Why don’t supermarket chains produce and sell compost?

Why don’t compost producers buy produce from supermarkets?

Apparently $15 bn. worth of food per year is discarded by supermarkets in the US. That has to add up to some non-trivial amount of compost. My only guesses are that 1) it’s prohibitively expensive for compost producers to pick the stuff up themselves, and 2) an intermediary compost transport business wouldn’t be viable. I’d like to know which (if not both) is the case, and why.

On the other hand, it seems there are already some big problems with commercial compost. What that article seems to dance around is the fact that these “contaminants” that somehow end up in commercial compost are in fact the same pesticides that are sprayed on the plants being used to make the compost. I suspect, without proof of course, that these instances of contamination are caused by using pesticide-laden food waste. Then if you grow food with that compost, either it dies or it has an even higher pesticide content than the last crop, and so on until the national compost stock is unusably toxic or we all get cancer or both.

As far as organics go, I remember talking to a (non-organic) New Jersey tomato farmer last summer about pesticides and spraying. He said he had basically two options to get a viable crop that summer: spray x amount of the conventional stuff, or spray 5x that amount of some kind of copper solution. He made it sound like the copper stuff was just as scary as the good old pesticide, that it was a lose-lose situation, and it was better than losing his crop. I have no idea if he was omitting important details, or if he’s an incompetent farmer who slept through his Intermediate Aphid Management class, or if he’s right that the copper solution is as nasty and dangerous as, say, endosulfan.

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Lots of bad ideas

If you’re reading a book (or watching a YouTube video) and you skip around, you’re going to miss a critically important point. It’s excusable in a math textbook, but it’s your own damn fault if you’re too impatient to sit through a two minute video. This recently happened to me, and if anyone actually read this blog it would have made me look like an idiot.  But there’s a darker side: None of my friends that commented on Facebook noticed that my numbers were completely wrong. They must have done the same thing I did: watch the beginning, feel patronized (policy-related media is invariably patronizing), skip to the end to see where it’s going, then skip around the middle to fill in the details. More likely, they just didn’t watch the video at all.

It takes a substantial amount of mental energy, and sometimes a nontrivial amount of time, to thoroughly examine and weigh an idea before allowing it to settle in your head. There are simply too many ideas out there, you only have so much brainpower. Then when an idea does settle, it’s extraordinarily hard to get rid of, because now it’s carved out its own space in your head that can really only be filled with more ideas.

Worse still, it’s very easy to convince yourself that your own ideas are good. So you go around authoritatively spreading your own ideas, and if your ideas are in fact not good, you’ve instilled a portion of those bad ideas in everyone who hears them. Or your ideas are good but nobody actually waits around to hear the whole story — they just absorb whatever part seems satisfying at the time and move on, because they are constantly bombarded with ideas and don’t have time to care much about yours.

But people do repeat what they think is true. No one remembers where they hear anything, but they remember the thing. Out of its original context, an idea might as well be their own idea, so they become convinced of the idea as if it were their own. So the cycle repeats, and your bad ideas–or distorted versions of your good ideas–end up spreading. Good luck tracking them down.

The result is that there are lots and lots of bad ideas out there, and they threaten to crowd out the good ones. There’s a strange push-pull between bad ideas and good ideas in the Internet age — we are bombarded with more ideas than ever before, so maybe we’re even less likely to have the time or the willpower to sift through them all for the good ones. On the other hand, maybe that also means we have a lot more practice, so maybe we’re much more efficient at it. I don’t know.

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A glaring omission

I made three shameful mistakes in my Wal-Mart wages post:

  1. The $300 m per year number is for Ohio alone. The total figure for the whole U.S. is actually $13 bn.
  2. The actual price increase is 1.4%, not 1%.
  3. I forgot about the increased wealth of Wal-Mart employees, in the form of increased wages.

Start with number 2. The total cost to consumers is in fact $3.69 bn and not not $2.64 bn. The per-capita cost changes from $8.42 to $11.77 , and the per-household cost changes from $23 to $32. The per-household net cost (including the $300 m tax windfall) is now $29.40 rather than $20.50.

Now for number 1. $300 m just the tax windfall from one state; the actual tax windfall is $13 bn. Each household gets back $112.85 from the government, so the per-household net cost becomes -$80.85. That is, every household is better off by $80.85. So maybe the government won’t just refund a chunk of everyone’s taxes. But the arithmetic is irrefutable: $3.69 bn is a lot less than $13 bn.

Number 3. The original video (here, for reference) seems to assume that the cost of the wage increase is passed fully and directly onto consumers, yielding the 1.4% price increase. This is just a transfer. Every household is $32 poorer this year, but the average Food-Stamp-receiving Wal-Mart employee gets a raise of $4.82 an hour. So each household is on the hook for about 6.64 hours of work for one employee, out of that employee’s 2,000 hours worked throughout the year. That’s like picking a random employee on Food Stamps and buying him a week’s worth of lunch at Subway (btw the Wal-Mart in Rochester has a Subway inside it). Oh and by the way, your check for $112.85 is in the mail.

Yeah, you could re-run the analysis with income and substitution effects for demand. Unless Wal-Mart sales are the ultimate Giffen good, it’s only going to make the cost to individual households lower, and the difference will come out of Wal-Mart’s profit. I think most of the people I know would agree there’s some karmic justice in that, and if you wait for Wal-Mart to raise their wages voluntarily it means you missed your chance. Either way, on a pure cost-benefit basis this policy is a no-brainer.

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The Cost of Paying Wal-Mart Employees a Living Wage

Wal-Mart’s low wages apparently cost the US government $300,000,000 a year, and forcing them to raise wages would result in a 1% price increase across the board. Let’s assume those numbers weren’t much different in 2012.

US personal consumption expenditures in 2012 were $9,603.3 bn. The US population was somewhere between 312 and 315 million that year (use the “select a date” feature). Let’s say it was 313.5 million. So per capita consumption expenditures were $30,642.

Net US sales in 2011 were $264,000,000,000, so the actual per capita US spending at Wal-mart was more like $842. Under a 1% price increase, with completely inelastic demand and completely elastic supply, consumers would have spent $8.42 more a year. That sounds like almost nothing, and it might be small enough to justify assuming inelastic demand. But 1% of $264 billion is $2.64 billion and that’s still an order of magnitude more than we’d save.

Sort of. The government spends $300 million less and consumers pay $2.64 billion more, or $8.42 per person. There are about 115.2 million households in the US, so it comes out to about $23 per year per household. If the $300 m windfall is distributed evenly across households, the cost drops to about $20.50 a year. That number is probably small enough that the analysis doesn’t change much with elastic demand, even if goods sold at Wal-Mart are always inferior goods (in the economic sense).

So, is it worth it to force Wal-Mart to pay employees a higher wage? That depends on whether it’s worth $20.50 out of every household’s annual income. The lesson here is that big numbers are scary, small numbers sound trivial, even when they’re saying the same thing, and $20 always sounds like a lot of money.

Personally, I’d rather see that money come directly out of Wal-Mart’s $119.95 bn 2012 profit. I have no idea how to make that happen.


Update — an exchange from Facebook:

Friend 1: “Spending $2B to save $300M? Good deal. Haha.”

ssdecontrol: “That’s what I said too. But there’s a reason I went through the whole analysis.”

Friend 2: “But it was on Upworthy, so you must hate poor people if you don’t agree with what the article said.”

ssdecontrol: “Well maybe my point wasn’t clear… Would you pay $20 a year to give several thousand people a big raise? That’s a much bigger impact than you’d get from donating $20 to a food bank.”

Friend 1: “But that’s only is EVERYONE does it. If the food bank had an extra $2B…”

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A recession by any other name…

Edward Lambert writes that it might be a good idea to induce a recession if it means we can use it to fix the inequality problem that seems to have been caused by the previous one. And why not?

As I understand it, the 2008 recession provided various labor markets an opportunity to correct for an excess of relatively unproductive workers that were too hard to fire in good times. Again as I understand it, the reason why is was a bad thing and not a good thing is that it both flooded labor markets and caused a severe drop in aggregate demand on top of what had prompted companies to cut staff in the first place. Since the cuts were ever only intended to preserve profits, when aggregate production returned the economy was all set to charge right into a second Gilded Age.

This is why no one that actually matters (i.e. average people) seemed to notice the “recovery.” So how can anyone call it a recovery and keep a straight face? I think I’ve cringed at every macro-indicator-related newspaper article I’ve seen this year… and not because of the numbers being reported.

The point here is that policy makers and market makers do not fear recessions because they hurt common people, but because they hurt the bottom line. That’s fair and to be expected. What’s more is that the corporate bottom line typically does affect the people on the assembly line. That is, talking about GDP and bank lending is necessary, but only insofar as it matters for making a typical American’s life as good as it can get. But it seems that public discussion, which should at the end of the day only be about common people, stops short at the macro indicators and routinely fails to make the connection from business back to humans.

So then: who fears a second recession? The people who would lose something because of it. And who would those people be? I don’t have a good answer, but it’s probably not the people who think the last one never ended.

There’s research to be done here.

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The US can learn from India

India is finishing initial success with its ambitious, almost futuristic biomarker ID program.

Cowen reports that India is uniquely well-positioned to implement such a labor-intensive project on such a vast scale because it’s labor force is similarly vast and willing to work for low wages.

Wait. Don’t we have 3.8 million long-term unemployed who might never work again?

Heck, you could even roll this employment program into a skills-retraining program, and make it a condition for receiving extended UI benefits.

Edit: I guess I should point out I don’t think we really need a biomarker ID system here, because we have social security numbers and a functioning IRS (haha) and such. Point remains.

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Economics After the Crisis

Based on this review, Economics after the Crisis says much of what I’ve been trying to say for a while. It’s at the top of my reading list, right above Game of Thrones.>

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