My friend George Scoville wrote a Black Friday-appropriate post on a problem with gift-giving, which touches on a broader point that libertarians should heed.
A microeconomics paper that’s bounced around econ-blogs for several years says gift-giving causes a huge deadweight loss: when someone else picks a gift for you, it may not be what you would have bought for yourself when you would have bought it, which normally implies that goods and services are being distributed inefficiently.
If that’s true, then Christmas is a tremendously wasteful institution, within an order of magnitude of the income tax, and we’d be better off giving each other cash gifts.
First, on a technical note, that paper was written in 1993, before Amazon wish lists and social media made it easier to detect people’s interests and needs, so perhaps we’re getting better at matching gifts with recipients.
More importantly, the paper fell short of meaningfully capturing deadweight loss, because it focused entirely on the value of the goods. Gift economies mostly operate on another kind of supply and demand: the desire for social cohesion, meaning closer relationships with family, friends, and other peers.
This is no trivial matter: relationships with people we can count on make us happier, healthier, and more successful. Anything that helps to build and cement those bonds is valuable, and while some academics and marketers try to quantify that value (it may be more than you’d think), the normal rule is that relationships of trust should not be fungible with cash. All societies have some social taboo against trading off the sacred and the mundane, which sometimes leads to absurdly stupid conclusions, but also allows people to build trust without worrying that anything intimate or of an extremely hard-to-price value (what’s the rest of your life worth?) will be easily sold for any of the mundane things that can be bought with cash.
It’s awkward when people give each other cash as gifts even if the amount is equal, and gift exchanges in which only one side puts any thought into it show unequal empathy. If you put a lot of thought into anticipating someone’s wants, and that person gives you a very generic gift, it’s like being put in the Friend Zone.
The point of gifts is to trip a hardwire in the brains of social mammals: cycles of giving and gratitude that go beyond simple reciprocity. When you’re trading cash, everyone is acutely aware of the value of what’s been exchanged, and there’s no fudge factor in the brain for “the thought that counts.”
That’s something we disagreeable, rationalistic libertarians should keep in mind, because the gift economy is a powerful force in human relations that resists and resents the intrusion of market forces, even if markets efficiently bring us the gifts.
So how did the great Wal-Mart protest go?
According to the Bentonville-based company, roughly 50 people who are actually on Walmart’s payroll joined today’s “walkout” nationwide. The protest organizers say “hundreds” participated. Even if 1,000 took part, that’s still less than 1/10 of 1% of Walmart’s 1.4 million associates.
If you can’t find 50 disgruntled employees in an organization of 1.4 million, well, you’re a refugee from the real world.
But look at that last number. 1.4 million people have jobs because of Wal-Mart. Then there’s the downstream effect – suppliers, etc. My guess is you’re looking at an organization responsible or at least partially responsible for 3 to 5 million jobs in this country.
And yet it is under attack.
Now, there were protests at Wal-Mart stores. But what should be clear is they weren’t protests by Wal-Mart’s vast majority of associates.
The “organization” which organized this flop, “OUR Wal-Mart”, is calling it a clear success. I mean what else would they call it? The fact that it only drew 50 employees in protest (50 who I assume are now ex-employees) seems to have been waived away for the fact that there were some protests.
Woo – hoo.
So who were the protesters? You’ll enjoy this:
Seems strange then that, according to organizer OUR Walmart’s website, the group speaks for actual Walmart employees. In the “About Us” sectionof its website, this not-for-profit describes its mission as follows: “We envision a future in which our company treats us, the Associates of Walmart, with respect and dignity. We envision a world where we succeed in our careers, our company succeeds in business, our customers…” (Italics mine.)
OUR Walmart was listed as a subsidiary of the United Food and Commercial Workers Union (UFCWU) in a 2011 Department of Labor filing. While the union disputes that the two organizations are one and the same, one thing is certain: The organizers of today’s protest represent not Walmart employees, but employees of grocery stores that compete with Walmart.
Oh, I’m shocked, shocked I tell you. Members from a union that represents the workers of stores that compete with Wal-Mart? Ah, of course – OUR Wal-Mart.
[W]hile the anti-Walmart movement claims to be about helping Walmart employees get better health care, improved working conditions, higher pay–not to mention preventing our children from the temptation of petty thievery–it’s really primarily about stopping the threat of cheap groceries–the same ones that go a long way towards helping cash-strapped Americans put food on the table.
Emphasis mine … and the reason, as mentioned yesterday, is this model works. It appears, at least superficially, that all but 50 Wal-Mart employees agree. Given the consumer reaction to the protests (uh, nil, nada, zip – didn’t slow down sales a bit), it’s rather hard to understand how any sane person could call the protests a success. But then no one said those who put together OUR Wal-Mart are sane, did they?
Not surprisingly, a union’s hand is found in a movement deceitfully claiming something that isn’t true and trying to cause problems for a company that employs a huge number of Americans and is responsible, at least partially, for the jobs of a huge number more.
And, watching these shenanigans, you can’t help but believe that unions are desperate – very desperate. Here’s a company which is offering the same products as their union stores offer at significant discounts and that’s an obvious threat to their continued employment. So they think nothing of starting a “movement” that is union backed and likely union financed to undermine that company by enticing workers, who apparently aren’t at all as disgruntled or as upset as this group has claimed, into a job action that’s guaranteed to be against their best interests and that would likely get them fired.
50 heeded the siren song and are likely now trying to figure out how to claim unemployment compensation.
And, they have the UFCWU and their apparent inability to think critically to thank for their folly.
Hey, maybe they can go apply at the union stores. I’m sure they’re hiring, huh? I’m equally sure they’re more than eager to hire someone who walked off their last job.
Here’s a picture:
Maybe that will help.
California, of course:
“The California Republican Party is functionally dead. And how is California doing, now that liberals have successfully terminated the state’s remaining conservatives?” #1 in debt, #1 in welfare, #1 in taxing the rich. And hoping for a federal bailout, I suspect. As is Illinois, which is in similar straits for similar reasons. “One-third of all the nation’s welfare recipients live in the state, despite the fact that California has only one-eighth of the country’s population. That’s four times as many as the next-highest welfare population, which is New York. Meanwhile, California eighth-graders finished ahead of only Mississippi and District of Columbia students on reading and math test scores in 2011.”
You can warn people till you’re blue in the face (no pun intended) how the blue state model is going to end up, but sometimes it is instructive to just let it happen. Of course that assumes that those observing the train wreck try to understand how it happened and work to avoid it elsewhere. I’m not so sure that’s the case in this nation. But fair warning, given the fiscal road we’re on California is as much in our future as Greece:
“For a century or so, guided by brilliant private sector leadership, California was a beacon to the world, a land of opportunity such as never had existed in human history. Unimaginable wealth was created. Yet it required only 40 years of liberal governance to bring the whole thing crashing down. Today, California is the most spectacular failure of our time. Its government is broke. Productive citizens have been fleeing for some years now, selling their homes at inflated prices (until recently) and moving to Colorado, Arizona, Texas and even Minnesota, like one of my neighbors. The results of California’s improvident liberalism have been tragically easy to predict: absurd public sector wage and benefit packages, a declining tax base, surging welfare enrollment, falling economic production, ever-increasing deficits. Soon, California politicians will be looking to less glamorous states for bailout money. Things have now devolved to the point where California leads the nation in poverty.”
California is a state which has modeled blue government for decades, despite warning of where it’s continuance would lead.
And, shockingly to the left, it has ended up right where it was predicted it would end up. Yet, they blindly and willfully continue to march along as though the reality will change and economic laws will disprove themselves if they just persist in their actions.
California is our future. Our near future. See, it’s pretty much as simple as this:
If a country runs a deficit (as a percentage of GDP) that is equal to its growth rate, the debt level will remain constant. This year U.S. GDP will be a little less than $16 trillion, and its historical growth rate is 3.25%. That works out to what we might call a “safe” deficit of $520 billion, or even $600 billion if you allow for a little inflation. Last year, however, the U.S. deficit was $1.1 trillion — or roughly $500 billion too much.
That gap could be closed by ending all tax cuts, tax breaks and stimulus payments for everyone, according to the Tax Policy Center. But two-thirds of the burden would fall on the middle class — something both political parties want to avoid. All the proposed tax increases on the wealthy, however, even combined with the end of the payroll-tax cut, would raise only $295 billion. So unless there were spending cuts twice as big as the ones currently scheduled, the deficit would still be too large.
Those sorts of cuts aren’t even being discussed. Imagine, if you would, radical cuts in the size and scope of our current federal government. Imagine subsidies of all sorts being eliminated. Imagine backing government out of many of the areas it has no business. Imagine simplifying the tax code and giving business a warm fuzzy feeling about the business atmosphere by freezing regulation and in some instances rolling them back. Imagine all of that, because none of it is going to be done.
Instead, the solution is to “tax the rich”.
So let ‘em have it (only if they repeal the Hollywood tax cut). Tax the rich. And when it doesn’t work, and it won’t (in fact, I’m not sure what “work” means in this particular case since the amount to be collected is a mere drop in a 1.6 trillion dollar ocean of debt that’s planned each year for the foreseeable future), they’re left with a lot fewer excuses, huh?
Not that they won’t try to point fingers when their grand plan crashes.
Yup, in the end it all looks like we’re headed to California. Apparently we’re going to have to recreate that debacle on a national level before the blinders come off of the public and the realization that you can’t spend more than you have forever finally sinks in.
Whether or not it will too late to salvage the country at that point, remains to be seen.
Amazing, but not atypical of a lot of thinking in this country these days:
The union that brought the 85-year-old baker of Twinkies and Wonder Bread to its knees is holding out hope that a buyer will salvage chunks of the company and send the union’s members back to work, even as Hostess Brands Inc. gears up for a fire sale.
While Hostess has said the shutdown would result in the loss of more than 18,000 jobs and place the fate of more than 30 American brands in jeopardy, union President Frank Hurt said he believed there was “more than a good chance” that a buyer quickly would swoop in to buy the profitable parts of the company and give his union’s members their jobs back.
Give them “their” jobs back?
See, if I was a buyer, the last people I’d hire are those whose inability to think beyond what the union demanded they do that caused a company to liquidate and “their” jobs to go away. Because I’d not want to give them the chance to gum up the works at my company. So I’d ensure that they understood that “their” jobs went with Hostess.
By the way, Frank Hurt isn’t hurting. He’s still got his six-figure job with the union that “their” jobs, since gone, helped pay for.
Said Teamster Luigi Peruzzi, a Hostess driver in Detroit for 25 years:
“I think they [the Baker's union]made a terrible choice based solely on terrible information from their leadership.”
Not that their “leadership” will suffer for it or anything.
If you’re at all concerned about the economy, the answer is likely “not very well”:
U.S. companies are scaling back investment plans at the fastest pace since the recession, signaling more trouble for the economic recovery.
Half of the nation’s 40 biggest publicly traded corporate spenders have announced plans to curtail capital expenditures this year or next, according to a review by The Wall Street Journal of securities filings and conference calls.
Nationwide, business investment in equipment and software—a measure of economic vitality in the corporate sector—stalled in the third quarter for the first time since early 2009. Corporate investment in new buildings has declined.
At the same time, exports are slowing or falling to such critical markets as China and the euro zone as the global economy downshifts, creating another drag on firms’ expansion plans.
Why are we seeing this happen? As it stands, most corporate spenders see no possibility of the hostility toward corporate America easing and also view whatever is to come in January concerning taxes and tax policy to likely be a lose-lose for them however it goes:
Corporate executives say they are slowing or delaying big projects to protect profits amid easing demand and rising uncertainty. Uncertainty around the U.S. elections and federal budget policies also appear among the factors driving the investment pullback since midyear. It is unclear whether Washington will avert the so-called fiscal cliff, tax increases and spending cuts scheduled to begin Jan. 2.
Companies fear that failure to resolve the fiscal cliff will tip the economy back into recession by sapping consumer spending, damaging investor confidence and eating into corporate profits. A deal to avert the cliff could include tax-code changes, such as revamping tax breaks or rates, that hurt specific sectors.
Or, as before the election, an unstable business climate persists which does not provide any incentive to expand, spend or hire. In fact, as indicated above, it is providing precisely the opposite incentives. It’s one reason the GDP forecast for the country has been downgraded again to 1.5% (Mexico, for heaven sake, has GDP growth of 3.2%).
But when you vote for the status quo, well, you get what you vote for — enjoy.
In a case study of cutting your nose off despite your face, union members who walked out on strike at bankrupt Hostess Brands (makers of Twinkies and other well known products) and refused to return to work by yesterday have forced the company into liquidation. Of the 18,000 workers who will lose their jobs, about one-third were union members.
The company had offered a compensation package that had cuts (to include an 8% pay cut). These were necessary during bankruptcy reorganization to keep the company afloat. The union refused the package and walked out.
Apparently, 100% of nothing is much better than 92% of something … especially in this job market.
Congratulations Bakery, Confectionery, and Tobacco workers and the Grain Millers International Union, among others. You put the capital “S” in Stupid, Selfish and Shortsighted (a crown previously held by the former union members of Eastern Airlines).
But I’m sure this will somehow end up being blamed on “greedy Capitalists” and be declared a “market failure” by the usual suspects.
The cultural corruption of entitlements should, by now, be well known. But it also is just as well known that our current system incentivizes the “Santa Claus” form of government vs. that of the night watchman. The end state is inevitable. It isn’t a matter of “if” but “when”.
“The more government takes in taxes, the less incentive people have to work. What coal miner or assembly-line worker jumps at the offer of overtime when he knows Uncle Sam is going to take sixty percent or more of his extra pay? Any system that penalizes success and accomplishment is wrong. Any system that discourages work, discourages productivity, discourages economic progress, is wrong.” – Ronald Reagan
You’d think that would be self-evident. Apparently it’s not. And if you doubt that, watch what happens next year as our “leaders” try to figure out how to get us to pay their way out of the mess they’ve made (and for which we’ve never, ever held them accountable).
All I could do when I read this was laugh. And laugh. And laugh:
The Danish government has said it intends to abolish a tax on foods which are high in saturated fats.
The measure, introduced a little over a year ago, was believed to be the world’s first so-called “fat tax”.
Foods containing more than 2.3% saturated fat – including dairy produce, meat and processed foods – were subject to the surcharge.
But authorities said the tax had inflated food prices and put Danish jobs at risk.
Gee, Econ 101 strikes again.
And we know we’re a nation of math scholars – NOT.
Seriously though, you shouldn’t have to be a math scholar to understand what constitutes unsustainable fiscal conduct. We seem to be a nation in denial. So was Greece and reality didn’t pay a bit of attention to their desire to ignore the math that put them in the situation they now enjoy. We, however, continue to think we’ll be an exception to reality.
Good luck with that. From Zero Hedge:
The amount of debt required today to create a single dollars’ worth of GDP today is clearly unsustainable. However, the current Administration has been increasing Federal debt at a run rate of more than $1.2 Trillion annually to date. The understanding of the impact of increasing debt on economic growth is crucially important to understand.
As we discussed recently in “Debt and Deficits: Killing Economic Prosperity” it is “the economic impact of spiraling debt levels that have eroded economic growth. Debt is, by its very nature, a cancer on economic growth. As debt levels rise it consumes more capital by diverting it from productive investments into debt service. As debt levels spread through the system it consumes greater amounts of capital until it eventually kills the host.
The current Administration, however, is trapped into the belief that “big government” is the solution to the long term economic ills. However, a simple look at the impact of debt increases on economic growth tells us that this approach is misguided.
It is not “misguided”, it is flat wrong. And there are tons of examples to make the point. But, we’ve just seen the status quo given another 4 years to redefine “unsustainable” into something from which we can’t recover (btw, 4th quarter GDP has been downgraded to 1.5%).
The good news?
Well the good news is “lady parts” will be “safe” for those 4 years unless, of course, the unsustainable crashes and then, well, I guess the Sandra Flukes of the world will have to find a new provider of contraception.