Wal-Mart and more

[dsummersminet at comcast.net]

Original Message:
-----------------
From: David Hobby hobbyd at newpaltz.edu
Date: Mon, 18 Feb 2008 19:58:13 -0500
To: brin-l at mccmedia.com
Subject: Re: Wal-Mart and more


Dan M wrote:

>> Dan--
>>
>> I read Krugman regularly, and usually agree with him.
> 
> The quote of his is at:
> 
>
http://economistsview.typepad.com/economistsview/2005/12/paul_krugman_wa.htm

Dan--

>Looks familiar.  I bet I read it when it first came out.
>The gist is that Wal-Mart does not create retail jobs.
>It's more efficient than the smaller stores it replaces,
>so the result is fewer retail jobs overall.

>Now is that a bad thing, per se?  Efficiency is usually
>good, it means the work gets done faster.  I'd hope no
>one is proposing that we create jobs by having people
>work inefficiently?

>To me, the problem is that there simply aren't enough
>decent jobs to go around.  So we're left with a pool
>of underemployed people, who compete for the low
>quality jobs that remain.  While this keeps labor costs
>down, I'd argue that it's a bad way to set up a society.

I understand the problem you are stating and have sympathy for the
arguement.  Historically, the possibility of the rise of the serfs into a
middle class was based on efficiency....it probably goes back to the three
crop rotation system and the horse collar.

Efficiency always throws someone out of a job.  But, true efficiency (as
measured in productivity per worker...not per dollar spent ona worker,
creates wealth.  In a sense, it is wealth created out of nothing. If you
have two men making chairs at one per day each, and someone comes along
with a technique that lets one man make a chair a day....one man gets let
go, and the price of chairs goes down (after the fourth or fifth person
figures the technique out the price will be cut in half....less material
costs, etc.)

Historically, new jobs have always been created for the guys that lose
their job.  There is dislocation, but in the end just about everyone
benefits.



>> Different business sectors tend to have different profit
>> margins.  That explains some of it.
> 
> Sure it does, and I'm fully willing to state that the difference doesn't

>So "Sure it does" claims that "evil" has explanatory power?

No, I was unclear.  Different business sectors naturally having different
profit margines explains why Microsoft makes so much more profit than
Wal-Mart.   I agreed that the difference in profit margin does not indicate
Microsoft is evil.


>Back on topic, I'd guess that Wal-Mart is not actually evil.
>All you get is that it is amoral and greedy.

Companies by their very nature are amoral and greedy. When I negotiate for
a contract, I focus on the money I can make my customer, not on my need to
put 4 people through college/grad school.

>A more careful formulation would be:  "Is the average quality of life
>of lower income people better after a Wal-Mart store comes?"
>Now "quality of life" is slippery to define, so we may have to fall
>back on utility.  This would give:  "Will the total utility of the
>lower income people in a region be greater after a Wal-Mart store
>opens in that region?"  That's still imperfect, but I give up.

>For example, consider a change that puts half the population
>out of work while giving the other half a bit more than twice what
>they had originally.  The average income could go up, but I'd
>argue that total utility would go down.  It's worse to lose one's
>job than it is good to earn a bit more than twice as much.

But, historically, the extra money the first half has is spent on things
that employ the second half.  That is _the_ process that created an
American middle class out of dirt poor farmers who could barely feed their
families.

>Another wrinkle is that the unemployment could be both unavoidable
>and temporary.  So Wal-Mart could produce net harm in the short
>term, while producing net good over a longer period.  (When and
>if the people who lost retail jobs find other work.)


I think the problematic wrinkle is that the new jobs are not in the US, in
many cases, but in the Third World.  Folks who were in abject poverty are
now starting on the path the US started on 100 or so years ago.  India's
and China's per capita GDP are growing, between them, by better than 5% per
year, after inflation.  It's not evenly distributed, there is still abject
poverty, but literally tens of millions of people are taking the first
steps out of horrid poverty.

This is why things don't look so good for the US, I think.  Job growth is
at a historical low, because much of it is elsewhere.

But, it is still true that when we increase productivity, we increase total
wealth.  My arguement is that we should consider this an inherently good
thing (as long as we properly figure the costs).  We should not fight
productivity, but we should find a way to ensure that those who are the
inevitable losers from change (there will always be losers associated with
every improvement) will be supported by the community that benefits as a
whole from the change.

Dan M. 

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