The Era of ‘No-Show’ Fees Is Here—and It’s Going to Cost You

Don’t be a flake. Your salon, personal trainer or housecleaner might send a bill if you are. Harbor Barber owner Greg Krupa didn’t mind losing a few customers because of his no-show policy.

By Imani Moise of The WSJ. 

This article reminded me of opportunity cost (the value of the best foregone alternative). Trainers and barbers could be doing something else with their time and if you don't show up they lost an opportunity to schedule someone else.

Excerpts from the article:

"businesses . . . [are] charging for not showing up."

"Harbor Barber . . . owner Greg Krupa had to go digital to stop no-show customers from trimming his profits."

"These days, missing an appointment can cost customers up to $100—double the price of a normal haircut."

"fees for flaking on appointments are spreading to salons, personal trainers and beyond. More beauty professionals charge cancellation fees, reaching 16% on Square’s payment platform last year, up from 5% in 2021. Restaurants on reservation platform Resy that charged at least one cancellation fee more than quadrupled from 2019 to 2024. 

Technology that streamlines booking and payments has made it easier to track late arrivals and no-shows. Many of the platforms are normalizing fees that help small businesses turn the tables on flakes. 

Square, which advertises these features, allows businesses to charge up to $500 for cancellations. StyleSeat, a booking platform for cosmetologists, lets stylists and makeup artists choose flexible, moderate or strict cancellation policies, which can charge customers up to 100% of the service price for cancellations with less than 24 hours’ notice. Wyzant, a platform for tutors, asks users to set their cancellation policy as part of creating an account."

"Since January 2020, the share of barbershops on Squire that collect payment information in advance has increased 43%. As a result, shops see 45% fewer cancellations and 82% fewer no-shows, according to company data."

"Some customers say the practice unfairly punishes them when life gets in the way of plans. Adding to the pain: They have little recourse when providers cancel on them."

"Businesses tend to tighten up cancellation policies during economic downturns, said Karen Xie, an associate professor of business-data analytics at University of Connecticut’s business school. That’s why many companies raised fees and shortened rescheduling windows during the pandemic. 

Fines don’t always reduce undesired behavior. One famous case study by economists Uri Gneezy and Aldo Rustichini found that when a daycare center imposed a fee to stop parents from picking up their children late, late pickups significantly increased. Setting a price for tardiness seemed to make the practice more acceptable, and turn the staff’s time into a commodity, the 2000 report published in the Journal of Legal Studies said."

"Gail Gallaher, a science and test-prep tutor . . . [said] Her policy of charging last-minute cancellations or no-shows 50% or 100% of her normal rate helps keep prices lower for clients who keep their appointments"

Consumers Fed Up With Food Costs Are Ditching Big Brands

After years of price increases, food companies say more consumers pull back; fast-food chains and snack makers plan new deals and flavors

By Heather Haddon and Jesse Newman of The WSJ. 

Seems like the law of demand at work. Prices go up, quantity demanded going down (although we are supposed to be hold all other factors constant, like incomes-but those have been generally rising lately even if not much more than inflation). One passage, though, says "shoppers are now contending with lower food-stamp benefits." That suggests that not everything else is being held constant.

Excerpts from the article:

"Consumers are voting with their wallets—and some of America’s best-known food brands are losing. 

Coffee drinkers are leaving Starbucks’s loyalty program. Chips Ahoy cookies are lingering longer on grocery-store shelves. Fewer customers are ordering at fast-food drive-throughs and kiosks, pressuring companies such as Wendy’s and McDonald’s. 

For about three years following the Covid-19 pandemic, food companies pushed through a series of sharp price increases, saying they needed to recoup their own rising costs—and that consumers would adjust to stick with their favorite brands. As a result, the portion of U.S. consumers’ income spent on food has reached the highest level in three decades.

Now, some consumers are hitting their limits. Restaurant chains and some food manufacturers are reporting sliding sales or slowing growth that they attribute to consumers’ inability—or refusal—to pay prices that are in some cases a third higher than prepandemic times."

"Fast-food prices in March were 33% higher than 2019 levels, according to the Labor Department, while grocery prices were up 26%.

U.S. fast-food traffic declined 3.5% in the first three months of this year compared with the same period in 2023"

"U.S. grocery sales of food and beverages fell 2% by volume for the 52 weeks ended April 20 compared with the year-ago period"

"At Starbucks, U.S. traffic dropped 7% in the three months ended March 31, the steepest quarterly decline since at least 2010."

"its active loyalty-rewards users declined by 1.5 million members from the end of the first quarter to the end of the second."

"Kraft Heinz said Wednesday that its quarterly sales fell 1.2%"

"Kellanova, which makes Pringles and Pop-Tarts, said Thursday that North American sales volumes slid 5% after the company increased prices by the same amount."

"shoppers are now contending with lower food-stamp benefits and higher interest rates—along with general inflation."

"Chips Ahoy is losing ground to cheaper store-brand chocolate-chip cookies."

"McDonald’s and Starbucks plan to launch more promotions and communicate them more clearly to consumers."

Additional information:

"Wages and salaries increased 4.3 percent for the 12-month period ending in March
2024"

From  Employment Cost Index Summary.

"The non-seasonally adjusted CPI was 312.332 in March and 301.836 in March 2023. That was up 3.5%."

From The Seasonally Adjusted CPI Was up 0.38% in March.

The Seasonally Adjusted CPI Was up 0.31% in April

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 313.207 in April and 312.230 in March. Since 313.207/312.230 = 1.0031, that means it was up 0.31% in Feb. If we had that every month for 12 months it would be up 3.82%.

It was 303.032 in April 2023. Since 313.207/303.032 = 1.0336, that means it was up 3.36% over the last 12 months.

The non-seasonally adjusted CPI was 313.548 in April and 303.363 in April 2023. That was up 3.36% also. 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 2.7% higher in March 2024 than March 2023).

For more information, see Inflation eases in April with consumer prices rising 3.4% from a year ago by Jeff Cox of CNBC. Excerpts:

"Inflation eased slightly in April, providing at least a bit of relief for consumers while still holding above levels that would suggest a cut in interest rates is imminent.

The consumer price index, a broad measure of how much goods and services cost at the cash register, increased 0.3% from March, the Labor Department’s Bureau of Labor Services reported Wednesday. That was slightly below the Dow Jones estimate for 0.4%.

On a 12-month basis, however, the CPI increased 3.4%, in line with expectations.

Excluding food and energy, the key core inflation reading came in at 0.3% monthly and 3.6% on an annual basis, both as forecast. The core 12-month inflation reading was the lowest since April 2021."

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 Data from 1913 to 2023

Personal Consumption Expenditures Price Index 

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

Is College Worth It?

Interesting tool created by FREOPP. It allows you to find out your return on investment (ROI) from going to college. You can choose a school and a major and it will tell you your ROI.

FREOPP is "A non-profit, non-partisan think tank that conducts original research on expanding economic opportunity to those who least have it."

For example, at The University of Texas at Austin, if you major in Petroleum Engineering and graduate on time, your ROI is $2.6 million over your lifetime of work.

If you major in math it is $763,000.

If you major in anthropology it is $36,000. 

See also 33 of the Highest-Paying Majors You Can Choose in College (2022). 

The last two items in the list below suggest that simply finishing college has value in terms of signalling to employers what your traits are and in developing cognitive endurance.

Related posts:

When it comes to lifetime earnings, the most important decision appears to be the choice of college major (2024)

Studying Economics Increases Wages a Lot (2020)

What College Majors Pay The Highest? (2013)

50 College Majors With the Best Return on Investment (2015)

Will Studying Economics Make You Rich? A Regression Discontinuity Analysis of the Returns to College Major  (2023)

Why do employers pay extra money to people who study a bunch of subjects in college that they don’t actually need you to know? Signaling (2020)

Cognitive Endurance as Human Capital (2022) 

More related posts:

Yes, a College Degree Is Still Worth It (2023)

Does It Pay To Go To College? (2009)

Maybe That College Degree Is Not As Valuable As You Thought (2010)

Is College Still A Good Investment? (2012)

For Some Grads, College Isn't Worth Debt (2014)

The Diminishing Returns of a College Degree: In the mid-1970s, far less than 1% of taxi drivers were graduates. By 2010 more than 15% were (2017)

The Diminishing Returns of a College Degree (2017) 

Many college dropouts are worse off economically than if they hadn’t started college (2019)

College Still Pays Off, but Not for Everyone (2019)

Good summary of the issues facing Social Security

I used to use The Economics of Macro Issues and The Economics of Public Issues by Roger Miller, Daniel Benjamin & Douglass North as supplemental textbooks. Each one had a chapter about Social Security.

The WSJ had a good article on this last week. See Social Security Funds Are Running Dry. Don’t Panic. Congress faces tough decisions about the program’s finances, but there may be an easier political path by Andrew Duehren (although the title in the print edition was "Social Security Is Running Dry, Posing a Political Test"). Excerpts:

"An aging population is pushing up the cost of the program as a smaller share of Americans directly pay into it. That imbalance means that Social Security could become unable to provide full retirement and disability benefits to Americans in 2035, the program’s trustees warned on Monday. 

At that point, without congressional action, elderly and disabled Americans who rely on Social Security could see their payments cut by 17%. Congress could avoid the crisis by raising payroll taxes, trimming benefits or some combination of the two."

"But they may not have to. The U.S. government will still likely be able to afford to pay full benefits to retired and disabled Americans in 2035. Whether it does so will in some ways be an accounting decision for lawmakers who control how money is classified within the government—and whether they want to tackle tough questions about federal spending or sidestep the politically radioactive debate."

"For decades after Congress overhauled the program in 1983, Social Security took in more money than it spent on benefits. The excess accumulated in the trust funds.

But money sent to the trust funds didn’t sit there. Instead, Social Security technically lent it back to the rest of the U.S. government, which then used it for anything from funding military operations to paying back bondholders. 

In return for the cash, the government gave the trust fund special IOUs—Treasury bonds that can’t be traded but are secured by the full faith and credit of the U.S. Those bonds generate interest, supplementing the income Social Security now nets from a 12.4% payroll tax, usually split between employers and employees, on up to $168,600 of income. 

To many economists, one part of the U.S. government lending to another part of the U.S. government is anomalous. Many of them disregard intragovernmental debt like the Social Security trust funds when they consider the overall U.S. debt burden. Overall U.S. debt is roughly $34.6 trillion, while debt held by the public, the metric favored by economists, is $27.5 trillion. 

In the past few years, as the cost of Social Security has outpaced its income, the program has had to rely on the trust fund to pay its bills. To do that, Social Security redeems some of its bonds to get cash from the Treasury. In 2023, the balance of the Social Security trust funds declined by roughly $41 billion.

The Treasury pays the bill for Social Security the same way it pays all sorts of other bills: by using non-payroll tax revenue and money borrowed from investors on Wall Street. While that effectively means that Social Security benefits are now financed by overall revenue, experts in the program emphasize that the legal obligation created by the bonds is important.

“That’s possible only to the extent that Social Security was running on a surplus sometime in the past, which was reducing pressure on general revenues,” said Paul N. Van de Water, a senior fellow at the Center on Budget and Policy Priorities. “That’s an important political and legal distinction even if it’s not so important from an economic point of view.”

The perception that Social Security is safe from political meddling also helps Americans feel confident in the program. Ahead of the depletion of the trust fund, Congress would have to pass a law to allow Social Security to pull from general, non-payroll-tax revenues without a bond from the trust fund to redeem."

"The move could also mean the U.S. deficit continues to grow at a pace economists find alarming, potentially weighing on the performance of the economy."

"“I am committed to extending Social Security solvency by asking the highest-income Americans to pay their fair share without cutting benefits or privatizing Social Security,” the president said in a statement on Monday."

"Spending on Social Security represented 5% of U.S. gross domestic product this past year, and it is expected to reach 5.9% of GDP in 2034"

"“The system is adding to federal borrowing. Getting rid of the trust fund and simply calling it a day would be perceived as Congress giving up on doing anything about the fiscal trajectory,” said Wendy Edelberg, a senior fellow at the Brookings Institution and a former chief economist at CBO. “I don’t put it past them. These are more political questions than economic ones.”"

What Ralph Waldo Emerson Knew About Money

The great American thinker was able to write his shimmering essays thanks to a healthy income from dividends and speaking fees

By James Marcus. He is the author of the new biography Glad to the Brink of Fear: A Portrait of Ralph Waldo Emerson. Excerpts:

"Emerson, who made very little money from his books until the end of his career, was forced to seek other sources of income as a public speaker. “I am no very good economist,” he once lamented, yet he was certainly adept at packaging and promoting Transcendentalism for what was then a mass audience."

"Emerson’s interest in money extended far beyond the management of his personal finances. For one thing, he read the great economists of the era. He was familiar with Thomas Malthus and Adam Smith’s “The Wealth of Nations”—which, he assured a Boston audience, was a “book of wisdom” on par with Paradise Lost. Since Emerson conceived of the universe as a vast, self-correcting mechanism, the laissez-faire arguments expressed in Smith’s book made perfect sense to him. “The basis of political economy is non-interference,” he wrote in a lecture titled “Wealth.” “The only safe rule is found in the self-adjusting meter of demand and supply.”"

"The industrialists of the Gilded Age . . . seized on his gospel of self-reliance, which had not only shaped the American character but merged quite comfortably with the social Darwinism of the era."

"Its [money]  role as a symbolic system, a way of transforming one thing into another, seemed almost magical to him. “Money,” he declared in a famous passage, “which represents the prose of life, and which is hardly spoken of in parlors without an apology, is, in its effects and laws, as beautiful as roses.” Emerson’s greatest acolyte, Henry David Thoreau, wrestled endlessly with the dilemma of how to live without money. Emerson was interested in how to live with it, which soured his friendship with Thoreau"

In the early 1860s, for example, his Boston publisher contacted Emerson about one of his articles that had previously appeared in The Atlantic magazine. There was now a plan to publish the same piece in a book, and so a check had been cut for the Sage of Concord—which he refused. “I don’t believe it honest for me,” he insisted, “to take money twice for the same piece of work.” He had an old-fashioned work ethic, believing that he had been paid for an honest day’s labor and the accounts were thereby balanced.The publisher pleaded with him to accept the payment. Emerson, softening, wondered whether he should stick to the high road after all. Weren’t his principles simply gumming up the sacred machinery of supply and demand? “We cannot live in obedience to the true poles of our being,” he allowed. “I vary from my highest self, and I have no disposition to play the evangelical peacock here.” To put it another way: he took the check." 

Is There Economic And Political Meaning In "The Wizard of Oz?"

To get a handle on this, you can read Money and Politics in the Land of Oz By Quentin P. Taylor.  Below is an excerpt from the Taylor paper:

"Dorothy, the protagonist of the story, represents an individualized ideal of the American people. She is each of us at our best-kind but self-respecting, guileless but levelheaded, wholesome but plucky. She is akin to Everyman, or, in modern parlance, “the girl next door.” Dorothy lives in Kansas, where virtually everything-the treeless prairie, the sun-beaten grass, the paint-stripped house, even Aunt Em and Uncle Henry-is a dull, drab, lifeless gray. This grim depiction reflects the forlorn condition of Kansas in the late 1880s and early 1890s, when a combination of scorching droughts, severe winters, and an invasion of grasshoppers reduced the prairie to an uninhabitable wasteland. The result for farmers and all who depended on agriculture for their livelihood was devastating. Many ascribed their misfortune to the natural elements, called it quits, and moved on. Others blamed the hard times on bankers, the railroads, and various middlemen who seemed to profit at the farmers’ expense. Angry victims of the Kansas calamity also took aim at the politicians, who often appeared indifferent to their plight. Around these economic and political grievances, the Populist movement coalesced.

In the late 1880s and early 1890s, Populism spread rapidly throughout the Midwest and into the South, but Kansas was always the site of its most popular and radical elements. In 1890, Populist candidates began winning seats in state legislatures and Congress, and two years later Populists in Kansas gained control of the lower house of the state assembly, elected a Populist governor, and sent a Populist to the U.S. Senate. The twister that carries Dorothy to Oz symbolizes the Populist cyclone that swept across Kansas in the early 1890s. Baum was not the first to use the metaphor. Mary E. Lease, a fire-breathing Populist orator, was often referred to as the “Kansas Cyclone,” and the free-silver movement was often likened to a political whirlwind that had taken the nation by storm. Although Dorothy does not stand for Lease, Baum did give her (in the stage version) the last name “Gale”-a further pun on the cyclone metaphor.

The name of Dorothy’s canine companion, Toto, is also a pun, a play on teetotaler. Prohibitionists were among the Populists’ most faithful allies, and the Populist hope William Jennings Bryan was himself a “dry.” As Dorothy embarks on the Yellow Brick Road, Toto trots “soberly” behind her, just as the Prohibitionists soberly followed the Populists.

When Dorothy’s twister-tossed house comes to rest in Oz, it lands squarely on the wicked Witch of the East, killing her instantly. The startled girl emerges from the abode to find herself in a strange land of remarkable beauty, whose inhabitants, the diminutive Munchkins, rejoice at the death of the Witch. The Witch represents eastern financial-industrial interests and their gold-standard political allies, the main targets of Populist venom. Midwestern farmers often blamed their woes on the nefarious practices of Wall Street bankers and the captains of industry, whom they believed were engaged in a conspiracy to “enslave” the “little people,” just as the Witch of the East had enslaved the Munchkins. Populists viewed establishment politicians, including presidents, as helpless pawns or willing accomplices. Had not President Cleveland bowed to eastern bankers by repealing the Silver Purchase Act in 1893, thus further restricting much-needed credit? Had not McKinley (prompted by the wealthy industrialist Mark Hanna) made the gold standard the centerpiece of his campaign against Bryan and free silver?"

Now an excerpt from a principles of economics text book by Irivin B. Tucker:

"Gold is always a fascinating story: The Wonderful Wizard of Oz was first published in 1900 and this children's tale has been interpreted as an allegory for political and economic events of the 1890s. For example, the Yellow Brick Road represents the gold standard, Oz in the title is an abbreviation for ounce, Dorothy is the naive public, Emerald City symbolizes Washington, D.C., the Tin Woodman represents the industrial worker, the Scarecrow is the farmer, and the Cyclone is a metaphor for a political revolution. In the end, Dorothy discovers magical powers in her silver shoes (changed to ruby in the 1939 film) to find her way home and not the fallacy of the Yellow Brick Road. Although the author of the story, L. Frank Baum, never stated it was his intention, it can be argued that the issue of the story concerns the election of 1896. Democratic presidential nominee William Jennings Bryan (the Cowardly Lion) supported fixing the value of the dollar to both gold and silver (bimetallism), but Republican William McKinley (the Wicked Witch) advocated using only the gold standard. Since McKinley won, the United States remained on the Yellow Brick Road."

But not everyone agrees with this. Economist Bradley Hansen wrote an article titled The Fable of the Allegory: The Wizard of Oz in Economics in the Journal of Economic Education in 2002. Here is his conclusion:

"Rockoff noted that the empirical evidence that Baum wrote The Wonderful Wizard of Oz as an allegory was slim, but he compared an allegorical interpretation to a model and suggested that “economists should not have any difficulty accepting, at least provisionally, an elegant but controversial model” (Rockoff 1990, 757). He was right—we did not have any difficulty accepting it. Despite Rockoff’s warning, we appear to have accepted the story wholeheartedly rather than provisionally, simply because of its elegance. It is as difficult to prove that The Wonderful Wizard of Oz was not a monetary allegory as it is to prove that it was. In the end, we will never know for certain what Baum was thinking when he wrote the book. I suggest that the vast majority of the evidence weighs heavily against the allegorical interpretation. It should be remembered that no record exists that Baum ever acknowledged any political meanings in the story and that no one even suggested such an interpretation until the 1960s. There certainly does not seem to be sufficient evidence to overwhelm Baum’s explicit statement in the introduction of The Wonderful Wizard of Oz that his sole purpose was to entertain children and not to impress upon them some moral. The Wonderful Wizard of Oz is a great story. Telling students that the Populist movement was like The Wonderful Wizard of Oz does seem to catch their attention. It may be a useful pedagogical tool to illuminate the debate on bimetallism, but we should stop telling our students that it was written for that purpose."

I found a review of the book in the NY Times from 1900 and it does not mention anything about OZ having political or economic meaning. The book was also made into a musical a few years later and none of the reviews of the musical mention any political or economic meaning.

Life is full of tradeoffs: if we want more "big data" and artificial intelligence then we might have less green energy

See How Big Data Centers Are Slowing the Shift to Clean Energy: In Virginia’s data-center alley, rising power demand means more fossil fuels by Jennifer Hiller and Scott Patterson of The WSJ. Excerpts:

"An explosion of so-called hyperscale data centers in places such as Northern Virginia has upended plans by electric utilities to cut the use of fossil fuels. In some areas, that means burning coal for longer than planned.

These giant data centers will provide computing power needed for artificial intelligence. They are setting off a four-way battle among electric utilities trying to keep the lights on, tech companies that like to tout their climate credentials, consumers angry at rising electricity prices and regulators overseeing investments in the grid and trying to turn it green.

Ground zero for the fight is Northern Virginia’s “Data Center Alley.” About 70% of global internet traffic passes through the area’s data centers. A spider web of power lines connecting data centers to the grid crisscross neighborhoods and parks. More are coming."

"Data centers tend to cluster together in places that have established networks and access to a plentiful energy supply. The rise of ChatGPT and similar large-language AI models, which require huge amounts of computing power, turbocharged data-center demand.  

Many new data centers coming to Northern Virginia are known as hyperscale, or facilities that are far larger than previous generations of data centers. The big ones use as much power as the city of Seattle. Dominion Energy D 0.06%increase; green up pointing triangle, which supplies electricity to most of the data centers in Virginia, expects their power use to quadruple over the next 15 years, representing 40% of the utility’s demand in the state. 

Utilities in Georgia and North Carolina are adding fossil-fuel power or considering delaying the shutdown of coal-fired plants to meet the demands of data centers and other industries. Duke Energy DUK 0.12%increase; green up pointing triangle told regulators it needs three new gas-fired power plants in the Carolinas. Otherwise it says it will have to keep coal plants open."

"residents complain about the constant buzzing that emanates from the hulking structures and the power lines that crisscross their neighborhoods."

"Wind and solar can’t serve data-center demand around the clock, so growth will need to be supplemented by natural-gas-fired power generation, said Arshad Mansoor, chief executive of the nonprofit Electric Power Research Institute.

“You can be an idealist,” Mansoor said. “But if you’re a realist, you’ll add a ton of solar and you can balance that with gas.” The only other option to new gas plants is delaying coal and nuclear-plant retirements, he said."

Related posts:

Life is full of tradeoffs: if we want more nickel to make EV batteries we might have to use more coal (2024)

Life is full of tradeoffs: it costs money to keep chemicals out of our water systems (2024)

Life is full of tradeoffs: reaching net zero emissions by 2050 vs. the costs of the transition (2023) 

Life is full of tradeoffs: If we want more wind farms, we might have fewer jaguars & pumas and less water (2023)

Life is full of tradeoffs: we can preserve more natural & cultural treasures by giving up uranium that promotes cleaner energy & less energy dependence (2023) 

Life is full of tradeoffs: More Renewable Diesel Might Mean Higher Food Prices (2023) 

Life is full of tradeoffs: More wind power might mean more light pollution & noise (2023)

Life is full of tradeoffs, west Texas wind power vs. the Air Force, landowners, ecotourists, astronomers, archeologists and conservationists (2023)

Life is full of tradeoffs: more houses to help the homeless vs. more trees (2023)

Life is full of tradeoffs: if we want more graphite for car batteries we might get more emissions in making it or raise humanitarian concerns (2023)

Life is full of tradeoffs: If we support American workers with trade restrictions it might mean more inflation (2023)

Life is full of tradeoffs, wind power vs. fishing edition (2022)

Life is full of tradeoffs, reducing animal cruelty vs. increasing worker safety (2022)

Life is full of tradeoffs: If we want more historic preservation we might have to give up some solar panels (2022) 

Life is full of tradeoffs: We can have more bison or we can preserve archaeological sites (2022)

Life is full of tradeoffs: Adding geothermal power could hurt the environment (2022)

Life is full of tradeoffs: sustainability vs. competition edition (2022)

Solar Power’s Land Grab Hits a Snag: Environmentalists: Mojave Desert residents say they support clean energy, but not giant projects, citing threat to tortoises and views (2021)

Life is full of tradeoffs, the case of federal renters assistance (2021)

Life Is Full Of Tradeoffs: If We Want To Do More To Fight Climate Change We May Have To Lower Tariffs On Solar Panels Which Might Put U.S. Firms Out Of Business (2021)

Tradeoffs and anti-trust policy (2019) 

Tradeoffs: More Goods And Services Might Mean Less Clean Air (2013)

The Recession Cleaned The Air, Another Example Of How Life Is Full Of Tradeoffs (2011)

Environmentalists vs. . . . other environmentalists? Or, are birds more important than clean, cheap energy? (2007)

More Proof That Tradeoffs Are Everywhere: Blind People Don't Like The New, Quiet Hybrid Cars (2007)

California Fast-Food Chains Are Now Serving Sticker Shock (due to higher state minimum wage)

Higher state minimum wage went into effect April 1; chains say burritos and burgers are getting more expensive in response

By Heather Haddon of The WSJ. Excerpts:

"Restaurants for months have said menu prices in California would rise as the state raised the minimum wage for fast-food workers. Now they are following through.

Consumers picking up burgers, burritos and chicken sandwiches at chains in the Golden State are grappling with prices that for months have been rising at a faster clip than in other states, according to market-research firm Datassential. 

Since September, when California moved to require large fast-food chains to bump up their minimum hourly pay to $20 in April, fast-food and fast-casual restaurants in California have increased prices by 10% overall, outpacing all other states, the firm found in an analysis of thousands of restaurants across 70 large chains."

"California raised the minimum wage for fast-food workers to $20 an hour in April, a 25% increase from the state’s broader $16 minimum wage."

"California restaurants already had some of the highest fast-food prices in the country, according to market-research firm Revenue Management Solutions. Every month since October, California fast-food and fast-casual restaurants have raised prices across a greater percentage of their menus compared with restaurants in the rest of the country, Datassential found."

"Customers across the country are starting to pull back on restaurant visits after eateries pushed up their prices in response to inflation, industry data shows."

Wages are the price of a resource, labor. When the price of a resource increases the supply of the good in question will decrease or shift to the left, leading to an increase in the price of the good. In this case, fast-food.

In 2013, Christina D. Romer, who was the first chair of the Council of Economic Advisors under Obama, wrote an article called The Business of the Minimum Wage in The NY Times. Excerpt:

"Some evidence suggests that employment doesn’t fall much because the higher minimum wage lowers labor turnover, which raises productivity and labor demand. But it’s possible that productivity also rises because the higher minimum attracts more efficient workers to the labor pool. If these new workers are typically more affluent — perhaps middle-income spouses or retirees — and end up taking some jobs held by poorer workers, a higher minimum could harm the truly disadvantaged.

Another reason that employment may not fall is that businesses pass along some of the cost of a higher minimum wage to consumers through higher prices. Often, the customers paying those prices — including some of the diners at McDonald’s and the shoppers at Walmart — have very low family incomes. Thus this price effect may harm the very people whom a minimum wage is supposed to help."

Dear Columbia Students, Divestment From Israel Won’t Work

Even if the university surrenders, it will be making a statement, not doing anything financially meaningful

By James Mackintosh of The WSJ. Excerpts:

"the parallel frequently made to the boycott of apartheid South Africa isn’t a very good one. That boycott lasted decades, mainly involved consumers, not investors, and had serious financial effects on the country’s exports. Cutting academic ties with South Africa didn’t have such a clear impact as protesters today believe, research suggests."

"But the financial effects, or lack of them, bear examining. And there’s a very instructive parallel: misguided demands to quit investments in fossil fuel companies to slow climate change.

Environmentalists think that if universities and others sell coal and oil stocks, it will influence fossil fuel production. It hasn’t, and it won’t, for three reasons that also apply to Israel.

First, there’s just too much capital around. University endowments are big (Columbia has $14 billion) but are a drop in the ocean of capital swilling around big companies. Microsoft, one of the stocks protesters want sold, alone is valued at $3 trillion. 

The impact of even a lot of universities selling would be negligible. There are far more people with huge amounts of money who don’t care about links to Israel (or oil). Investors who sell to protest against Israel will find others willing to buy for purely financial reasons. And some deep-pocketed supporters of Israel may have money to spare that would once have been a university donation.

Look at the climate campaign. The most widespread divestment has involved coal companies, which many huge pension funds and endowments agreed to exclude, and which are almost universally banned by ESG (environmental, social and corporate-governance investing) funds.

But when the world decided it wanted more coal, after Russia’s invasion of Ukraine led to energy shortages, no amount of shunning by investors could stop the shares of coal companies soaring. Investors who want to stop the use of coal should stop using coal, or push governments to ban coal use earlier, not try to somehow affect production by steering clear of coal stocks.

Second, small changes in share prices have no effect on corporate investing decisions. It is hard to detect the effects of interest rates on corporate investment, let alone of share prices.

Even if there were some marginal effect on a company’s valuation from massive disinvestment—and the evidence is there wouldn’t be much if any—the feed through to investment decisions would be more marginal still. Israel is much more likely to have trouble attracting capital because it is at war, not because share prices of companies invested in Israel are slightly reduced by disinvestment.

Even if selling the stock made it cheaper, the effect would be counterproductive. The profits of the companies would be unaffected, since they are determined by their costs and revenues; a boycott of their goods might matter, but a boycott of their shares won’t.

Selling the shares cheaply to someone else just leaves the buyer owning the future profits instead, at a bargain price. The university would have less money to spend on students, while those who are pro-Israel, pro-oil or just pro-profit would have more.

Third, the companies most important to Israel’s military, and to fossil fuel production, belong to or are supported by governments. Even if divestment somehow worked on other companies, it still wouldn’t work here. Israel receives large U.S. military support, financed by the government. Weapons will continue to flow no matter what private investors do—only Congress or the White House can stop them.

Likewise, in the climate debate, five of the top 10 oil producers in the world are controlled by Saudi Arabia, China, Mexico and Brazil, and they pump far more than the big five private U.S. and U.K. producers. They just aren’t vulnerable to divestment threats."

"“Divestment will not directly reduce the capital available to publicly listed fossil fuel companies, and may in fact promote the transfer of fossil fuel extraction activity to national and state-owned companies that are more polluting, less transparent, less sensitive to societal pressures, and less committed to addressing the climate crisis,” the committee said. It wants to be able to engage companies to encourage a switch to clean fuels by 2050 and to stop them lobbying against climate science. For that, the university needs to be a shareholder." (Columbia's socially responsible investing committee)

The Era of One-Stop Grocery Shopping Is Over

Consumers are making 8% more trips to different retailers as inflation continues to upend household budgets

By Rachel Wolfe of The WSJ. 

One thing that I always talked about with inflation was that one of its costs was all the things we had to do to avoid it. This article seems like an example of that.

Here is a passage from the related post linked below about Germany in the early 1920s when they had hyperinflation that is an another example of costly behavior:

"By mid-1923 workers were being paid as often as three times a day. Their wives would meet them, take the money and rush to the shops to exchange it for goods."

Now excerpts from Wolfe's article:

"Consumers bought groceries from an average of 20.7 different retailers between March 2023 and February 2024 according to data firm Numerator, up 23% from the same months between 2019 and 2020. In addition to visiting more stores, shoppers are also traveling to cheaper ZIP Codes to shop"

"latest example of consumers changing their behavior in response to the higher of prices in our lives"

"with groceries taking up the highest percentage of household budgets in 30 years"

"Grocery prices are up 21% in three years"

"shoppers are making 8% more trips than they did last year"

"Traditional grocers ate up 66% of total consumer spending on food at home in 2022"

"That’s down from 69% in 2017. "

"Roger Beahm, a marketing professor at Wake Forest University School of Business, says some food stores are now leaning into differentiation rather than trying to be all things to all people." 

Related posts:

World War I Finally Ends (a post from 2010 when Germany made the last payment for war reparations from World War I in 2010 that may have contributed to the hyper inflation)  

When workers were paid twice a day and given half-hour shopping breaks (Germany, 1923)

The % of 25-54 year olds employed was 80.8% in April after being 80.7% in March (and was 80.9% in both June and July of 2023); Average hours worked down

One weakness of the unemployment rate is that if people drop out of the labor force they cannot be counted as an unemployed person and the unemployment rate goes down. They are no longer actively seeking work and it might be because they are discouraged workers. The lower unemployment rate can be misleading in this case. People dropping out of the labor force might indicate a weak labor market.

We could look at the employment to population ratio instead, since that includes those not in the labor force. But that includes everyone over 16 and that means that senior citizens are in the group but many of them have retired. The more that retire, the lower this ratio would be and that might be misleading. It would not necessarily mean the labor market is weak.

But we have this ratio for people age 25-54 (which also eliminates many college age people who might not be looking for work).

The % of 25-54 year olds employed was 80.8% in April, after being 80.7% in March.  It was 80.6% in Jan. 2020 just before Covid. The 80.9% in June 2023 was the highest since the 80.9% in April, 2001.  

It was 80.6% in Jan. 2020 and 69.6% in April 2020.  Click here to see the BLS data. 

It was 79.875% for all of 2022 & 80.667% for all of 2023.

The unemployment rate was 3.9% in April after being 3.8% in March. The unemployment rate was 3.6% for all of  2022 as well as 2023.  Click here to go to that data.

The labor force participation rate fell to 62.66% from 62.67%. It was 62.2% for all of 2022 and was 62.6%. in 2023.

60.24% of the adult population was employed in April (that is people 16 years old and older). 

60.275% of the adult population was employed in March. So we had a slight decrease.

60.0% of the adult population was employed in 2022 (that is people 16 years old and older). 

60.3% of the adult population was employed in 2023. So we had a slight increase.

Here is the timeline graph of the percentage of 25-54 year olds employed since 2014.

 

Now since 1948.

Now hours worked. This comes from the St. Louis FED. See Average Weekly Hours of All Employees, Total Private. It was 34.3 in April & 34.4 in March. Shaded areas indicate U.S. recessions.