Monday, March 30, 2015

Highly Linkable

Doin' the wave. (don't miss the video at the bottom)

Michael Pollan drops in to see what condition LSD's condition is in. [HT: Tyler Cowen]

Guess I'll have to dial back my snobbish detesting of the imbeciles who are doing tomatoes "wrong".

And while we're getting off our dietary high horses, Megan McArdle offers some balanced food for thought.

Accountability is an important concept. We should apply it to important institutions like the Fed; so argues Scott Sumner and George Selgin. Bash the Fed!

We end with three on immigration: First, Adam Davidson in the NYT Magazine debunks the myth of the job-stealing immigrant (HT: John Cochrane). Second, Bryan Caplan challenges the idea of immigrant idleness. Third, Arnold Kling reasonably dismisses the conservatarian argument against immigration.

Sunday, March 15, 2015

On The Boats, And On The Planes . . .

For roughly 70 years since end of World War II, we've been trying to bring America to "them". Isn't it time we gave bringing "them" to America a try?

What a better way to demonstrate the virtues and strengths of our relatively free and open society? This is my essay for Open Borders Day 2015.

We've spilled oceans of blood and mountains of treasure fighting for change in foreign lands. It seems that the best way to make the world safe for democracy is to let the most people into the world's leading democracy.

Instead of exporting The American Dream as an ideal, why not import those who wish to live the dream on very soil from which it springs? I know, I know . . . goods are imported, people are . . . well, they are largely denied a chance to voluntarily participate in a society in which they desperately want to belong. Why must that be?

Do we fear they will arrive only to be wards of the state where they take more than they provide? Then have them forfeit or delay eligibility to the programs we fear they will overuse. Or have them pay an entry fee (tax) of a substantial amount.

Do we fear they will arrive only to begin voting for policies truly "un-American"? Then let them in conditional on not being citizens; therefore, not eligible to vote. Let them stay indefinitely in this status or perhaps be eligible for citizenship after however many years we believe it takes for the assimilation we desire. Of course, I might quibble that all these fears and restrictions are themselves un-American. Nevertheless, let us not argue a side point while those who await our decision suffer.

Do we fear they will arrive only to drive down natives' wages and dilute our standard of living?
Then we must be talking about productive, working people. Now ask yourself how much better or worse off your local community would be if a substantial number of the workers exited (or were removed) from said community.

Another way to look at this is to say, "then for goodness sake let them in!" Surely they will do less economic damage to us as fully part of our national economy being both producers and consumers than if they continue to afflict us with their asymmetric warfare of only being low-cost producers from afar. Disagree with that framing of the economics? Good. You should, but perhaps not for the reason you suspect--assuming you hold the immigration-diluted-economy fear.

Eventually all production must be matched with consumption. If would-be immigrants are producing from abroad things we are buying from them, they directly or indirectly must eventually buy from us (consume our production)--accepting our IOUs is consuming our production in the future. They are already producers and consumers in our economy--they just do it inefficiently from far away. If all of this leads you to the conclusion that we should close the borders to both things as well as people to preserve our economy, I would remind you that economies don't get larger by getting smaller. The bigger the market, the more it can provide, the more specialization it can allow, the more productive and efficient and creative and prosperous it can become.

It is kind to say that our attempts at bringing America to the world has been expensive and with varying results. But why would we expect otherwise? We seem to be solving the problem in the worst possible way--we are trying to move an entire country and ethos to a person rather than move the person to the country.

Someone is knocking at the door. Do us all a favor. Open the door. Let 'em in.

Saturday, March 14, 2015

Highly Linkable

Remembering the lessons of "Swamp Thing", 3-D printing DNA can make us more of what we already are.

Flying without getting the window seat is like dieting without looking in the mirror--where's the satisfaction?

And while you're flying, make one of these your destination.

This photo set represents the good, the bad, and the ugly of humanity. Prepare yourself before clicking.

Every bridge in America. (HT: Tyler Cowen)

A great example of how in well-functioning markets outcomes satisfy along multiple dimensions.

Bryan Caplan recycles a great piece that speaks to making the perfect the enemy of the good--don't let your quest for purity extinguish your chances for progress.

Scott Sumner provides example applications of what he calls The Wittgenstein Test. This is an effective way to check one's reasoning that I plan to start employing on myself.

Arnold Kling seems to not realize that "I want this to be; therefore, it is feasible" is a logical argument for some people.

It seems that the Republicans will be running with tax-reform as a central part of their agenda for 2016--one can hope, but don't hold your breath waiting for results. To that end Sumner says Rubio-Lee is great; co-blogger David Henderson says not so fast.

Disagreements about that particular bundle of tax proposals aside, I'm sure Henderson would agree with Sumner's analysis here of why a pure wage tax equals a consumption tax and that taxing capital income is VERY BAD.

One last one from Sumner: I agree with his analysis on what Democrats really want and where reducing inequality ranks. To those who want progress against inequality, which one should though the devil is in the details, I'll give the same advice as above--continue breathing.

Sunday, March 8, 2015

WWCF: Ultra-Luxury Shopping Malls or Widespread, Pervasive Free Samples?

Which will come first?

Ultra-Luxury Shopping Malls

or

Widespread, Pervasive Free Samples

We've been hearing about the death of malls for some time.

Evolution of shopping: It used to be an expensive luxury to go shopping--imagine Christmas shopping downtown in the big city in a black and white movie. The economies of scale both in production (better machines allowing low-cost labor to be more productive) and marketing (a big umbrella venue in the form of the traditional mall) worked for decades to make shopping more and more affordable. Malls couldn't exist until these factors reached a critical threshold. Then they became prolific. But something funny happened on the way to the Ridgemont Mall stereo store. 

Now shopping is again becoming too expensive for malls to provide it but not because of resource limitations but because of better alternatives. In both cases (the pre-mall and soon post-mall eras) opportunity cost are high (remember, opportunity cost is the only economically meaningful way to look at cost). It used to be that one needed to purchase a lot and purchase wisely given one's time investment in going shopping along with the goods offered for sale being a relatively big sacrifice. In steady progression the falling cost of goods and the improved experience meant that malls could command our shopping attention because they lowered the opportunity cost. Malls generally offered a more efficient alternative; although, the entertainment value of the mall cannot be overlooked. The mall was a big tent, bundled package much like a newspaper. It had a little bit of everything and could afford to accommodate nearly every taste because of the volume. Certain high-margin sales, which translated into profitable leases for the landlords, created opportunities for many low-margin sales--the marginal cost of adding costume jewelers and Orange Julius is pretty low once the mall is built and being paid for by anchor department stores.

However, today we have reached a state in which the alternative method of shopping, ordering online, dominates the efficiency of physical shopping by many orders of magnitude.* Compounding this problem for malls is the fact that there are many alternative forms of entertainment that make hanging out at the mall seem fairly dull. Hence, today the resource limitation is the ever-growing value of our time.

Are malls dead? Only malls as we knew them and in such numbers as we knew them. I predict a resurgence of destination shopping with and because of vastly enhanced luxury experiences. The retailer or landlord who masters this will enjoy rewards some will find surprising. These may not be the one-stop shop where "this mall has everything" and "the people of today's world hang out," but they will attract our time and wallet in a way that today's shopping malls cannot. I am thinking the magnitude of these differences will approach the differences between a day at Harrod's versus a trip to Wal-Mart and the experience at Bass Pro Shops and Cabela's versus the local bait shop. 

To be clear a qualifying "luxury mall" would have the following qualities:
  1. It would be a destination unto itself not just a shopping trip--many customers would go for the experience with no expectation of buying anything.
  2. It would offer a large variety of goods rather than a single theme.
  3. It would have a significant common space independent of any particular retailer.
  4. It would make past generations of mall goers feel completely out of the shopping league.

That was a long way to go to get to the first half of this WWCF. The second half will come quicker. Goods are getting fantastically cheaper as is shipping. Our time and attention continues to be scarce--in fact, it grows more scarce as our options of what to do with our time improve. One solution for marketers is simply giving the goods they wish to sell away for trial. Instead of targeted advertising to demographically attractive households, how about targeted distribution of the goods themselves? I am thinking a $100 purchase of household items from Amazon will come with a curated box of complementary items for free. The first of the month brings an unsolicited trial supply of "things you never knew existed and cannot possibly live without." Eventually, many households will come to expect this as the primary way to discover new, perishable goods. 

Which comes first? The adaptations to the mall experience have a bit of incumbency advantage being that the mall has a more symbolic and established position in our shopping lives. However, the sampling idea may have a faster ramp up. To make the competition more determinable I'll say the creation of the fifth luxury-type mall (new construction or massive renovation of existing space) competes against the regular delivery of unsolicited free sample goods to >500,000 households. These thresholds hopefully capture an established trend rather than a one-off beta test. I predict the free sample idea to come within 10 years and just before the luxury mall idea can qualify, but I believe both will spur along the other making it a quick finish. 


*Don't be misled by statistics that show only a small effect coming from online sales. I contend that heterogeneous-consumer, high-fixed costs businesses are generally very sensitive to small decreases in demand because they rely on a diverse, network-effect customer base that is harder to understand (hence, harder to regain once it begins to slip) and they cannot scale downward effectively.