Marginal Revolution

Price controls by any other name

Mom-and-pop service stations are running into a problem as gasoline marches toward $4 a gallon: Thousands of old-fashioned pumps can't register more than $3.99 on their spinning mechanical dials.

The pumps, throwbacks to a bygone era on the American road, are difficult and expensive to upgrade, and replacing them is often out of the question for station owners who are still just scraping by.

Many of the same pumps can only count up to $99.99 for the total sale, preventing owners of some SUVs, vans, trucks and tractor-trailers to fill their tanks all the way.

As many as 8,500 of the nation's 170,000 service stations have old-style meters that need to be fixed — about 17,000 individual pumps, said Bob Renkes, executive vice president of the Petroleum Equipment Institute of Tulsa, Okla.

Here is the full story, thanks to William Griffiths for the pointer.

Taken to the Cleaners, Again

A tariff on imports of coat hangers from China is raising dry cleaning costs.  The Aplia Econ blog runs the numbers:

Advocates of trade restrictions often argue that protection will save jobs. Since we can observe price and cost increases associated with trade restrictions, we can estimate how much it costs to save each job in a protected industry. According to the NPR story, there are roughly 30,000 dry cleaners in the U.S., and on average, each pays an additional $4,000 per year due to the hanger tariff. This indicates an average annual cost of 30,000 firms x $4,000 per firm = $120 million. According to the U.S. International Trade Commission's report, U.S. employment in wire hanger manufacturing was 564 workers in 2004 and fell to 236 workers by 2006. Let's assume that employment in this sector would have fallen to zero in the absence of the tariff, and that with the tariff, employment will recover to 2004 levels. In other words, assume the tariff "saves" 564 jobs. Dividing the cost of the tariff to U.S. dry cleaners ($120 million year) by the number of jobs saved (564 jobs) indicates that each job saved costs about $212,765 per year. Keep in mind that the typical full-time worker in this sector earns about $30,000 per year. Even if we assume that industry employment doubles, the cost of the tariff is still roughly $120,000 per job.

Not From the Onion

FTC Wants to Know What Big Brother Knows About You

That's the headline for a story in today's Washington Post (about government regulation of internet advertising).  I suspect the irony was lost on the editors or perhaps this is an Orwellian attempt to twist language.

Addendum: The irony was not lost on the ever-wise Arnold Kling.

Japanese retailing is more efficient than most people think

Kyoji Fukao, professor at Hitotsubashi University's Economic Research Institute, thinks so too. The team he heads provides much of the Japanese data that go into international comparisons. He argues that the usual measures of service sector efficiency - value added per man hour and total factor productivity, which incorporates capital and labour inputs - are crude and hard to compare across borders.

He cites Japan's retail sector, regularly branded as inefficient. The basic measure of retail-sector productivity is how much of a product an employee can shift in an hour. On this measure, Germany does well. That turns out to be because of restricted opening hours, which oblige customers to make hefty purchases in one go. Japan does badly. Cavernous US superstores do better than cramped noodle or tofu shops. Japan also has a dense network of convenience stores on almost every city block, open 24 hours, allowing people to shop whenever they want. This makes them inefficient, since purchases are less concentrated.

No allowance is made, either, for the fact that Japanese shops tend to be within walking or, at most, cycling distance. Figures do not capture the inconvenience of having to travel, or the externalities associated with long shopping expeditions: traffic accidents, pollution, road maintenance.

Here is the full article, interesting throughout.  The quality of Japanese service, by the way, is miles ahead of anywhere else (though stores don't like to take returns) and those subjective pleasures of the shopping experience don't get picked up by the numbers either.  I can't imagine how a Japanese would feel moving to Germany or Austria.

Why are books so outrageously expensive in Brazil?

That's from a reader request.  I'm no expert on Brazil, but here are a few possibilities:

1. Most Brazilians do not read.  I don't mean they can't read, I mean they don't read for leisure so much.  I was stuck at the Sao Paulo airport for seven hours and did not see a single person reading a book, not once.

Taking that as given, low demand means high prices.  That's why Stephen King paperbacks are cheap and Edward Elgar (the name of an academic publisher) tomes go for $100 and up.

2. Brazilian retailing is not in every way efficient.  Efficient retailing in the traditional sense is, by the way, bad for the quality of your food because it means it is easy to serve large numbers.  And Brazil has some of the world's best food, and so inefficient retailing for its books.

3. No other supply source is right nearby and the Portuguese language does not produce an extremely thick market.  Note that the Portuguese of Portugal is very different from the Portuguese of Brazil.

4. The Brazilian currency may be overvalued at the moment, at least in purchasing power parity terms, due to Brazil's commodity exports.

The secret to a happy marriage

This article is poorly written but it does in fact present the secret to a happy marriage: "Be annoying."

The pointer is from Craig Newmark.