How Capitalism Saved Christmas (plus Dilbert on gift giving and an economist explains why parents want their kids to believe in Santa)

The commercialization of the holiday, a familiar lament this time of year, helped rescue Christmas from the grip of violent street gangs

By Jason Zweig of The WSJ. Economists talk about how gift giving can be inefficient (see related posts linked below). But if the emphasis on gift giving reduced the chaos caused by the gangs, maybe it it is worth it (or not quite so inefficient). Excerpts:

"Everyone seems to complain about how Christmas has been commercialized. But without the business of gift-giving that sprang up in the 19th century, Christmas might still be what it once was for many people: a riotous bacchanalia in which drunken gangs brawled in the streets and bashed their way into houses demanding money and alcohol.

With the hard work of the harvest behind them, December was downtime for Americans, as it had been for Europeans as far back as the raucous Saturnalias of ancient Rome. The Puritans were so offended by the disorder surrounding Christmas that celebrating the holiday—by feasting, “playing either at cards or at dice,” or even just taking the day off from work—was illegal in Massachusetts from 1659 to 1681. The fine was five shillings, roughly $50 in today’s money."

"In the 1800s, at Christmastime in cities like Boston, New York and Philadelphia, gangs of drunk young men, dressed in outrageous disguises, marauded through the nighttime streets, often setting off firecrackers, lighting fires or shooting guns in the air."

"These gangs were called “mummers” and “fantasticals” for their flamboyant costumes or “callithumpians” for the rough music they banged out on pots, pans and other makeshift instruments. Rampaging from house to house, the mobs might smash windows, tear down fences or wrench the handles off doors if homeowners wouldn’t let them in.

Once inside, they helped themselves to food, commandeered alcohol, spit tobacco on the carpets and wiped their greasy hands on the curtains. Not even the watchmen hired by local residents could deter them."

"“As soon as Santa Claus entered the picture,” says Prof. Nissenbaum, “people had to go shopping.” Santa Claus was part of a broader movement to domesticate the holiday by creating a warm, comforting family event centered around giving gifts to children. Mayors, merchants and the middle class all wanted to get the violent Christmastime gangs off the streets.

“There’s a general taming of the holiday that goes on throughout the 19th century,” says Penne Restad, author of “Christmas in America” and a retired historian at the University of Texas, Austin. The mass marketing of Christmas gifts, she says, was “a way of creating boundaries.”

"As the holiday became about giving gifts to family and friends, rather than about seizing food and drink from strangers, the seasonal street gangs faded away."

Also see Why Does Santa Claus Exist? by Sam Branthoover. It seems that it helps parents to have an outsider who is in charge of giving gifts. That way kids aren't always begging the parents to spend money on toys. They can always tell their kids that they have to wait for whatever Santa brings. So it is out of the parents' hands

Dilbert had a funny strip on Christmas about this. Here is what happens:

 

Panel 1
Dilbert: Merry Christmas. Here's a hundred bucks.
Dogbert: And here's a hundred bucks for you.

Panel 2
Dilbert: We could save another step by setting up an electronic transfer with an annual recurring option.
Dogbert: Excellent.

Panel 3
Dogbert: Or we could not give gifts.
Dilbert: Hush your crazy talk.

Related posts:

Is Christmas Gift Giving Inefficient?

Are Homemade Gifts Better Or More Special?

What Melvin Anthropologist Konner Fails To See When He Criticizes Economists And Their Views On Gift Giving  

Conflicting opinions from economists on the value of giving gifts

Use Data to Buy Gifts

Why Did Charles Dickens write A Christmas Carol?

Why Did Charles Dickens write A Christmas Carol?

Money might have been a big factor. A Christmas Carol

See The Writer's Almanac with Garrison Keillor. Excerpt:

"It was on this day in 1843 (Dec. 19) that Charles Dickens published A Christmas Carol. Dickens wrote the novel after his first commercial failure. His previous novel, Martin Chuzzlewit (1842) had flopped, and he was suddenly strapped for cash. Martin Chuzzlewit had been satirical and pessimistic, and Dickens thought he might be more successful if he wrote a heartwarming tale with a holiday theme.

He got the idea for the book in late October of 1843, the story of the heartless Ebenezer Scrooge, who has so little Christmas spirit that he wants his assistant Bob Cratchit to work on Christmas Day.

Dickens struggled to finish the book in time for Christmas. He no longer had a publisher so he published the book himself, ordering illustrations, gilt-edged pages and a lavish red bound cover. He priced the book at a mere 5 shillings, in hopes of making it affordable to everyone. It was released within a week of Christmas and was a huge success, selling six thousand copies the first few days, and the demand was so great that it quickly went to second and third editions.

At the time, Christmas was on the decline and not celebrated much. England was in the midst of an Industrial Revolution and most people were incredibly poor, having to work as much as 16 hour days, 6 days a week. Most people couldn't afford to celebrate Christmas, and Puritans believed it was a sin to do so. They felt that celebrating Christmas too extravagantly would be an insult to Christ. The famous American preacher Henry Ward Beecher said that Christmas was a "foreign day" and he wouldn't even recognize it.

When Dickens's novel became a huge bestseller in both the United States and England, A Christmas Carol reminded many people of the old Christmas traditions that had been dying out since the beginning of the Industrial Revolution, of cooking a feast, spending time with family, and spreading warmth and cheer. Dickens helped people return to the old ways of Christmas. He went on to write a Christmas story every year, but none endured as well as A Christmas Carol."

Related posts:

How Capitalism Saved Christmas

Is Christmas Gift Giving Inefficient?

Are Homemade Gifts Better Or More Special?

What Melvin Anthropologist Konner Fails To See When He Criticizes Economists And Their Views On Gift Giving  

Conflicting opinions from economists on the value of giving gifts

Use Data to Buy Gifts

How might Trump's immigration policies affect the economy?

See What Trump’s Immigration Plans Mean for America’s Job Growth: Surging unauthorized migration swelled the labor force. Deportations, tighter border controls could change that by Paul Kiernan of The WSJ. Excerpts:

"Since 2021, immigration has added around 10 million people to the U.S. population, according to Congressional Budget Office estimates. Less than one-third came into the country legally on immigrant visas, work or student visas, or as refugees. Many of the rest crossed the border without authorization or overstayed their visas, often requesting to stay on humanitarian grounds once they had entered.

Even before this historic migration surge, there were about 11 million undocumented immigrants living in the U.S. as of 2022"

"The undocumented population includes roughly three million “Dreamers,” who were brought to the U.S. as children"

"the president has broad authority to restrict many of the pathways that immigrants have used to enter the country in recent years."

"initially at least, a narrow subset of migrants would be targeted: those deemed “public-safety threats and national-security threats,” and migrants who have been ordered to leave the U.S. but haven’t yet done so."

"Removals of immigrants from the interior of the country (as opposed to at the border) peaked at 243,000 in 2009, at the depths of the 2007-09 recession, and averaged 126,000 a year over the following decade"

"Immigrants who arrived in 2020 or later accounted for 1.8% of the U.S. population as of last year, according to the Census Bureau, but 8.1% of roofers, 6.7% of agricultural workers, 5.6% of construction laborers and 5.6% of maids and housecleaners, among other occupations."

"“Our economy is just going to grow more slowly, and our labor force is going to grow more slowly—in some ways that’s just accounting,” said Edelberg [Wendy Edelberg, an economist at the Brookings Institution]. “What gets painful is having such changes be very abrupt.”"

Related posts:

Economics and the election (What Trump’s Win Means for the Economy: President-elect plans tariffs and tax cuts, as in his first term. There are risks with both, but also lots of caveats)

Life is full of tradeoffs: Trump can make stronger growth or a smaller trade deficit his priority, but not both

How some of Trump's policies might affect the economy (Taxes and tariffs)

Immigration & Asylum meet Type I & II Errors

Immigration Is Behind the Strong U.S. Economy

Adam Smith And Joseph Campbell On The Dangers Of "The Man Of System"

Here is a passage from The Theory of Moral Sentiments by Smith (author of the book The Wealth of Nations in 1776 that started economics) at the Library of Economics and Liberty. Smith emphasizes the arrogance and conceit of those who think they can arrange society any way they want. In a separate passage, Smith writes about how this can be dangerous (that follows this longer excerpt). First, Smith discusses the man of humanity and benevolence, then the man of system for contrast. Then I have some quotes that are similar from Campbell (author of the book on mythology The Hero With a Thousand Faces that was one of George Lucas's inspiration for Star Wars).

"The man whose public spirit is prompted altogether by humanity and benevolence, will respect the established powers and privileges even of individuals, and still more those of the great orders and societies, into which the state is divided. Though he should consider some of them as in some measure abusive, he will content himself with moderating, what he often cannot annihilate without great violence. When he cannot conquer the rooted prejudices of the people by reason and persuasion, he will not attempt to subdue them by force; but will religiously observe what, by Cicero, is justly called the divine maxim of Plato, never to use violence to his country no more than to his parents. He will accommodate, as well as he can, his public arrangements to the confirmed habits and prejudices of the people; and will remedy as well as he can, the inconveniencies which may flow from the want of those regulations which the people are averse to submit to. When he cannot establish the right, he will not disdain to ameliorate the wrong; but like Solon, when he cannot establish the best system of laws, he will endeavour to establish the best that the people can bear.

VI.II.42

The man of system, on the contrary, is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder.

VI.II.43

Some general, and even systematical, idea of the perfection of policy and law, may no doubt be necessary for directing the views of the statesman. But to insist upon establishing, and upon establishing all at once, and in spite of all opposition, every thing which that idea may seem to require, must often be the highest degree of arrogance."

Adam Smith also says in his book The Theory of Moral Sentiments:

"The natural course of things cannot be entirely controlled by the impotent endeavours of man: the current is too rapid and too strong for him to stop it; and though the rules which direct it appear to have been established for the wisest and best purposes, they sometimes produce effects which shock all his natural sentiments."

The "effects which shock all his natural sentiments" are the unintended consequences of man trying to impose his will on society. He can't know all the effects of all the changes he his bringing to a complex system.

Here is what Campbell has to say. This is from the book The Power of Myth (some parts might only be in the video version of the interview Campbell did with Bill Moyers upon which the book was base):

Campbell condemns "the man of system."  He states this clearly while speaking of the character Darth Vader from the Star Wars movie trilogy.  He is critical of him being an "executive of a system" who has no humanity. The man of system is a government planner, a bureaucrat who wishes to impose his own ideals on society.  Campbell mentions what he thinks is a good Oriental idea:  "You don't force your mission down people's throats." (recall that Smith says the man of benevolence respects individuals, and will not attempt to subdue them by force) Also, "Instead of clearing his own heart, the zealot tries to clear the world." (Smith refers to "furious zealots" who have contempt for open minded people)   Both Campbell and Smith fear the planner who will force his system on the rest of us.  Campbell's views on this are best expressed in his comments on Darth Vader, the evil dark lord of the Star Wars movie trilogy.

"Darth Vader has not developed his own humanity.  He's a robot.  He's a bureaucrat living not in terms of himself but in terms of an imposed system.  This is the threat that we all face today.  Is the system going to flatten you out and deny you your humanity, or are you going to be able to make use of the system so that you are not compulsively serving it?  It doesn't help to try to change it to accord with your system of thought.  The momentum of history behind it is too great for anything really significant to evolve from that kind of action" (this is like Smith saying the current is too strong to be stopped by the impotent endeavours of man)

This is all seen much more clearly in an exchange between Campbell and Moyers from the second televised segment of The Power of Myth called "The Message of the Myth": 

Moyers:  Do you see some of the new metaphors emerging in the modern medium for the old universal truths that you've talked about, the old story?

Campbell:  Well, I think that the Star Wars is a valid mythological perspective for the problem of is the machine-and the state is a machine (emphasis added)-is the machine going to crush humanity or serve humanity? 

And humanity comes not from the machine but from the heart. 

[As the unmasking of Darth Vader scene from the movie The Return of the Jedi  is shown, Campbell continues:]

Campbell:  The father (Darth Vader) had been playing one of these machine roles, a state role; he was the uniform, you know?  And the removal of that mask-there was an undeveloped man there.  He was kind of a worm by being the executive of a system.  One is not developing one's humanity.  I think George Lucas did a beautiful thing there.

Moyers:  The idea of machine is the idea that we want the world to be made in our image and what we think the world ought to be.

[Campbell seemed to agree or at least offered no dissent to this statement of Moyers-again, Smith says the man of system wants to impose his own plan on society, very similar to making the world in your own image]

Campbell put this in a slightly different way when he also discussed the movie Star Wars:

"Here the man (George Lucas) understands metaphor.  What I saw was things that had been in my books but rendered in terms of the modern problem, which is man and machine.  Is the machine going to be the servant of human life?  Or is it going to be master and dictate?  And the machine includes the totalitarian state, whether it is Fascist or Communist it's still the same state. And it includes things happening in this country too; the bureaucrat, the machine-man. "What a wonderful power the machine gives you-but is it going to dominate you?  That's the problem of Goethe's Faust.  It's in the last two acts of Faust, Part Two.  His pact is with Mephistopheles, the man who can furnish you the means to do anything you want.  He's the machine manufacturer.  He can manufacture the bombs, but can he give you what the human spirit wants and needs?  He can't.

This statement of what the need and want is must come from you, not from the machine, and not from the government that is teaching you (emphasis added) or not even from the clergy. It has to come from one's own inside, and the minute you let that drop and take what the dictation of the time is instead of your own eternity (recall Smith says "every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it"), you have capitulated to the devil.  And you're in hell.

That's what I think George Lucas brought forward.  I admire what he's done immensely, immensely.  That young man opened a vista and knew how to follow it and it was totally fresh.  It seems to me that he carried that thing through very, very well" (From The Hero's Journey: Joseph Campbell on His Life and Work by Phil Cousineau).

Here is the passage from Adam Smith where he talks about "furious zealots" (also from The Theory of Moral Sentiments):

"The animosity of hostile factions, whether civil or ecclesiastical, is often still more furious than that of hostile nations; and their conduct towards one another is often still more atrocious. What may be called the laws of faction have often been laid down by grave authors with still less regard to the rules of justice than what are called the laws of nations. The most ferocious patriot never stated it as a serious question, Whether faith ought to be kept with public enemies?—Whether faith ought to be kept with rebels? Whether faith ought to be kept with heretics? are questions which have been often furiously agitated by celebrated doctors both civil and ecclesiastical. It is needless to observe, I presume, that both rebels and heretics are those unlucky persons, who, when things have come to a certain degree of violence, have the misfortune to be of the weaker party. In a nation distracted by faction, there are, no doubt, always a few, though commonly but a very few, who preserve their judgment untainted by the general contagion. They seldom amount to more than, here and there, a solitary individual, without any influence, excluded, by his own candour, from the confidence of either party, and who, though he may be one of the wisest, is necessarily, upon that very account, one of the most insignificant men in the society. All such people are held in contempt and derision, frequently in detestation, by the furious zealots of both parties. A true party-man hates and despises candour; and, in reality, there is no vice which could so effectually disqualify him for the trade of a party-man as that single virtue. The real, revered, and impartial spectator, therefore, is, upon no occasion, at a greater distance than amidst the violence and rage of contending parties. To them, it may be said, that such a spectator scarce exists any where in the universe. Even to the great Judge of the universe, they impute all their own prejudices, and often view that Divine Being as animated by all their own vindictive and implacable passions. Of all the corrupters of moral sentiments, therefore, faction and fanaticism have always been by far the greatest."

Amazon’s New Robotic Warehouse Will Rely Heavily on Human Workers

The 3 million-square-foot distribution center in Shreveport, La., demonstrates the limits of automation in big logistics operations

By Liz Young of The WSJ. 

Yes, robots and machines can replace workers. But sometimes robots and machines lead to new types of jobs and also the increase in output they might generate will lead to even more workers being needed. Some of the related posts below are examples of this.

Excerpts from The WSJ article:

"Amazon just opened its most-automated warehouse yet. But underneath the robotics and artificial-intelligence technology at the site, the facility will still rely on thousands of employees.

The e-commerce behemoth said its 3 million-square-foot building in Shreveport, La., is its first warehouse to use automation and artificial intelligence at every step of the fulfillment process."

"Amazon has hired more than 1,400 people at the Shreveport distribution center in recent months and plans to eventually employ 2,500 workers picking orders, loading and unloading trucks and managing the robotics systems."

"The idea is to speed up operations, save on labor costs and make warehouses safer for the workers that remain."

"Some traditional warehouse roles have proved too difficult for Amazon to fully automate, however, partly because the company sells more than 400 million widely varied products that range in size, weight and fragility, from dog toys to toaster ovens"

"If you don’t know what items you’re going to be handling, it makes it very difficult to create an automated system that’s flexible enough to handle the various items"

"Humans can easily look into a storage container packed full of goods, identify a particular item and know how to pick it up and handle it, whether it is a bottle of shampoo or a sweater.  

“The tactile grasp that the human hand has, and the situational awareness and the perception of the human brain, is unmatched,” said Tye Brady, chief technologist at Amazon Robotics."

"robots at the facility carry storage containers full of merchandise to human employees who look inside and pick out the item a customer ordered, then place that item into a tote box that goes onto a conveyor belt and is taken to be packaged.

Human workers also load and unload trucks at the Shreveport facility, and pack orders that are an unusual size or shape.

The company said many of the roles at its new building involve managing and working with robots"

"Amazon warehouses using its latest automation will be able to handle one million orders a day, creating many opportunities for issues that require a human touch"

Related posts:

 

Two recent articles on robots and human workers (2024) 

 

"The Battle Over Robots at U.S. Ports Is On: Striking dockworkers are back to work—but disagreement over automation​ stands in the way of lasting peace"

"At a Brooklyn Warehouse, Robots Are Reshaping the Grocery-Delivery Business: A discount grocer’s pilot program is using robots to help complete orders—and keep prices down"

 

Self-service kiosks at McDonald’s are not reducing employment (2024)

 

The AI-Generated Population Is Here, and They’re Ready to Work: AI that can predict how specific humans will look, act and feel could do the jobs of fashion models, focus group members and clinical trial participants (2024)

 

Meet the Robots Slicing Your Barbecue Ribs (2024)

 

Robots writing science fiction (2024)

 

Robots Are Looking Better to Detroit as Labor Costs Rise (2024)

 

Are robot vehicles replacing workers in freight yards, warehouses and seaports or are they being used because it is hard to find workers? (2023)

 

Sweetgreen Hires Kale-Shooting Robots to Speed Up Service  (2023)

 

“Why did the human stare at the glass of orange juice?” “They were trying to concentrate.” (2023) (this post it partly about jokes written by ChatGPT)

 

Will technology cost artists their job? (2023)

 

Rent a robot for Christmas? Makes sense if you are a logistics company (2022)

Walgreens Turns to Prescription-Filling Robots to Free Up Pharmacists (2022)

Answering the Call of Automation: How the Labor Market Adjusted to the Mechanization of Telephone Operation (2022)

Warehouses Look to Robots to Fill Labor Gaps, Speed Deliveries  (2021)

Is unemployment still high because of structural unemployment?    (2021)

The Pizza Delivery Guy Will Be a Robot at Many Campuses This Fall  (2021)

Many Jobs Lost During the Coronavirus Pandemic Just Aren’t Coming Back (2021)

Can computers write poetry?Could they replace poets? (2020)

Will computer programs replace newspaper columnists?  (2020)

Is Covid causing some structural unemployment? (2020)

Is Covid causing some structural unemployment? (Part 2) (2020)

McDonald’s Tests Robot Fryers and Voice-Activated Drive-Throughs: Burger giant wants to speed service as competition for fast-food diners mounts (2019)

Is Walmart adding robots to replace workers or because it is hard to find workers? (2019) 

The Robots Are Coming And It Might Not Be A Case of Structural Unemployment  (2018)

Broncos to debut beer-pouring robot at upcoming game (2018)

Robots Are Ready to Shake (and Stir) Up Bars (2018) 

Automation Can Actually Create More Jobs  (2016)

Are Computer Programs Replacing Journalists? (2015)

Robot jockeys in camel races (2014) 

Structural Unemployment In The News-Computers Can Now Tell Jokes  (2013)

WHAT do you get when you cross a fragrance with an actor?

Answer: a smell Gibson.

Robot Journalists-A Case Of Structural Unemployment? (2010)

Two examples of wages rising for one occupation leading workers to move into it from other occupations

See $500,000 Pay, Predictable Hours: How Dermatology Became the ‘It’ Job in Medicine: Americans’ newfound obsession with skin care has medical students flocking to this specialty by Te-Ping Chen of The WSJ. Excerpts:

"Four-day workweeks, double the salary of some colleagues and no emails at night. If those perks sound like they belong to a few vaunted tech jobs, think again. Dermatologists boast some of medicine’s most enviable work lives, and more aspiring doctors are vying for residency spots in the specialty.  

“It’s ungodly competitive,” says Dr. Lindsey Zubritsky, a dermatologist in Ocean Springs, Miss., who finished her residency in 2018 and now splits her time between clinical work with patients and her social-media feed, where the “dermfluencer” has three million followers on TikTok and Instagram. 

Medical residency applications for dermatology slots are up 50% over the past five years, according to data from the Association of American Medical Colleges, with women flooding the zone. A younger generation of physicians wants better work-life balance than their predecessors and, unlike pressure-cooker medical specialties such as cardiac surgery, dermatology fits the bill."

"Dermatologists earn a median $541,000 a year"

"Pediatricians, by contrast, earn a median $258,000 annually."

"Given the infrequency of skin emergencies, far fewer dermatologists are on call at night and on weekends."

"At Idriss’s clinic [Dr. Shereene Idriss], patients pay out of pocket for $500 microneedling sessions and $4,000 laser and filler treatments to smooth skin tone and texture and reduce lines and wrinkles. The procedures can last from 20 minutes to an hour. Idriss declined to say how much she makes but says that for dermatologists offering cosmetic treatments, “the sky’s the limit, depending on how efficient you are.”"

See The Hot New Job for Men: Nursing: The number of male registered nurses in the U.S. has nearly tripled since the early 2000s by Harriet Torry of The WSJ. Excerpts:

"The number of male registered nurses has increased from about 140,000 in 2000 to about 400,000 in 2023. This means that about 14% of nurses are now men, up from about 9% roughly two decades ago. 

Economists at the Washington Center for Equitable Growth found that men who were becoming registered nurses tended to do so in their late 20s or early 30s rather than as their first job."

"The job of registered nurse—what patients tend to think of when they hear the word “nurse”—usually requires a bachelor’s degree. The average pay is about $95,000 a year, compared with the average nationwide salary of about $65,000."

Related posts:

Inter-industry competition can affect labor markets (2023) (this was about an auto related company in Alabama that was not only competing for workers with other firms in its industry but also with restaurants and retailers)

Come Make $100,000, the Billboard Says: Police Departments Are Hustling For Recruits (especially when wages are rising for other jobs (2024)

Example of cross industry competition for workers (2021)

This related to something I used to talk about in my micro class.

For the whole market, the wage is simply determined by the supply and demand curves. The demand for the whole market would be found by adding the demand (or MRP) of each individual firm.

It would seem that the supply for the whole market would also be the sum of the supply curve for each individual in the market. But it is not that simple, since the labor supply for each individual likely looks something like the labor supply curve in the graph below.

In this graph, L stands for the number of hours worked. As your wage increases, you are willing to work more hours. But to do so, you have to sacrifice leisure time. The higher wage allows you to buy more goods, but at a cost of less leisure. But at some point, your wage gets so high, that it allows you to buy all the goods you want. So now you want more leisure time, which means you need to work less.

Imagine if your boss offered to double your hourly wage. You might want to put in more hours. So as W increases, so does L. But if your wage was extremely high, say, $1,000 per hour, you might work just a few hours a week, meaning the number of hours worked (L), decreases. So there must be a wage so high that when you reach it, you start to reduce the number of hours that you work.

The typical American worker worked many more hours a week about 100 years ago than today. They may have worked 60 hours or more. Today, we work fewer hours a week (around 40) yet the average income (adjusted for inflation) is much higher. We make enough money so that we can work less and have the goods we want.

So why can we draw the market supply curve upward sloping if it is “backward bending” for individuals? There are two reasons:

1. As W increases, workers from other industries enter the market in question, so L increases. When W increases, we assume it increases in one market only. For example, if the wage paid to janitors increases, convenience store clerks will apply to become janitors.

2. As W increases, nonworkers enter the market in question. Some workers who were not previously working in any market, will start to apply for jobs if the wage rises high enough. Examples might be stay at home spouses and students.

(I think I got this from Bradley R. Schiller's textbook)

In both cases, an increase in W leads to an increase in L. This is required for the supply curve to slope upward for the market. These two forces will outweigh any “backward bending” effect.

So wages are determined by the supply and demand for the job or occupation.

On his 254th birthday, remembering Beethoven the astute businessman

The musical genius also had a flair for commerce, it turns out 

By Luis Dias writing for Scroll.in magazine. Beethoven turned 250 this past December 16. Even Art can never be completely divorced from economics. Excerpts

"Once Beethoven had poured his creative energy to the fullest into a composition, he regarded it as commercial property, deserving the best possible price on the most favourable terms. Of the hundreds of his letters that have survived, a major chunk deals with the mundane business of getting published: pitching a work, complaining about poor terms, bargaining, and correcting proofs. This is hardly surprising; he is perhaps the first composer whose income depended so much on being published, even more so after his crippling deafness gradually put an end to his career as a performer and to some extent as a teacher as well.

But Beethoven rose to the occasion as quite an astute businessman, regarding publishing and all it entailed as par for the course. He wished to excel in it just as much as in his creativity.

Upon completing a work, Beethoven would offer it to one or more publishers. But before that he needed a copyist, someone who could legibly decipher his scrawl across the manuscript pages so that a publisher could make sense of them. One copyist, Wenzel Schlemmer, undertook that unenviable task for some twenty years.

Once a publisher accepted a work, the real pain of proofreading of invariably faulty engravings and endless corrections would ensue. In one instance, Beethoven found eight mistakes in one published work, corrected them and sent them to another publisher under the heading ‘Edition très correcte’. But in a further comedy of errors, that heading itself was misspelt.

Royalties were unheard of then; the publisher bought a work for a flat fee and would then hope to sell as many copies as possible. It was important to sell as quickly as possible because piracy was a very real threat. As there was no copyright, any successful composer’s hit work was highly susceptible to piracy. The pirate could even be the copyist, who could clandestinely make another copy, spirit it out to another publisher, sometimes even before the legitimate one. The threat was so serious that Mozart had his copyists work only in his apartments, under his watchful eye.

Beethoven railed and ranted when he encountered pirated versions of his music. Since he didn’t have the finance for lawsuits, which could end up nowhere – piracy, plagiarism and forgery were regarded as reprehensible, but not against the law – he resorted to sending spluttering, threatening letters to errant publishers and getting public notices published in newspapers. To be pirated was almost a back-handed index of one’s popularity and success.

As payments for compositions were small (for instance, Beethoven settled for 100 florins for his First Symphony, a shockingly low price), a composer had to churn out a lot of music. This gives us a new perspective on the prodigious output of composers of that era: it was driven not just by creative juices but by the need to put food on the table. Ironically, short piano works would fetch a better price than, say, a symphony, concerto or bigger works, for purely commercial reasons.

 One way (that Haydn usedprofitably) of squeezing as much money out of a work was to give it to two or more publishers in different countries, each one having limited but mutually exclusive territory, so that one could be legitimately paid for the same work more than once. Beethoven followed suit, but then found that if he wanted to prevent pirates preying on his music, he would have to get a work published simultaneously in each country, no easy task in his time of snail-mail and travel.

Another ploy Beethoven resorted to was to offer a piece to the person who commissioned it and pocketing the fee. He would then defer publication but give that patron exclusive rights to the work in manuscript for a given time (usually six months, as he did with Prince Lobkowitz for his Third Symphony). Once that period was over, he could plug and sell it afresh."

"On the “tiresome business” of publishing, Beethoven grumbled in a letter to the publisher Hofmeister: “There ought to be in the world a market for art, where the artist would only have to bring his works and take as much money as he needed. But, as it is, an artist has to be to a certain extent a businessman as well.” True then, true today."

Americans Are Stockpiling to Get Ahead of Tariffs: Some consumers are snapping up computer parts, vacuum cleaners, coffee and olive oil before levies take effect

By Jasmine Li and Rachel Wolfe of The WSJ.

This is a follow up on yesterday's post. When buyers expect higher prices in the near future their demand today increases.

But I also said that because sellers cannot pass all of the increase in a tax (in this case tariff), it means that once the tax or tariff goes into effect, the seller will be getting less per unit sold. So they might try to sell more today, meaning that the supply line shifts to the right. In red below one executive even says that sellers cannot pass all of the tax increase along to the buyers.

Excerpts from The WSJ article:

"Tariff-conscious consumers are stockpiling goods and rushing to upgrade old cars and appliances to get ahead of potential price increases. 

A quarter of Americans surveyed said it was a good time for major purchases as they expect prices to go up next year, up from 10% a month prior and a record high, according to the University of Michigan’s monthly survey of consumers. And a third of the 2,000 people surveyed recently by CreditCards.com said they were buying more now because they feared tariffs. 

Some economists warn that by spending as though inflation is coming, people could already be pushing it higher. The consumer-price index of goods and services grew 2.7% year over year in November, according to the Labor Department, slightly higher than in the prior month. The boost was driven in part by a surge in durable-goods purchases some shoppers said are related to President-elect Donald Trump’s threats of tariffs on imports from countries including Canada, Mexico and China.

“People can make a judgment that, ‘Well I thought I was going to buy a TV in the next 12 months. Maybe I should buy it in the next 12 weeks,’” said Robert Barbera, director of the Center for Financial Economics at Johns Hopkins University. "

"“If the run is big enough and the shortage is big enough,” a retailer will have to raise prices, said Harrison Hong, a professor of economics at Columbia University.

Hong points to a ban on nonbasmati rice exports from India in 2007, which likely caused price increases for U.S. consumers. Americans hoarded bags of rice, exacerbating shortages. The products and stores with the highest levels of hoarding saw greater price hikes a few months down the line.

Furthermore, inflation expectations matter for future inflation. So it is possible that retailers and manufacturers are preparing for higher tariffs by raising prices now, in expectation of higher import prices, said Paul Ashworth, chief North America economist at Capital Economics.

“The notion that you think prices are on a particular trajectory plays elementally in your decision about how to raise your prices, or what your wage demands are,” said Barbera of Johns Hopkins.

Businesses in the U.S., which imported around $3.2 trillion of goods in 2022, are making plans for the worst-case scenario. Some are stocking up on imports to get ahead. Others are urging shoppers to buy now before prices go up. 

Best Buy Chief Executive Corie Barry said on a November press call that “the vast majority of that tariff will probably be passed onto the consumer as a price increase.”" (notice he does not say all-again, if that is the case, sellers end up getting less per unit)

Buy Now Before Tariffs Hit, Retailers Are Telling Shoppers

Businesses play up fears of a price hit in marketing goods from furniture to fishing rods

By Suzanne Vranica of The WSJ. Excerpts:

"“Pre-Tariff Sale! This is not a drill,” declares a Facebook post from Finally Home Furnishings, urging customers to order now before prices “double.” 

The online furniture retailer is one of many businesses urging customers to buy now before President-elect Donald Trump’s proposed tariffs potentially raise costs—and prices."

"Some influencers on TikTok are feeding into the tariff frenzy, urging people to buy their favorite products in bulk now."

"Tariffs have the potential to cost shoppers up to $78 billion in annual spending power, according to a recent study from the National Retail Federation."

One of the shift factors for demand and supply is expectation of future price. If buyers expect prices to be significantly higher in the near future, the demand for the product will increase today (the demand line will shift to the right).

What about supply? Normally, if sellers expect prices to be significantly higher in the near future, supply to today will decrease (the supply line will shift to the left). This is because they would rather wait to sell the product until the price has gone up.

But in this case, the price is going up because of the tariff, which is a tax. When a tax is enacted, the seller cannot pass all of the tax along to the customers, so, in effect, the seller is getting a lower price. If the tax is $1 per unit the seller might be able to pass only half of that along to the customer. So the price the seller receives in the future would actually fall. Then supply today would increase or shift to the right.

See An example of a product price rising less than an increase in a tax. There I use supply and demand lines to illustrate how this works.

Other posts on supply and demand shifts:

Expectation of future price in the news (2024)

Record Cocoa Prices Are Making Sweet Cravings Expensive (2024)

A New Age of Materials Is Dawning, for Everything From Smartphones to Missiles (2024)

Orange Juice Prices Are at Record Highs—and Could Keep Climbing (article illustrates supply and demand principles) (2023)

Supply, demand and the price of bacon (2023)

New cars, used cars and substitutes (2023)

This post is featured in an economics textbook (2023)

Is the TV show Yellowstone changing consumer's taste in clothing? (2023)

Do Wages Drive Prices, or Vice Versa? The Answer Matters for Interest Rates (2022)

Home sale prices, apartment demand and the price of subsitutes (2022)

How Supply and Demand Explain Higher Wages for Teen Babysitters (2022)

Are Expectations Helping To Raise The Price Of Lithium? (2021)

Farmers might be reducing supply of corn now in expectation of higher prices this fall (2019)

Grocery stores try to alter the tastes and preferences of men (2018)

Supply Means Producing A Good And Customers Being Able To Purchase It (2018)

How Supply And Demand Have Affected Beef Prices Recently (2017)

New Zealand sheep farmers turn to cattle as the world price of milk rises (2017)

Beef Prices Come Down As Supply Increases (2016)

Russians rush to stores to pre-empt price rises (2015)

The Seasonally Adjusted CPI Was up 0.313% in November

Here are the changes in the seasonally adjusted CPI each of the last six months:

June  -0.0562%
July  0.1549%
Aug  0.1872%
Sep  0.1799%
Oct  0.2441%

Nov  0.3129%

See Consumer Price Index for All Urban Consumers: All Items in U.S. City Average from FRED (Federal Reserve Economic Data) compiled by the Research Division at the Federal Reserve Bank of St. Louis for data on the seasonally adjusted CPI.

That site shows a graph but if you click on the Download button you will get the actual numbers in Microsoft Excel.

The Consumer Price Index for All Urban Consumers: All Items in U.S. City Average (CPIAUCSL) was 315.454 in Oct. and 316.441 in Nov. Since 316.441/315.454 = 1.00313, that means it was up 0.313%. If we had that every month for 12 months it would be up 3.82%.

It was 308.024 in Nov. 2023. Since 316.441/308.024 = 1.0273, that means it was up 2.73% over the last 12 months.

In the last 6 months it is up just 1.01027%. If we had that for 12 months it would be up 2.0604%.

The non-seasonally adjusted CPI was 315.493 in Nov. and 307.051 in Nov. 2023. That was up 2.75%. So pretty close to the seasonally adjusted CPI. This is still above the Fed's target of 2.0% (although they prefer to use the Personal Consumption Expenditures Price Index which was 2.3% higher in Oct. 2024 than Oct. 2023).  

For more information, see Annual inflation rate accelerates to 2.7% in November, as expected by Jeff Cox of CNBC. Excerpts:

"Consumer prices rose at a faster annual pace in November, a reminder that inflation remains an issue both for households and policymakers.

The consumer price index showed a 12-month inflation rate of 2.7% after increasing 0.3% on the month, the Bureau of Labor Statistics reported Wednesday. The annual rate was 0.1 percentage point higher than October.

Excluding food and energy costs, the core CPI was at 3.3% on an annual basis and 0.3% monthly. The 12-month core reading was unchanged from a month ago."

The article also discusses what is going up and what is going on. There is a graph of the monthly year-over-year percent change in prices and core prices going back almost 3 years.

Other related links:

Consumer Price Index for All Urban Consumers: All Items Less Food and Energy in U.S. City Average (CPILFESL) This is also from from FRED (Federal Reserve Economic Data), compiled by the Research Division at the Federal Reserve Bank of St. Louis. It has the seasonally adjusted core CPI.

Consumer Price Index Data from 1913 to 2023

Personal Consumption Expenditures Price Index 

The Bureau of Labor Statistics makes seasonal adjustments. See Consumer Price Index Summary.