Markets in Everything :: Hiring the homeless to buy Play Stations

Quote:

Thomas Rosatti and his buddies were first in line at the store. But shortly after they pitched their tent, they got company.

"A truck rolls up, one of those U-Haul type trucks, and seriously, 50 people rolled out, and he says they got them from the homeless shelter," Rosatti said.

While WRAL was there, the truck used to transport the men from the homeless shelter returned with food for the men. Abdul Salem said he and a friend came up with the idea. They said they plan to pay the men $100 a day to stand in line for a ticket to purchase a PS3 unit that costs around $600.

"It's got to be the eBay incentive," Salem said.

The eBay incentive is all about money. The going price on the site for a PS3 unit is approaching $2,000. Salem called his arrangement with the men from Raleigh's homeless community a win/win proposition.

Which leaves the question: why don't the homeless buy the PS3's for themselves? Lack of liquidity? Desire to have the money now rather than later? Poor access to resale market or lack of reputation in that market? Some of all these I suspect.

The link comes from Fark. See the Farkers' comments.

And there's more. Look who's getting in line: John "I was against Wal-Mart before I was for it" Edwards.

"Markets in everything" is a conception of Marginal Revolution.

TAGS: farkonomics, markets in everything

UPDATE: Wal-Mart manager comes up with way to save folks time waiting in line. What could possibly go wrong? Farkers explain.

Who's done more to lift people out of poverty? - Microfinance or WalMart

Greg Mankiw appproves of John Tierney's message. Tierney:

I don't want to begrudge the Nobel Peace Prize won last week by the Grameen Bank and its founder, Muhammad Yunus. They deserve it. The Grameen Bank has done more than the World Bank to help the poor, and Yunus has done more than Jimmy Carter or Bono or any philanthropist.

But has he done more good than someone who never got the prize: Sam Walton? Has any organization in the world lifted more people out of poverty than Wal-Mart?

The Grameen Bank is both an inspiration and a lesson in limits.
. . .
there's a limit to how much money villagers can make selling eggs to one another -- a thatched ceiling, as Michael Strong calls it. Strong, the head of Flow, a nonprofit group promoting entrepreneurship abroad, is a fan of the Grameen Bank, but he figures that villagers can lift themselves out of poverty much faster by getting a job in a factory.

The best way for third world villagers to tap ''the vast pipeline of wealth from the developed world,'' he argued in a recent TCSDaily.com article, is to sell their products to the world's largest retailer, Wal-Mart. Strong challenged anyone to name an organization that is doing more to alleviate third world poverty than Wal-Mart.

So far he's gotten a lot of angry responses from Wal-Mart's critics, but nobody has come up with a convincing nomination for a more effective antipoverty organization.

UPDATE: More at Cafe Hayek.

The American standard of whining - Forbes.com

Virginia Postrel writing in Forbes:

Wal-Mart and other superstores charge up to 27% less for food than traditional supermarkets, estimate economists Jerry Hausman of MIT and Ephraim Leibtag of the Department of Agriculture. But the BLS doesn't factor those lower prices into its inflation estimates. It simply assumes that Wal-Mart's price reflects worse service, and ignores the savings.

Government statisticians, Hausman complains, "want to act like accountants, and they don't want to take economics into account at all."

Using ACNielsen data from 61,500 households, Hausman and Leibtag calculate that grocery shoppers are 20% better off--not the full 27%--with a superstore shopping trip. "So some of the food isn't quite as good or the diversity isn't quite as good," says Hausman. "But you still get a huge boost."

Since groceries make up 12% of household spending and as much as 25% for low-income Americans, this distortion significantly understates real incomes, especially at the bottom.
...
Gordon [economist Robert J. Gordon of Northwestern University] is the author of a much-cited study showing that from 1966 to 2001 real income kept up with productivity gains for only the top 10% of earners. What the pessimists who tout his study don't say is that, while Gordon does find that inequality is increasing, he's convinced that the picture of middle-class stagnation is false.

"The median person has had steadily improving standards of living," he says. But real incomes have been understated. The problem lies in how the U.S. Bureau of Labor Statistics calculates the cost of living.

If you are for the little guy you should be a fan of big box stores. Yet Wal-Mart and other big box stores are routinely attacked by Democrats in the U.S. Congress. People have noticed.

A recent LA Times editorial:

The gusto with which even moderate Democrats are bashing Wal-Mart is bound to backfire. Not only does it take the party back to the pre-Clinton era, when Democrats were perceived as reflexively anti-business, it manages to make Democrats seem like out-of-touch elitists to the millions of Americans who work and shop at Wal-Mart.

One reason the Democrats may have a tin ear on this subject is demographic. Certainly most of the party's urban liberal activists are far removed from the Wal-Mart phenomenon. The retailer has thrived mainly in small towns and exurbs, which is one reason a Zogby poll found that three-quarters of weekly Wal-Mart shoppers voted for President Bush in 2004, and why 8 out of 10 people who have never shopped at Wal-Mart voted for John Kerry. Denouncing the retailer may make sense if the goal is to woo primary activists, but it's a disastrous way to reach out to the general electorate. Or to govern, for that matter.

Liz Peek writing in the NY Sun:

Wal-Mart has recently been named by Black Enterprise magazine as one of the country's top companies for diversity. The firm was also celebrated this year by Diversity Inc., Asian Enterprise Magazine, the National Association of Women, Black MBA Magazine, Careers & The Disabled Magazine and by Hispanic Magazine for similar accomplishments.

This is the company that Democrats are campaigning against?

That's just the beginning. Read the whole thing.

UPDATE: Virginia Postrel has more here and here.

Arbitrageurs are not terrorists

Quote:

DALLAS — The three Dallas-area men arrested in Michigan on state terrorism charges are well-known to cell phone wholesale and retail shops here, where managers said Monday they are part of a brisk trade in buying phones from Wal-Mart and other discount stores and reselling them to smaller shops.

In Michigan, meanwhile, the FBI said it has no information to indicate that the three Palestinian-Americans arrested with about 1,000 cell phones in their van on Friday had any connections to terrorism.
. . .
"For these guys, there is a lot of margin in these," said Sean Mobh, manager of Wireless Stop, a cell phone store on Harry Hines Boulevard in northwest Dallas. "There is a phone that they buy from Wal-Mart for 20 bucks and sell for $38."

Mobh said the group has come in "three or four" times in the last three months and he made one purchase of about 100 phones. They would usually sell prepaid TracFones, like the kind they were found with in Michigan, because Wal-Mart's discounts on them are so deep that they can make a nice resale profit.

"One trip and that's about $6,000 each minus gas and expenses," he said.

Mobh said the three men are among dozens of individuals in the competitive market of buying goods from Wal-Mart and other deep discounters and reselling them to other stores that mark them up and sell them retail or wholesale.

Mobh said he resells the phones in bulk in higher-priced markets such as New York or Los Angeles, or ships them abroad.

Wal-Marts in Dallas and other cities often are sold out of the most popular phones because of all the resellers about, so entrepreneurial types such as the Othman brothers and their cousin will travel long distances to find stores with inventory, several shopkeepers said.

UPDATE: Be sure to read the first comment. It adds great value to this story. From an economic point of view.

In praise of globalization :: Daniel W. Drezner :: Us greedy, chocolate-eating, Wal-Mart-shopping, family-protecting academics

Quote:

If Gendle wants to make his Elon students really ponder their consumer behavior, here's a question worth asking -- what is the welfare effect of not purchasing goods and services made in the least developed countries?

Read the whole thing.

Send in the clowns: Bastiat remembered

David Boaz at CATO offers us Hillary and the candlemakers: not a parody. Senatorial B.S. features prominently.

Wal-Mart shoppers, let's shine some disinfecting sunlight on Clinton's silliness.

Is what's good for Wal-Mart good for the Pentagon?
Just-in-time goes to war

The Washington Post's Take on Wal-Mart Bloggers :: Palousitics

Heh. Read the whole thing.

If bloggers are drama queens, what does that make NYT reporters?

If a reporter unilaterally emails me, am I obliged to assume that it is in confidence? What if someone from NYT visits my blog and it shows up on my SiteMeter [TM]? My open to the world SiteMeter? Beware the visits you make. The world can watch.

UPDATE: IRONY ALERT - The New York Times (IP 199.181.174) entered Emirates Economist on this permalink using the second Technorati tag below. Time: Mar 17 2006 10:57 am.
- - -
TAGS: Wal-mart, Michael Barbaro, Howard Kurtz

Wal-Mart enlists bloggers, cue controversy :: blogging4business

Quote:

It was only a matter of time before Wal-Mart tried to establish a foothold in the same forum that attacks it daily and has sprung to life such public advocacy groups as WalmartWatch.com and WakeupWalMart. And for this they should be congratulated. But I cannot help but think that much of Wal-Mart’s problems stem from its decades-long policy of closed-door PR, effectively creating a seal-tight vacuum of information around the company. I have been hung up on more times by a Wal-Mart PR in my journalism career than by any other company, bar none. Even with this trusty blog, I would doubt their policy towards me would change.

Message to Wal-Mart PR: Listen to Bernhard's message.

Wal-Mart enlists bloggers in its P.R. campaign :: New York Times

Very nice article by Michael Barbaro giving a solid presentation of views from all sides of the issue.

I suspect that I am like Michael Barbaro, which is that I do not always reveal my sources and my posts represent my thoughts and words. Quoted material is always clearly referenced/hyperlinked.

I am a recipient of Wal-Mart's newsletter to bloggers. Frankly, it provides little if any value-added to my blogging. An example of value-added is that it did immediately notify me of the NYT article. If that makes me part of the early-response team for Wal-Mart, so be it. My view is that it makes my blogs better for my readers.

My posts on Wal-Mart go back to my first days as a blogger. You can locate most of those posts with technorati:

1. Emirates Economist - Wal-Mart

2. New Virginia Church Man - Wal-Mart

TAGS: Wal-Mart, Michael Barbaro, Marshall Manson

Wal-Mart growth slows down :: Emirates Today

[Note to readers - Emirates Today links go stale in a short time.]

We very rarely read about Wal-Mart in UAE newspapers. Wal-Mart has not come to the UAE, but if it did it would eviscerate the many local shops that are poorly managed. Even hypermarkets here like the French-owned Carrefour have poor supply chain management - items can fly off the shelves and then not be restocked for months, if ever.

The striking thing about the Emirates Today article is that it only considers the American market for Wal-Mart. And it only discusses how Wal-Mart can grow further by adding a more upscale dimension to its merchandise offerings.

At least the article is accompanied by a photo showing Wal-Mart's first store in China. Wal-Mart will grow by expanding internationally.

Expect to see a Wal-Mart in your local emirate soon, especially now that the UAE is further liberalizing its foreign direct investment rules.

TAGS: Wal-Mart Carrefour UAE China

Hispanic Pundit is on a roll

I hadn't checked Hispanic Pundit for a while. Not so long ago he wrote he'd have to cut back on his blogging. Well now he's back to proving why he's one my favorite human browsers. Or perhaps he never dialed back. There's a reason he's on my shortlist of fellow travelers.

From his current collection:

1. Why Wal-Mart is supporting an increase in the minimum wage. (Or, how a corporation uses government to harm its competitors.)

2. The failed French model.

The secret history of the minimum wage :: Marginal Revolution

Lost jobs due to minimum wage? It's not a flaw, it's a feature!

Alex Tabarrok at Marginal Revolution tells us:

Progressives, including Richard Ely, Louis Brandeis, Felix Frankfurter, the Webbs in England etc., were interested not in protecting women but in protecting men and the race. Their goal was to get women back into the home, where they belonged, instead of abandoning their eugenic duties and competing with men for work.

Unlike today's progressives, the originals understood that minimum wages for women would put women out of work - that was the point and the more unemployment of women the better!

This sort of irony has me rubbing my economist hands together Mr. Burns like. Excellent!

Mahalanobis had a post in a similar vein last year. He quotes from a Journal of Economic Perspectives "Recommendations for further reading":

What distinguished supporters of minimum wages from their marginalist opponents was how they regarded minimum-wage-induced job loss. Whereas the marginalists saw disemployment as the principal cost of binding minima, indeed as the reason to oppose minimum-wage legislation, minimum-wage advocates regarded minimum-wage-induced disemployment as a social benefit—a eugenic virtue of legal minimum wages. Sidney and Beatrice Webb ([1897] 1920, 785) state it plainly: “With regard to certain sections of the population [“unemployables”], this unemployment is not a mark of social disease, but actually of social health.” [<> “Of all ways of dealing with these unfortunate parasites,” Sidney Webb (1912, 992) argues, “the most ruinous to the community is to allow them unrestrainedly to compete as wage earners.”]

Both links via this Mahalanobis post on Wal Mart's pro minimum wage stance. In addition to scoring progressive points by supporting a higher minimum wage, it would have the (surely unintended) consequence of driving some of its remaining competitors out of business. (Remember Pennington!)

Meanwhile, Wal Mart is also working on scoring points with progressives by going green - less green house gases and more renewable energy. Part the plan is to use plastics derived from corn instead of from petrochemicals. Only trouble is, gee whiz, corn is fertilizer intensive, and fertilizer comes from .... petrochemicals.

Corn farmers fret over fertilizer costs :: Yahoo! News

Higher oil prices have meant higher fertilizer prices - chemical fertilizers are derived from oil. This article provides a nice example of how the higher cost of fertilizer influences farmer's decisions to substitute between production fertilizer-intensive crops like corn into less fertilizer-intensive crops.

The Oil Drum in Philly points out the irony of using plastics derived from corn in place of plastics derived from petroleum.

Phil Miller of Market Power has been on a roll of late. I recommend his recent posts on Canadian medicine (doctors are in short supply), Wal-Mart medicine (innovation in health care delivery), economists in major league baseball (thinking like an economist is valuable).

Massive productivity gains in U.S. grocery retailing :: Economics Unbound

Want lower grocery prices in the UAE? Bring on Wal-Mart. And trust the market. (Both links via Newmark's Door.)

The Eclectic Econoclast is on a roll
Snails, hate speech, and employer-paid health insurance

It will be worth your while to pay the Eclectic Econoclast a visit over the next few days. The 13 week Canadian semester is over and he's knee deep in grading papers. This has driven him into diversionary tactics as revealed by greater output and profundity in his blog.

I've already linked to several of his posts, but the hits just keep coming. A sampler:

1. A relection on snails, Bosnia, factor prices and endowments.

2. If I quote something you said, is that "hate speech"?

3. Quoting Kevin at Always Low Prices: "... why should employers be involved in the financing of their employees' healthcare at all? Private employers don't pay for employees' housing, education, food or recreation, so why healthcare?"

4. In the same post (brilliant segue) coming up with line, "Would anyone like to make book on whether the U.S. gubmnt will bail out the GM workers' health care plan if necessary?" about the story on whether GM will be able to fulfill its commitments to pay health insurance for its retirees.

Before asking that question he stated

if I were retired from General Motors, I might have preferred to be paid more and to choose my own health-care provider rather than be worried about whether my health care would be covered in the future.

Chilton's reply: GM and Auto Workers conspired against the American people. They took a gamble the GM could survive despite making these heavy delayed compensation commitments to the Auto Workers. They calculated that Americans would bail them out if things went sore. That's opportunism based on an implicit contract. The good hearts of the American people created the moral hazard. They were taken advantage of by GM and the Auto Workers. I use the loaded term moral hazard because I'm feeling judgmental this morning. I'd use adverse incentives if I was feeling more even handed.

Why use delayed compensation? The American people have not shown they are inclined to pay Wal-Mart workers health insurance (although they have shown themselves prone to punish Wal-Mart workers by boycotting Wal-Mart because it doesn't pay health insurance to its workers). But when it comes to retirees and commitments made by a company's management 20 years ago, they have shown themselves willing to fulfill promises a company now can no longer keep.

P.S. - Employer-paid health insurance is like saying the party on which a tax is levied pays all the burden. Things don't work that way. To the extent that state-mandated employer-paid health insurance is binding it makes the worker pay for something she would not purchase if she had sovereignty over how she spends her compensation package.

Claude Charron: Closing Wal-Mart in Jonquiere is like the Holocaust - Always Low Prices: "He actually referred to WM closing the Jonquiere store as a holocaust, and referred to the town itself as Auschwitz. [Link in French]"

Anyone who makes analogies to Auschwitz is essentially a Holocaust denier.

Wal-Mart Canada places ad in Quebec newspapers to vaunt strength of employees - Moneysense.ca

Quebec isn't the Far West where the cowboy with the biggest revolver can do what he wants.

Wal-Mart is closing a store in Quebec following what Wal-Mart characterized as excessive wage demands by the newly certified worker's union at the store. The Econoclast picked up on the story and reminded us that the consumers who benefit from the always low prices when Wal-Mart comes to town were being forgotten in the debate about the closure. (In the comments of that post I added my two cents that those who were criticizing Wal-Mart over the closure probably were the same ones who fight Wal-Mart's invasion of small town Canada (and America).)

There is another wrinkle to the story: Wal-Mart has lots of stores. And it does want to deter unionization and its spread to other stores. So it will close any unionized outlet where the union's demands reach a certain point. Not because the outlet has become unprofitable, but because the costs of acquiescence are too high.

So, Wal-Mart is playing the role of the cowboy with the revolver. And that's good for consumers interested in always low prices.

For more on reputation building and credible threats see the Milgrom and Roberts classic Predation, Reputation and Entry Deterrence.