To:[email protected] CC: BCC: Subject:Re: Wal-Mart efficiency L3
Original Message: ----------------- From: Nick Arnett [EMAIL PROTECTED] Date: Thu, 22 Dec 2005 09:08:30 -0800 To: [email protected] Subject: Re: Wal-Mart efficiency (was Re: My annual Xmas tirade...) On 12/22/05, Dan Minette <[EMAIL PROTECTED]> wrote: > > > But, the efficiency improvement from Wal-Mart is documented. It is really > efficiency. >That's only one measurement. Surely you don't think that prices and profits >are all there is to evaluating Wal-Mart? Are you unwilling to consider >other measures of the efficiency and value of a company? Efficiency can be measured by a number of different means...output per $ of capital investment output per worker per year, output per worker per hour. I was thinking of the efficiency that is reflected in the last standard measure of productivity: output per hour per worker. If a worker is paid $5/hour or $100/hour, this measure of productivity is the same. The value created can be divided up many different ways: higher wages, higher profits, and lower prices are three. >All that we *know* Wal-Mart is good at is getting big > >and keeping prices low. Not being a worshipper of low prices, I'm not > >willing to let that be the only "bottom line." No, that's not all we know. I went to Brad DeLong, a well known ecconomist and (former?) Brin-L member. He has an interesting quote from Paul Krugman at his website. <quote> Wal-Mart can claim, with considerable justice, that its business practices make America as a whole richer.... [I]ts low prices aren't solely or even mainly the result of the low wages it pays. Wal-Mart has been able to reduce prices largely because it has brought genuine technological and organizational innovation to the retail business. <end quote> It's at: http://delong.typepad.com/sdj/2005/12/julian_sanchez_.html That's the foundation of the arguement I was making. He is an ecconomist who generally regarded as liberal and is far from happy with the Bush Administration: as you can get from the transcripts of his discussion of the ecconomy with LAWRENCE KUDLOW found at http://www.pkarchive.org/ Now, he attaches slightly more weight than I do to a study that indicate that retail wages tend to fall after WalMart comes in (as you will see if you read just beyond my clip from Brad's website. But, for arguement's sake, I'd be willing to posit that and then discuss how one could best deal with negative side effects of something that is mostly positive. > And cutting unnecessary costs. Wal-Mart has driven up _productivity_. >Again, by one measure. Who is measuring the productivity of the families >and communities that are impacted by Wal-Mart? Shall we just ignore the way >they treat employees? If so, then slavery is even more efficient, so what's >stopping us? Slavery doesn't result in productivity. The critical point is the one Paul made in the quote given above > > Cutting costs 10% is the same as getting an 11% raise. Wal-Mart's > innovations have >I can't believe you're serious. To the person who has no income, it's 11 >percent of zero. To the person with no health insurance, it has no value. Cutting costs to everyone who has a job is like a 11% raise. To do a cost benefit analysis of Walmart for lower income workers, one has to consider this on the plus side, beside consider the loss of work by those who lose jobs at inefficient stores. >Wal-Mart is using all sorts of tactics to offer fewer benefits than most >small businesses. OK, I'd like to see the data that supports that...Indeed, not just that, but fewer benefits than other small retail businesses....obviously small high tech businesses with highly educated workers offer more benefits than small retail businesses. I gave a specific example of the wages offered by a catagory small stores, which were lower than WalMart. Surely if that were known to be the case, someone would show a comparision of the average wage and compensation package provided nationwide by small retail stores, and show that it is significantly better than the comparable numbers from Wal-Mart. I tried fairly hard to obtain substantiation for my arguements. For example, I looked at a website of the one ecconomics professor on this list; and one who has tended to be liberal. I quoted a fairly well known liberal ecconomist/columnist from his website to show that my views on efficiency are supported by a wide range of professionals. >Yes, I could, were I an elitist jerk. So don't go putting those words in > my > >mouth. > > Should have been "one can argue"....I didn't mean to imply that you do > believe that....was using "you can" as the less formal version of "one > can" >Why bring it up at all? It's a straw man. Not really. Two arguements that have this assumption as a tacit prerequsite have already been made in this thread. I expected more, so instead of discussing them one by one, I thought I'd get general agreement that this prerequsite is false, in order to use A-> B to falsify all of the other arguements. For example, you brought up that cost is not the only measure, the distance needed to travel to shop is a factor that has to be included. The counter would be that shoppers at Wal-Mart have already made this tradeoff. People won't go 5 miles Wal-Mart to save $0.25 on a gallon of milk when they can buy it 6 blocks away at a higher priced store. But, they will do their weekly grocery shopping there, to save 10% on a $200 grocery bill. If we assume that people make the best decision for themselves, then we have to assume that cost is more important than convenience whenever people travel farther to shop at Walmart instead of a more expensive store that's nearby. Again, if they buy a $10 shirt at Walmarts instead of a $60 shirt at an upscale department store (say Foley's or Dillards in the Houston area), then it's a reasonable decision, even if the $10.00 shirt looks far worse after a few washes than the $60.00 shirt. By us agreeing that lower income people make the right ecconomic decision for themselves and their families when they shop at WalMart, we can eliminate a whole catagory of attacks on WalMart. Indeed, I have found myself making different decisions on different days dependant on my income stream. If I have more work than I can handle, then my time is worth a lot of money. I won't take an hour to save $10. But, if work is very slow, then I will. Both decisions are very rational. > >> If everyone lived as though they truly loved each other, we wouldn't need >> much in the way of structure. But, people haven't been, are not, and will >> not be perfect in the future. Any system has to work when folks think >> more >> of themselves and their own families than other folks. It's not that we >> shouldn't care, it's that we should build a system that works with people >> as they are, not dependant on a general improvement in the morals of >> everyone. >I don't even know what this means, really. We should rely only on market >forces to achieve social and economic justice? If the market dictates that >some people lose their jobs, then that must be okay? No, that any system that is proposed must benefit people without first postulating that we all become less selfish. Any system that is proposed must work when people are selfish. Indeed, that is part of the genius of the American political system, it tends to work OK when people work towards their own ends....by trying to set things up so they also benefit society when they benefit themselves. > I see inefficiency as money down the toilet. Efficiency is the foundation > of the world we live in. Zambia has a much much less efficient economy, > mostly separated from world trade, and people are near starvation there. > When the average farmer produces 5% more food than his/her family needs, > then there is little room for error, as well as little chance for more > than > a few to rise above hand to mouth poverty. >It's seriously twisted logic to argue that businesses that result in lower >incomes, fewer benefits and fewer jobs is good for society just because it >results in lower prices. No, the logic I'm using is standard ecconomics, accepted by a very wide range of ecconomists. In a real sense, it's arguing that there was a boom under Clinton because the increase in productivity during his administration had the result he expected....an ecconomic boom and tremendous job growth. This was true, even though a number of people lost their jobs as a result of the improved productivity. My agruement, which is fairly well supported by historical data and comparision of ecconomies around the world, is that improved productivity in a country improves the well being of the people in the country. The measure is fairly straightforward. Ecconomic decisions that make the nation, or the world, _as a whole_ richer are inherently good (unless there are unique compelling reasons to argue otherwise). Many times, this can result in a subset of the nation experiencing substantial loss (e.g. the address decipherers I mentioned.) My arguement is that we should not stop innovations that create wealth; rather we should use some of the newly created wealth to mitigate the adverse effects on the minority. >Again I'll say, what stops us from the >"efficiency" of slavery? Because slavery is merely cheap, efficient. For example, lets assume we have the following comparison: A slave (who's minimal upkeep is the equivalant of $1.00 per hour) is able to make 1 chair a day. A skilled craftsman (working with equipment) is able to make 10 chairs/day and makes $20.00/hour. The productivity of the craftsman, as given by standard measures, is 10x that of the slave....even though the cost per chair for the slave is higher. When productivity improves, fewer people are required to produce the same amount. This often/typically results in short term job loss. But, without productivity improvement, the ecconomy is stuck...the real per person income cannot go up. I gave one example of this happening; let me give another. Recently 150 Post Office jobs have been lost in the town I grew up in: Duluth MN. A number of families are hurting a great deal because of this job loss. The reason for this is an advance in post office machinery. The software that picks up addresses from packages has improved. Before, a large number had to be sent to this, and other, worksites to be input manually. With the improvement, the fraction that had to be manually input was reduced significantly. As a result, these workers were laid off. This happens continuously, as technology and technique improve. WalMart is just another example of this. For some reason, people losing their jobs as better techniques make their jobs obsolite is acceptable when it happens to some people, but not others. I'd argue it's no worse for someone to lose a job as a retail inventory clerk because new techniques allow the work to be done with 5 people and computers instead of 50 people and paper and pencils. I'm doing this via web based email, so I'm having to stop here...at L3. Dan M. -------------------------------------------------------------------- mail2web - Check your email from the web at http://mail2web.com/ . _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
