this, in any case it is already obvious how much Ezra is in the very top tier of NYT columnists after only a few pieces. Every part of it is an actual argument, supported by evidence of some kind or another.
Diem is getting underway
Diem has been through several iterations since it was first announced in June 2019, with adjustments not being limited to just a change of name. Now those behind the project are beginning to reveal where they expect Diem to sit within financial markets and how the stablecoin will overcome regulatory and structural hurdles as it enters use.
On 11 February, an OMFIF audience heard Diem’s plans of becoming a bridge between traditional banking and new, digital assets. Christian Catalini, chief economist at the Diem Association and co-creator of Diem, tackled many of the concerns surrounding it, presenting it as a tightly regulated organisation that is also incorporating some of the best features of new digital currencies.
Diem had already made the transition to focus on single currency stablecoins fully backed by reserves, concentrating on the Diem dollar initially and abandoning a move toward a permissionless system in the future. Catalini went further at the OMFIF meeting, detailing how Diem will not allow the stablecoin to be fractionalised or leveraged elsewhere.
In his session with OMFIF’s Digital Monetary Institute, Catalini also gave new insights into the ongoing regulatory process. Diem, in its payment license application, is essentially being treated as a new bank by its regulator, the Swiss Financial Market Supervisory Authority, Catalini said. Diem’s reserves follow closely Basel III’s capital requirements and incorporate additional buffers to account for redemptions…
Diem has always maintained that there will be no fractionalisation of reserves, but concerns about how to enforce this have lingered. Even without lending by the issuer, virtual asset service providers, such as wallet suppliers or operators, could engage in fractional reserve banking with the coins as collateral. Catalini revealed that Diem will address this risk with new requirements for these service providers to back liabilities fully with Diem coins.
This makes ‘Diem different relative to any stablecoin today’, Catalini said.
Developing…one lesson is never underestimate projects initiated or sponsored by Facebook! And more generally, the continued interest in stablecoins (which are not appreciating, by definition) shows there is very real interest in some kind of direct digital transfer mechanism, call it money if you wish. So I am happy to see some major players moving to fill this space and in a manner designed not to collapse once the regulators get their paws on it.
Here is the full story and further detail.
My history of manual labor
Here is another request:
What is the hardest manual labor you’ve ever done? I love intellectual policy wonk commentary, but I can’t help but feel some small amount of disdain for people who SEEM (a possibly faulty assumption) to have never really suffered trying to solve problems in the physical realm. There’s so much abstract data/policy up for debate, but how many talking heads have even replaced a toilet or turned a wrench in their lives?
From ages 16 through 18 I worked in the produce department of a supermarket, and that involved a fair amount of lifting of heavy boxes and additional physical labor, though nothing as hard as digging ditches or as unpleasant as cleaning toilets. My first job was at Hillsdale Valley Fair, where at the same time James Gandolfini (Sopranos star) was a shopping cart fetch boy. My second job was at Hillsdale Stop & Shop, again in the produce department.
These were fundamental experiences for my core outlook, for these reasons and more:
1. I learned that earning money is very good for people’s psyches. No amount of money, neither large nor small, ever should be taken for granted because somewhere along the way someone earned it. At the time I felt very rich.
2. The people slated to fail in life might be just as intelligent as those set to succeed. And often they are funnier and more fun to hang around with and sometimes in these kinds of jobs more productive as well. Yet somehow they do not have the conceptual frameworks that might put them on the road to success, nor could they acquire such frameworks easily.
3. It is not that easy to find a good produce department manager. Really quite a few skills are required, not the least of which is the ability to handle and motivate the junior staff. The most difficult quality to find in the produce managers, however, was the discipline to avoid saying “**** you” to the store bosses, who were always busting their chops.
4. They all thought I was weird. It was periodically remarked that I didn’t smile very much. Yet most of the time I was having a blast. I was producing stuff.
4b. I learned that being called “****head” a few times a week is not such a terrible thing. Sometimes it made me smile.
4c. I had to wear a tie or they would send me home. That seemed just to me.
5. I continued working several nights a week for the first half of my freshman year at Rutgers Newark. After I got back from the long drive to classes (I lived at home still), accompanied by Bruce Springsteen music, I would either wrap lettuce or go read Nassau Senior and Malthus.
6. Back then they did not hire women to work in the backrooms of the produce department, so it was quite a “guys club” in terms of rhetoric and ethos. I remained polite.
7. It was stupid that they ever wrapped bananas in clear wrap in the first place, and I was relieved when they stopped the practice. Plums were by far the most fun fruit to wrap into packages.
Political economy matters
Schools in Oregon, Washington, and much of the west coast are slow to reopen, even with teachers getting vaccinated:
Marguerite Roza, a Georgetown University school finance expert based in Seattle, points out that Washington, Oregon and California “all have more left-leaning leadership that is cozier with the unions.” But Boston, Chicago and New York also have strong public employee unions.
Those Eastern cities also have mayoral control of the school systems. Elected school boards govern the districts on the West Coast, and in most, teachers’ unions are strong political players, particularly in major cities such as Portland, Seattle, Los Angeles and San Francisco.
I guess you could say that the mayors have more “inclusive” constituencies? Here is the full NYT article, depressing throughout.
Wednesday assorted links
1. Arnold Kling on feminized culture.
2. SSC on vitamin D. He is fairly skeptical, I am more skeptical yet. The macro correlations that are there could be the result of many different forces, there is not much reason in theory to attribute such power to vitamin D.
3. How Paul Graham chose what to work on, painting, RISD, why he quit YC, and other stuff too.
4. Human challenge trials coming to the UK. And a brief but important comment: “This is most important experiment on COVID not yet done anywhere in the world. Can give us badly-needed data points on viral load, transmission and infection progression. Can later be used for vastly accelerated trials for vaccines, therapeutics and preventative approaches.”
5. Ben Southwood on how to build strong suburbs.
6. Cowen’s Second Law: “Accuracy of Urologic Conditions Portrayed on Grey’s Anatomy.”
7. Kalshi: real money prediction markets coming later this spring (WSJ).
The problem with rapid testing was always on the demand side
The U.S. government distributed millions of fast-acting tests for diagnosing coronavirus infections at the end of last year to help tamp down outbreaks in nursing homes and prisons and allow schools to reopen.
But some states haven’t used many of the tests, due to logistical hurdles and accuracy concerns, squandering a valuable tool for managing the pandemic. The first batches, shipped to states in September, are approaching their six-month expiration dates.
At least 32 million of the 142 million BinaxNOW rapid Covid-19 tests distributed by the U.S. government to states starting last year weren’t used as of early February, according to a Wall Street Journal review of their inventories…
“The demand has just not been there,” said Myra Kunas, Minnesota’s interim public health lab director.
…the tests are piling up in many states, the Journal found.
Here is more from Brianna Abbott and Sarah Krouse at the WSJ. You may recall the discussions of demand-side issues from my CWTs with Paul Romer and Glen Weyl. The envelope theorem remains underrated.
Why will the important thinkers of the future be religious ones?
Tony O’Connor requests I cover this:
A few times you have said that the important thinkers of the future will be the religious ones. It would be interesting to hear more about what led you to this conclusion.
Concretely, I wonder if this would arise because religious populations within liberal polities are expanding over time (due to higher birth rates), or because there could be a shift from the non-religious population into religion. The potential causes of the latter would be interesting to hear about, if that is your belief.
First of all, I was led to the point by example. For instance, Ross Douthat and Peter Thiel are two of the most interesting thinkers as of late and they are both religious and Christian. I am also struck by the enduring influence of Rene Girard. I am never quite sure “how intellectually Jewish” are our leading Jewish intellectuals, but somewhat to be sure. Even if they are atheists, they are usually strongly influenced by Jewish intellectual and theological traditions, which indicates a certain power to those traditions. In fiction, Orson Scott Card is one of the intellectually most influential writers in the last few decades and he is a Mormon. Knausgaard is drenched in the tradition of the Christian confessional memoir, and Ferrante is about as Catholic a writer as you will find, again even if “the real Ferrante” is a skeptic. Houellebecq I don’t even need to get into.
Second, I see that both secular “left progressive” and “libertarian” traditions — both highly secular in their current forms — are not so innovative right now. I don’t intend that as criticism, as you might think they are not innovative because they are already essentially correct. Still, there is lots of recycling going on and their most important thinkers probably lie in the past, not the future. That opens up room for religious thinkers to have more of an impact.
Third, religious thinkers arguably have more degrees of freedom. I don’t mean to hurt anybody’s feelings here, but…how shall I put it? The claims of the religions are not so closely tied to the experimental method and the randomized control trial. (Narrator: “Neither are the secular claims!”) It would be too harsh to say “they can just make stuff up,” but…arguably there are fewer constraints. That might lead to more gross errors and fabrications in the distribution as a whole, but also more creativity in the positive direction. And right now we seem pretty hungry for some breaks in the previous debates, even if not all of those breaks will be for the better.
Fourth, if you live amongst the intelligentsia, being religious is one active form of rebellion. Rebelliousness is grossly correlated with intellectual innovation, again even if the variance of quality increases.
Fifth, I have the general impression that religious idea rise in importance during unstable and chaotic times. Probably the current period is less stable than say 1980-2001 or so, and that will increase the focality of religious ideas, thereby making religious thinkers more important.
Sixth, religious and semi-religious memes are stickier than secular ones. Maybe not on average, but the most influential religions have shown an incredible reach and endurance.
If you are reading a secular thinker, always ask yourself: “what is this person’s implicit theology?” No matter who it is. There are few more useful questions at your disposal.
Tuesday assorted links
1. Copenhagen medical students more likely to get Covid from socializing than from treating patients.
2. Further results on the anti-obesity drug.
3. Why does Texas have its own power grid? And a Bloomberg explainer on what happened in Texas. And from ArsTechnica.
4. How to reopen your schools?: “Crazy slow spend out rate for the education provisions of the Biden plan. Only $12 billion (7%) of the $168bn set aside for elementary/secondary/higher ed relief fund will get spent this fiscal year”. And Vox on teacher’s unions. And state of Virginia now has a $730 million budget windfall. C’mon people, yes there are still some significant state budget problems, but it is time to put down your Progressive catnip and contorted rationalizations and admit that Larry was right about this one.
5. Further Bloomberg coverage of the China hack. I genuinely do not know what is the bottom line here, but interesting to see that the story still is alive.
6. On late bloomers.
The economic geography of global warming
By Jose Cruz Alvarez and Esteban Rossi-Hansberg:
Our baseline results show welfare losses as large as 15% in parts of Africa and Latin America but also high heterogeneity across locations, with northern regions in Siberia, Canada, and Alaska experiencing gains. Our results indicate large uncertainty about average welfare effects and point to migration and, to a lesser extent, innovation as important adaptation mechanisms.
A few points:
1. Average global welfare loss is about six percent. The discount rate is 0.9%, and yes those are welfare losses. Losses as a percent of gdp are somewhat lower, because amenity costs are a factor with global warming.
2. About half of the global losses stem from the negative effects on productivity. For Africa, amenities losses are especially important. Overall the biggest losers are Central America, India, Brazil, and Africa. Many colder regions are better off.
3. The model allows for many margins of adjustment, including migration. Cheaper/freer migration is a good way of limiting the costs from global warming.
4. Subsidies to green energy don’t help very much, because of Jevons-like effects, namely that energy becomes cheaper and total energy use rises.
5. A carbon tax postpones fossil fuel use but in the long run it doesn’t help much, unless the delay in fossil fuel extraction is used to buy effective abatement measures.
Of course the assumptions in such papers always can be challenged, but this is one case where the authors think like economists throughout the entire exercise. It seems to be one of the best such studies.
My net conclusion (not theirs) is that the paper shows why serious action has been so slow in coming. The world as a whole might lose about two years worth of economic growth, with most of the losses concentrated in countries that are not calling the shots. Let’s say a poor country loses fifteen percent of welfare and about ten percent of gdp. Isn’t that somewhat similar to many of the losses caused by the current pandemic? Circa early 2021, how many vaccines are we sending to those places?
I do fully agree that we should be more cosmopolitan, but first to fix the malady we must understand it.
The conversation some of you want to have
The most frequently upvoted request was this, noting that I will add in numbers so you may follow my replies:
1. Looking back on your history of blogging, what were you most right about? And what were you most wrong about? Are there any posts you regret?
2. If you were to go back in time and choose a profession other than economics, what field would you choose, and why?
3. What important questions are the least answerable empirically, and how should these questions be approached?
4. What questions would benefit most from better empirical evidence?
5. A number of years ago, I recall you saying something like “Bloggers get the commenters that they deserve.” Do you regret saying this? (Sorry–ha ha).
Thinking back on the history of MR, here are my answers:
1. I believe I was right (and proven right) about the Great Stagnation, a controversial proposition at the time. I also believe I have been right about many aspects of the Covid crisis, as Alex has been as well. See also my earlier writings.
I still like last year’s blog post on State Capacity Libertarianism.
Perhaps two things I was right about, but still not recognized as correct are: 1) post-2012 or so (but not earlier), unemployment was fundamentally a re-matching problem, and would not have been helped much by nominal decisions by the Fed, and 2) we could have done much better than Obamacare and no I don’t mean single payer.
Two of my more obvious errors were dismissing the notion of a major financial crisis in the early days, as I didn’t see that a bursting real estate bubble would wreck the shadow banking system, rather I expected (at worst) something like the recession of the early 1990s.
I also was wrong to think that Greece and Italy would leave the eurozone after the crisis of 2011. I thought deposits would be more mobile across borders than they turned out to be, thus crushing domestic banking systems and requiring a breaking with par.
I was originally wrong in calling bitcoin a bubble, though I improved and earlier yet MR was one of the first outlets to call attention to bitcoin; see also this earlier 2007 post, when I wrote: “…monetary economics will end up as a special case of a more general theory of encryption. One day they’ll solve Riemann’s Hypothesis and the price level will just go poof…!”
I am pleased to have played early roles boosting ngdp work, especially in free market circles, and standing firm on the need for some kind of green energy policy, though neither involved any originality on my part. I see both decisions as vindicated.
That all said, I regret the post where I wrote “Bloggers get the commenters that they deserve.” Even if it is true.
2. if my current profession were inaccessible to me, I would be either a philosopher or a legal academic, but trying to replicate the essential features of my current life as I know it. I feel I would be much less effective in either venue, however.
3. “What important questions are the least answerable empirically, and how should these questions be approached?” Maybe that is too broad a question, but two responses. First, I am not sure we ever will understand “culture,” as more empirical work perhaps will broaden the concentric circles of our ignorance and create more open questions, by both teaching us more detail and showing how much context-dependence matters. Second, I am increasingly skeptical that we will ever find “the theory of everything” in physics. Maybe it is all just a sprawling mess that resists systematization and comprehension by our feeble little brains. How well do felines grasp Keynesian macroeconomics?
That said, approach these dilemmas by fighting to understand and indeed doubling down.
4. “What questions would benefit most from better empirical evidence?” Well, many of them, but be ready to deal with this notion of broadening and expanding the concentric circles of our knowledge — and ignorance — at the same time. In many, many areas that is at least as likely as convergence on a definite set of answers.
Do commenters get the bloggers they deserve? I don’t think so.
Monday assorted links
1. Profile of Caroline Shaw, who is good (Atlantic).
2. Sentences to ponder. And only one point, but a good point about SSC vs. NYT.
3. The new vitamin D results appear quite suspect. And more here.
4. Major breakthrough against lung cancer?
5. The most rigorous paper to date on schooling and Covid spread?
*Resetting the Table*
The author is Robert Paarlberg and the subtitle is Straight Talk About the Food We Grow and Eat. This book is a refreshing change of pace from most of the other food books, which tend to be illiterate on the economic side. Here is one excerpt:
Modern farming protects the environment not only by using less land compared to several decades ago; it also uses less water, less fossil energy, and fewer chemicals for every bushel produced. One major contributors here is no-till farming, which is a method for planting seeds in unplowed fields. This method requires specialized equipment, but it reduces soil erosion, protects soil moisture, sequesters carbon, and requires much less burning of diesel fuel, which is why farmers began doing it in the 1970s, a decade of high fuel prices. According to the latest USDA Census of Agriculture, more than twice as much cropland is now under no-till or reduced-till compared to intensive tillage. In parallel fashion, new irrigation systems such as center-pivot and drip have replaced simple flooding, thus conserving water. Lasers are employed to help level farm fields, which eliminates surface runoff. GPA auto-steering eliminates wasteful overlaps in the field. Genetically engineered seeds help farmers protect against insects and weeds with fewer and less toxic chemical sprays.
Recommended, sensible throughout.
Danny Ray, RIP
Here is the NYT obituary for Danny Ray, who (among other things) handled the cape for James Brown.
That is what people did and watched before they had an internet, and for years I treasured the battered video cassette I had of that televised performance, playing it for guests who would come over.
Diversity in policing
In the wake of high-profile police shootings of Black Americans, it is important to know whether the race and gender of officers and civilians affect their interactions. Ba et al. overcame previous data constraints and found that Hispanic and Black officers make far fewer stops and arrests and use force less than white officers, especially against Black civilians. These differences are largest in majority-Black neighborhoods in the city of Chicago (see the Perspective by Goff). Female officers also use less force than male officers. These effects are supportive of the efficacy of increasing diversity in police forces.
That is a new paper in Science by Bocar A. Ba, Dean Knox, Jonathan Mummolo, and Roman Rivera. Via Anecdotal.