I saw this list of the 12 worst Supermarkets earlier today.
I was pretty sure Shaws, the local monopoly in Cambridge, MA, would be number one but it fell all the way to #3 because the stores are clean. Ranked just above it, at #2, was Wal-Mart.
Yes, Wal-Mart, the largest grocer in America, which faces stiff competition from a variety of regional chains and yet tends to dominate wherever it goes . . . is the kind of place no one wants to shop at.
So what should we trust, what people do when they go and shop there, or what they say when they say it is one of the worst supermarkets?
Probably the former. The survey (apparently) gives equal wait to prices, cleanliness, food quality, and service. That means Shaws can make up for 30 and 40% markups by having a clean store with clear aisles. But would you be willing to pay 30% more for the right to shop in a cleaner store? I'm not.
Wal-Mart customers complain about long lines, bad meat, and poor service, but are "highly satisfied" with the prices. Evidently if I can shave $50 off you grocery bill you're wiling to wait 10 extra minutes in line. That make's sense. $50 for 10 minutes works out to $300/hour for your time.
Sunday, March 31, 2013
Friday, March 29, 2013
Cost Analysis: Flex Time Edition
Slate has a great cost-analysis of flex time for workers with young children.
As regular readers know, I write about cost analysis because it fixes a major problem with cost-benefit analysis: it requires you to think about why a plan is good and why it is bad and make tradeoffs and tough choices. Cost analysis is black and white: we obsess over why an idea is bad so we can trash it without any regret about benefits we are sacrificing.
The basic idea in the Slate article is that, without flex time, women can either be career women or stay-at-home moms without much of a career.* Flex time gives women a third option with more work-life balance, but by opening the door for work-life balance some women choose to get out of the rat race and as a result (on average) women earn less, work fewer hours, and will ultimately have fewer top positions in their field.
The only problem I have with the article is this sentence:
* - This is an exaggeration. Obviously there are many ways to do some of each, so flex time really just expands women's options.
As regular readers know, I write about cost analysis because it fixes a major problem with cost-benefit analysis: it requires you to think about why a plan is good and why it is bad and make tradeoffs and tough choices. Cost analysis is black and white: we obsess over why an idea is bad so we can trash it without any regret about benefits we are sacrificing.
The basic idea in the Slate article is that, without flex time, women can either be career women or stay-at-home moms without much of a career.* Flex time gives women a third option with more work-life balance, but by opening the door for work-life balance some women choose to get out of the rat race and as a result (on average) women earn less, work fewer hours, and will ultimately have fewer top positions in their field.
The only problem I have with the article is this sentence:
This kind of work-life balance may make for happier women—consider the Netherlands, where women are quite happy . . .By acknowledging that flex time makes women happier you're acknowledging the tough tradeoff between happiness and money/prestige that women face. No one wants to hear about how you can't have a work 60 hours a week earning money and spend 8 hours a day with your family and get 8 hours of sleep.
* - This is an exaggeration. Obviously there are many ways to do some of each, so flex time really just expands women's options.
Thursday, March 28, 2013
Fans say time keeper should not decide the game
The NBA league office confirmed that time should have expired when Kobe Bryant made a game winning shot against the Minnesota Timberwolves on Saturday night.
The league office statement explained that "the time keeper did not want to let the clock decide the game." An anonymous source clarified that "[w]ith just 0.8 seconds remaining Kobe may not have had time to set up a decent shot if we started the clock when he received the inbounds pass" so the time keeper decided that "it was not up to [him] to decide the game, so he let Kobe spot up before starting the clock."
Lakers' Coach Mike D'Antoni commented that "They should start the clock, I think, in theory, but also in theory they want players to decide the game. So, I can understand it" before adding that "[t]his is Kobe Bryant was are talking about, the normal rules don't really apply, right?"
Timberwolves coach Rick Adelman, best known for losing game 6 of the 2002 Western Conference finals to Kobe's Lakers due to 22 inexplicable free throws awarded to the Lakers in the 4th quarter, was fuming after the game. "If you are going to not start the clock in order to give Kobe a shot, why not wait until we get another shot as well?" The league office fined Adelman $5,000,000 for making "a really retarded comment."
When asked about whether the shot came in time at shootaround the next morning Kobe was incredulous. "If time is still on the clock, I got it off in time. Like Fish." referring to the game-winning shot Derek Fish took 0.6 seconds to make when the clock only had 0.4 seconds left.
The league office statement explained that "the time keeper did not want to let the clock decide the game." An anonymous source clarified that "[w]ith just 0.8 seconds remaining Kobe may not have had time to set up a decent shot if we started the clock when he received the inbounds pass" so the time keeper decided that "it was not up to [him] to decide the game, so he let Kobe spot up before starting the clock."
Lakers' Coach Mike D'Antoni commented that "They should start the clock, I think, in theory, but also in theory they want players to decide the game. So, I can understand it" before adding that "[t]his is Kobe Bryant was are talking about, the normal rules don't really apply, right?"
Timberwolves coach Rick Adelman, best known for losing game 6 of the 2002 Western Conference finals to Kobe's Lakers due to 22 inexplicable free throws awarded to the Lakers in the 4th quarter, was fuming after the game. "If you are going to not start the clock in order to give Kobe a shot, why not wait until we get another shot as well?" The league office fined Adelman $5,000,000 for making "a really retarded comment."
When asked about whether the shot came in time at shootaround the next morning Kobe was incredulous. "If time is still on the clock, I got it off in time. Like Fish." referring to the game-winning shot Derek Fish took 0.6 seconds to make when the clock only had 0.4 seconds left.
Tuesday, March 26, 2013
Why Medicare bills are like College Tuition
Imagine you're married and have two teenagers. Somehow you ended up with $25,000 in credit card debt and payments are you don't know how it happened. Since you kids are in their teens you know that in a few years they will go off to college and tuition bills will start arriving in the mail. You don't want to get deeper in debt in the future so you've dedicated most of your financial planning to dealing with those tuition bills.
Does that make any sense?
Sort of. That is how most policy wonks think about the federal budget. The U.S. is deep in debt and Medicare costs are increasing rapidly. If costs continue to grow as the baby boomers retire the country will be forced to run massive deficits (or raise taxes) to pay those big bills off on the horizon.
But the question everyone is interest in today is how the U.S. got so deep in debt and what we can do to get out of debt. To understand why we have a large debt today you have to focus on what we spend money on in the past, not what we will spend money on in the future.
The fixation on future costs has led many to minimize discretionary spending. Their projections assume discretionary spending will decline as a percentage of GDP into irrelevance while Medicare costs will explode. So the talking point for the anti-sequester bloc is that "discretionary spending isn't a real problem so we don't need the sequester."
1) It is like saying "I don't need the medicine, the doctor said I would heal."
Projections of declining discretionary spending are based on the premise that Republican leadership will remain obsessed with cutting discretionary spending to the bone. Telling them to stop worrying about the problem because it is going to get fixed is like saying you don't need to take the medicine (the sequester) because the doctor said you would feel better next week (... if you take the medicine).
2) We have a huge debt because of discretionary spending.
This point cannot be emphasized enough. If discretionary spending was so obviously going to recede into irrelevance why hasn't it happened yet. In theory when the Cold War ended there was going to be a major "peace dividend" as military spending decreased. Why did it go? Military spending remains close to 5% of GDP when costs for the wars are factored in and are two biggest factor in explaining why the U.S. fiscal position deteriorated over the past decade.
Does that make any sense?
Sort of. That is how most policy wonks think about the federal budget. The U.S. is deep in debt and Medicare costs are increasing rapidly. If costs continue to grow as the baby boomers retire the country will be forced to run massive deficits (or raise taxes) to pay those big bills off on the horizon.
But the question everyone is interest in today is how the U.S. got so deep in debt and what we can do to get out of debt. To understand why we have a large debt today you have to focus on what we spend money on in the past, not what we will spend money on in the future.
The fixation on future costs has led many to minimize discretionary spending. Their projections assume discretionary spending will decline as a percentage of GDP into irrelevance while Medicare costs will explode. So the talking point for the anti-sequester bloc is that "discretionary spending isn't a real problem so we don't need the sequester."
1) It is like saying "I don't need the medicine, the doctor said I would heal."
Projections of declining discretionary spending are based on the premise that Republican leadership will remain obsessed with cutting discretionary spending to the bone. Telling them to stop worrying about the problem because it is going to get fixed is like saying you don't need to take the medicine (the sequester) because the doctor said you would feel better next week (... if you take the medicine).
2) We have a huge debt because of discretionary spending.
This point cannot be emphasized enough. If discretionary spending was so obviously going to recede into irrelevance why hasn't it happened yet. In theory when the Cold War ended there was going to be a major "peace dividend" as military spending decreased. Why did it go? Military spending remains close to 5% of GDP when costs for the wars are factored in and are two biggest factor in explaining why the U.S. fiscal position deteriorated over the past decade.
The Health Care Cost Crisis
Policy wonks around the country agree that the U.S. has a serious health care cost crisis.
As Peter Orzag notes, Medicare currently takes up about 3.8% of GDP and that proportion could rise to 6.8% by later this century. But Medicaid costs are also increasingly rapidly as are private sector so total health care expenditures currently take up 17% of GDP and could rise to 30% of GDP by 2040.
But first, you might be wondering why I'm only talking about the problems with spending money on health care. It is because the fact that fewer people are dying because of all of this money invested in health care is something we can safely ignore. When every other industries grow, like the cell phone industry or the automobile industry, we celebrate all the "job creation" and value the higher quality of new products. In fact, that is why we those industries grow: people like their products so much they spend more and more money on them. But health care is different for reasons I can't explain.
The chart below should the historical pattern from 1945 to 1995 as more of our resources were dedicate to healing the sick.
As you can easily extrapolate why out of sample, health care could easily take up 0.3% of GDP by 2040. Wait . . . that can't be right. Oh, sorry, this is a graph of movie ticket sales as a percentage of GDP. And since it ignores DVD, VHS, and streaming video sales and rentals, obviously it understates the percentage of GDP we are dedicating to movies and entertainment.
I think I just diagnosed America's movie cost crisis.
As Peter Orzag notes, Medicare currently takes up about 3.8% of GDP and that proportion could rise to 6.8% by later this century. But Medicaid costs are also increasingly rapidly as are private sector so total health care expenditures currently take up 17% of GDP and could rise to 30% of GDP by 2040.
But first, you might be wondering why I'm only talking about the problems with spending money on health care. It is because the fact that fewer people are dying because of all of this money invested in health care is something we can safely ignore. When every other industries grow, like the cell phone industry or the automobile industry, we celebrate all the "job creation" and value the higher quality of new products. In fact, that is why we those industries grow: people like their products so much they spend more and more money on them. But health care is different for reasons I can't explain.
The chart below should the historical pattern from 1945 to 1995 as more of our resources were dedicate to healing the sick.
As you can easily extrapolate why out of sample, health care could easily take up 0.3% of GDP by 2040. Wait . . . that can't be right. Oh, sorry, this is a graph of movie ticket sales as a percentage of GDP. And since it ignores DVD, VHS, and streaming video sales and rentals, obviously it understates the percentage of GDP we are dedicating to movies and entertainment.
I think I just diagnosed America's movie cost crisis.
Monday, March 18, 2013
Is the NYTimes the web's most unscrupulous business?
There are a lot of scumbags running scams on the Internet but it's usually easy to sort out Nigerian princes from legitimate businesses.
The exception is NYTimes.com
The Times is running an outdated business model, investing heavily is coverage that is occasionally excellent (David Leonhardt on economic policy) but mostly mediocre. Few people are willing to pay for it with so much free competition.
So if the Times can recruit new customers what are they gonna do?
Hold their current base hostage, of course.
NYTimes: Working hard to conform to stereotypes and conspiracy theories since (at least) 2013.
The exception is NYTimes.com
The Times is running an outdated business model, investing heavily is coverage that is occasionally excellent (David Leonhardt on economic policy) but mostly mediocre. Few people are willing to pay for it with so much free competition.
So if the Times can recruit new customers what are they gonna do?
Hold their current base hostage, of course.
That isn't a misprint.
You can sign up online but you can't cancel. You have to call their customer service line, which is only available about half the time, tell them your name, e-mail, and address and refuse two hard sells (99 cent for 4 weeks, 50% off for 12 weeks).
NYTimes: Working hard to conform to stereotypes and conspiracy theories since (at least) 2013.
Saturday, March 16, 2013
Why You Don't Have Any Wealth
The NYTimes has a story about how my generation has less wealth than my parents with the subtext that this is a serious problem.
The "problem" is that my generation is investing more in education so we have more student debt and we take longer to get into the workforce.
We make more money, especially when you take into account the life-saving health care we of get as a fringe benefit,* but it takes longer before we start earning. The result is that in our 20s we received far fewer paychecks than our parents did and as a result we've earned less in wages.
No one really doubts that by the time we reach our 40s and 50s everything will have flipped. We will catch up with our parents, pass them, and soar to new high, and probably accumulate more wealth along the way, but while we're young we have more debt (from higher investment) and less savings (from lower income).
Another less misleading way to think about it is that we DO have a lot of wealth but it isn't in real estate, stocks, or bonds, it is in what economists call human capital (i.e. education and experience). Our "lack of wealth" is misleading because it doesn't count our primary asset.
If that sounds abstract a simple example shows what I mean. Would you rather be a newly minted M.D. earning $150,000 a year with $100,000 in debt our a department manager at Wal-Mart earning $35,000 a year with $30,000 in equity in his house? The department manager has $130,000 more wealth but if you take into account human capital the doctor has over $1,000,000 more wealth.
* - An example: when I was born there was an experimental procedure to eliminate a congenital heart defect I was born with. By the time I was 8 my mom felt it was safe enough to try and now I no longer have a 1 in 200 chance of sudden death. If I were born in the 60s that wouldn't be true.
The "problem" is that my generation is investing more in education so we have more student debt and we take longer to get into the workforce.
We make more money, especially when you take into account the life-saving health care we of get as a fringe benefit,* but it takes longer before we start earning. The result is that in our 20s we received far fewer paychecks than our parents did and as a result we've earned less in wages.
No one really doubts that by the time we reach our 40s and 50s everything will have flipped. We will catch up with our parents, pass them, and soar to new high, and probably accumulate more wealth along the way, but while we're young we have more debt (from higher investment) and less savings (from lower income).
Another less misleading way to think about it is that we DO have a lot of wealth but it isn't in real estate, stocks, or bonds, it is in what economists call human capital (i.e. education and experience). Our "lack of wealth" is misleading because it doesn't count our primary asset.
If that sounds abstract a simple example shows what I mean. Would you rather be a newly minted M.D. earning $150,000 a year with $100,000 in debt our a department manager at Wal-Mart earning $35,000 a year with $30,000 in equity in his house? The department manager has $130,000 more wealth but if you take into account human capital the doctor has over $1,000,000 more wealth.
* - An example: when I was born there was an experimental procedure to eliminate a congenital heart defect I was born with. By the time I was 8 my mom felt it was safe enough to try and now I no longer have a 1 in 200 chance of sudden death. If I were born in the 60s that wouldn't be true.
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