One of the things I like about economics is how it can explain so many things in the world around us. For example, I’m writing this in a coffee shop on a major street by a large university. (It’s not actually a great place to do work. Too much commotion. Students are coming in and out, as are people having brief meetings in a focal location.) Like most coffee shops nowadays it has free wifi, and as expected my two nearest neighbors are also wearing headphones and typing away. But unlike most coffee shops that I’m used to—residents of New York and San Francisco might have different expectations—they charge for refills. $0.54 is not a lot, but it’s a bit of a hassle. Why would they do this?
As I mentioned, it’s a high-traffic area. While they want people to come in, they don’t necessarily want them to stay all day drinking coffee. At my undergraduate university I had a coffee shop I hung out in all the time, and I definitely stayed for hours between classes, but it was different by not being nearly so busy. Thus they didn’t need their customers to be in and out quite so fast. As this coffee shop they’d quickly reach their capacity if lingering had too low of a cost. A small change in the cost, 54 cents a refill, apparently makes all the difference. It’s fairly full at the moment, but not so full that newcomers can’t find a spot. Coffee refills are not what they’re mainly charging for. They’re charging for time in seats.
They could offer free refills, but it appears they’d lose money doing so. It costs money to run a coffee shop, and with the small refill fee they’ve struck a balance between being hospitable enough that people want to come but not so hospitable that they block other people from coming.
P.S. It was the first thing I noticed, but I forgot to add that they also don’t seem to have electrical outlets accessible to laptop users, presumably for the same reasons as above. Other locations owned by the same people do, and also don’t charge for refills.
I’ve seen a lot of attacks against libertarianism in highbrow media outlets in the last few years. I take this as a good sign overall, even if the attacks rarely if ever have anything convincing in them. I’m not just being partisan; I’d welcome a good critique. But so far I’ve been disappointed. My goal on this blog is not to defend libertarianism per se. I am a libertarian, and I think you should be too, but it’s really not my purpose here. I keep this blog as a sort of scratch pad for economics-related thinking.
However, I couldn’t resist commenting on Claude Fischer’s odd hit piece “Libertarianism is Very Strange”. Not so much for the misunderstanding of libertarianism, which is part of it, but for the strange lack of consistency and the economic error(s). The latter first. Fischer writes on the historically odd emphasis libertarians place on individualism:
For most of history, including Philadelphia, 1776, more humans were effectively property than free. Children, youth, women, slaves, and servants belonged to patriarchs; many patriarchs were themselves serfs to chiefs and lords. And selling oneself into slavery was routine for the poor in many societies. Most world cultures have treated the individual as a limb of the household, lineage, or tribe. We moderns abhor the idea of punishing the brother or child of a wrongdoer, but in many cultures collective punishment makes perfect sense, for each person is just part of the whole. [emphasis added]
That’s one way to look at the rationale behind collective punishment, but not a very good one. Why else might other, mainly earlier societies use collective punishment?
This is a law & economics question. The answer is not that “each person is just part of the whole” but that when resources for law enforcement are very limited, it is a more efficient way to get people to modify their behaviors than punishing only the lawbreaker. By making my family liable for the crimes I might commit, the costs of monitoring me shift from the authorities to my family, i.e. from the high-cost observer to the low-cost observer. With greater knowledge of what I’m doing, they’re more likely to nip my criminal impulses in the bud than some distant, near-sighted authority. You’ll notice that collective punishment tends to disappear as societies become wealthier and can thereby support more capable law enforcement, as well as allowing them to rely less and less on their families, clans, or communities and more and more on the impersonal economy.
In general, this is a problem throughout the piece. Sociological analysis is one way to understand the world, and through this lens the best explanation might seem to be in how the members of society conceive of themselves. Economic analysis is another, and its evolutionary logic does a much better job of explaining this phenomenon without having to read minds. And it doesn’t rely on society being logically prior to individuals, which is good because there is no singular entity that is society. Society is a collection of individuals. Connected and interdependent in many complicated ways though they may be, only they think, choose, act, etc.
Later in the piece, Fischer makes another claim:
Americans’ life expectancy, health, physical security, and living standards soared in the 20th century—not, however, because of the march of libertarianism, as Domenech insinuates, but in great measure because of the welfare state and of regulation of food, medicine, water, work safety, pollution, and so on. Personal liberty itself has also improved in the last century, with civil rights for minorities and women and broader guarantees of civil liberties. These advances, too, largely developed not against government but with it.
A lot of people believe this in full or in part, including economists. But there are so many other factors involved that this claim is misleading in its oversimplification. Why didn’t the regulatory era happen much sooner? Put differently, why didn’t it happen until social product and tax revenues were high enough to sustain it? If some European monarch had tried to implement a modern-looking regulatory system in the late Middle Ages, how would it have gone?
The field of public choice is full of case studies in which government intervention into the economy or society more broadly have negative social benefits, and they almost always have some high-sounding purpose. It may be the case that some of these interventions were socially beneficial, sure. But it also may be the case that technological progress would have taken us even further than it has if it were not for governments intervening on behalf of powerful interests. Showing a blithe disregard for a century and more of incredible technological progress is easier than wading in to separate the helpful from the unhelpful and seeing what the balance is. You don’t have to be a libertarian to see that such a gross oversimplification is irresponsible at best.
My broader takeaway is Fischer’s inconsistency. Libertarianism is silly because it’s ahistorical—a factual claim I would dispute in a longer post, but will let slide here—but somehow this doesn’t apply to, say, all other political philosophy ever? Rawls does not suggest that the original position behind the veil of ignorance is realistic. Hobbes does not suggest that we agreed to an absolute monarch to protect us from each other. What Fischer criticizes Nozick for is what political philosophers have been doing for quite a while, including political philosophers Fischer probably likes.
Moreover, isn’t it good to have goals? The past was awful in a million ways. Isn’t it good to envision a society that is awful in as few of them as possible? And shouldn’t we incorporate economics into it so that we can be sure our means can accomplish our ends and our best intentions don’t run off the rails?
Most of the attacks against libertarianism that I mentioned above have been poorly done hit pieces that we’ll look back on one day and laugh at. Fischer is no hack, but he doesn’t do much better. In attacking libertarianism he makes other errors, and these undermine his case more than his political priors.
The three most sensational recent measures to legalize the possession and consumption of marijuana, those of Uruguay and the US states of Colorado and Washington, also include provisions for its cultivation, distribution, etc., or at least provisions for future provisions, not just for its use. Many advocates of the former phenomena are not advocates of the latter. In fact, FEE just posted this Facebook status update about the licensing scheme in Colorado:
Some libertarians oppose marriage licenses for same-sex couples because they don’t want the state in the marriage business. (One argument like this was made in our first Arena.)
Are the licensed marijuana shops in Colorado a step in the right direction, or a step back because the state shouldn’t license businesses period?
As a libertarian, I see the logic. I don’t think the moral or efficiency arguments are convincing for licensing business in general. But I don’t consider it especially important when analyzing the policies. The real value of these legal changes is not in how they affect the cultivation and distribution of marijuana. The real value is that law enforcement agencies at the relevant level of jurisdiction will no longer be able to arrest people for possession! If this seems silly or obvious, my response is: don’t overthink it. The ability of law enforcement agencies to arrest people and ruin their lives—and the rule of law—based on actions that are not (very) socially destructive is an incredibly antisocial force. In practice, this is a cure incalculably more harmful than the disease it aims to counteract.
As we already know, legal marijuana outlets are not where most marijuana purchases are made. I don’t expect these new systems to change that fact. In fact, I fully expect the federal government of the US to try to clamp down on state-licensed outlets in Colorado and Washington. Socially speaking, this is a small price to pay for the ability of the common man to possess a plant that is comparable to alcohol without risking jail time for it. It can hardly be the case that people found in possession of marijuana will be made to produce documentation showing that they purchased it through state-approved channels. The licensing issue is really a distant second place.
One of my top ten movies of all time is the classic 1979 flick The Warriors. It’s based on (a novel that’s based on) Xenophon’s Anabasis, updated so that it follows a gang based in Coney Island whose members have to fight and sneak their way back from the Bronx, dodging the police and every other gang in New York City along the way. If you haven’t seen it, I recommend it. It’s not a spoiler to tell you that the viewer finds out they’re marked men almost immediately, while the characters themselves only find out during the course of the movie. </intentionally vague>
I owned a cell phone for several years before I ever saw The Warriors. I couldn’t help thinking, even as I first watched it, that you could never make a movie like that nowadays. Cell phones make it so easy to exchange information that our world is very different from the world of 1979. I remember a time when, like almost all human beings who ever lived, I had to coordinate plans with people without cell phones. It seems like a different era!
Innovation changes our lives on different margins all the time, and we rarely get the opportunity to appreciate it. Whether innovation is in technological capability, organizational practices, or social movements, it’s disruptive. It changes things. It’s a minor, relatively unimportant consequence that a book or movie like The Warriors would simply not be believable in the modern day. It’s a much more important consequence that a movie like 12 Years a Slave could not be made in the modern period.
Hardly any significant change in the world happens quickly. Most important progress is made a little at a time. These increments of progress are so small we rarely notice them individually, and only when the dam bursts does the broader picture become intelligible to us. A dramatic event like the American Civil War is easy to remember and point to, but the elimination of institutional slavery throughout the civilized world was several hundred years in the making.
I don’t mean to suggest that we should not aim for large-scale reforms of things we find objectionable. Obviously it is important to keep end goals in mind. I only mean to say that most of the things we consider victories when we look back at history were the accumulation of innumerable smaller things that were not usually memorable in themselves. What starts as the impossibility of remaking The Warriors in the present ends up as the impossibility of remaking 12 Years a Slave in the present.
One of the problems involved with discussing a minimum wage or increases in the current minimum wage is that, for most people, this is a Democrat vs. Republican issue. As the issue usually goes for left-leaning people, Democrats are trying to help poor people, so they favor increases in the minimum wage, and Republicans are indifferent to the suffering of the poor and only interested in helping wealthier people (roughly speaking, employers), so they oppose increases. As the issue usually goes for right-leaning people, Democrats are trying to interfere with the free market based on an ideological crusade, while Republicans are trying to defend the free market against this kind of political interference which helps Democrats in the short run and hurts the economy as a whole in the long run.
To an economist, this kind of political focus is a distraction at best. While many, perhaps most economists in the United States have some kind of party affiliation, this is not a political issue so much as a technical issue. As a technical issue, there’s a better and a worse answer, and these don’t depend on the ideology of the person advancing the argument.
I have no party affiliation. When I say I don’t favor increases in the minimum wage, it’s not because I buy the Republican argument. It’s because I don’t buy the monopsony argument. And because the economic theory we all rely on doesn’t support minimum wage increases as helping the lot of the poor. And because I don’t believe that either Republicans or Democrats are particularly correct in their positions; politics is mostly about symbolism, and the consequences, frankly, are for nerds to work out quietly where nobody will notice. Ultimately, it’s because I think increases in the minimum wage harm most people, and most directly harm the worst off among those physically and mentally able to work.
If the Democratic Party really cared about helping the poor in the long run, I’d be sympathetic. If the Republican Party really cared about the free market, I’d be sympathetic. It’s just that I see little evidence that they actually hold those positions. As far as I can tell, making war on the poor and on the free market is part and parcel of what both parties do. One of the things I appreciate most about the left-libertarian movement is how its adherents devote so much energy to cataloging the innumerable ways that governments make war on the poor by making war on the free market. There are excellent theoretical reasons to think that if the free market actually existed anywhere, instead of a very thoroughly mixed economy in most places, this would be a good thing for the poor. The winners in the current system are already the winners; they gain little by changing the game.
I worry that what I’m writing here may be incomprehensible to the average political partisan in the United States or Europe. To break everything down into good guys vs. bad guys is too easy a mental error to make, and to step outside of that framework is too unfamiliar. But economics does, in fact, deal with technical issues and not partisan issues.
Many US cities and counties have implemented plastic bag taxes at grocery stores, raising the price of the bags. This is rightly interpreted as a measure that will cut down on the use of plastic bags. I don’t think anybody believes a tax of 5¢/bag will eliminate their use entirely, but I can’t think anybody doubts it will lead to fewer bags being used. Shoppers react in predictable ways. If buying a small number of items, they may skip the bag. They may put more items into each bag than they would have before. Some shoppers now bring their own reusable grocery bags to the store.
The US federal government, US states, and more local levels of government apply excise taxes to gasoline, raising the price of the gasoline. These revenues go to fund a variety of other things, mainly road construction and maintenance, but it is also widely (and correctly) believed that increases in gasoline taxes lead to less gasoline being purchased. Drivers react in many ways. They may use other forms of transportation more, carpool, combine errands into one trip, etc., and in the long run buy more fuel efficient automobiles.
Most proponents of these taxes acknowledge that, yes, the product in question is used less than it would be otherwise because of the tax, but think it’s a good thing. One may agree or disagree about the desirability of the consequences, but I don’t find that people dispute that the people who purchase and consume the resources will adjust in certain predictable ways along certain predictable margins.
For my final example, the US federal government, almost all US states, and many more local levels of government have legislated minimum prices for labor, raising the price of some labor…
People may agree or disagree about the desirability of the consequences, but to pretend that there is no tradeoff happening is irresponsible at best. If you recognize the economic logic at work in the first two examples, it takes a lot of explaining to do to say that the same economic logic doesn’t apply in the third. It’s entirely possible that countervailing phenomena at play in the labor market overwhelm this phenomenon; many economists brighter than I am have claimed this to be true. But simply asserting that the minimum wage is a matter of social justice or social responsibility does not help you understand the actual effects, nor does it help the people whose labor has been adjusted away from by purchasers of labor. Of course it’s a desirable goal that the worst off should see their lot in life improve, but what’s at issue is whether this policy actually does that or not. If the goal is important, it’s important to find out if the means chosen to achieve that goal can actually do it.
For more information on this topic, I recommend about 100 posts on Cafe Hayek.
The charge of thinking about people atomistically is frequently leveled at libertarians, often at economists, and inevitably at libertarian economists. I find that particularly ironic in the face of some “living wage” arguments. The idea that a low-skilled laborer deserves a wage he can live on, and in some variants support a family on, presupposes that he needs to live on it. While it’s true that many unskilled and low-skilled jobs are done by adults, a great many of them are done by teenagers who do not live on their own and hence do not “need” to be able to support themselves. Even among adults, many adults in low-wage positions live with other workers, whether roommates, partners, or spouses. To assume that all low wage earners are therefore struggling to get by and need help from policy makers seems, well, atomistic.
Everybody wants low-wage earners to be better off. I also grant that many people are desperately poor and have few or no options for help from family, friends, and others. But policy does not happen in a vacuum, and low-wage earners are not atomistically separate. It is socially irresponsible not to take these facts into account when considering policy.