Thursday, March 26, 2009

Follow-up Hypothetical Question

Here's a follow-up to the previous hypothetical question, which I'll copy here:

Imagine you live in an apartment complex with a diverse assortment of tenants. There's a butcher, a baker, and a candlestick maker. A doctor, a lawyer, and an Indian Chief. A truck driver, a dentist, a mortician, a schoolteacher, and a mechanic.
Anything you need, you can get from the residents of your apartment. No one purchases anything from anyone outside the apartment complex. It helps to protect your apartment complex's jobs.
There's a slight problem. The schoolteacher hates kids. The truck driver is an alcoholic. The butcher is a Muslim, and won't handle pork.
Should you be allowed to trade with people who live in other apartment complexes? Even if it endangers the jobs of those in your apartments?

If someone uses the services of people living in another apartment complex, lessening the amount of potential revenue within the landlord's grasp, what percentage penalty should he/she be required to pay on those transactions?

14 comments:

Dr Ralph said...

Okay, even though the hypothetical strikes me as flawed in the extreme, I'll play, but only insofar as I can ask a few counter questions.

By the way, I don't see the grasping presence of the landlord mentioned in your original question, who I gather is meant to be a stand-in for the government.

So...

What happens to you, the baker, if the butcher and candlestick maker can no longer afford to by your bread, because everyone is now buying their candles and sausages at the apartment complex in Chinatown?

What happens if the candlestick maker can no longer afford the rent and is evicted? Now you have no local source of candles.

What happens to services at your apartment complex if half the apartments are vacant because no one can sell enough goods to pay rent any more? Does the landlord raise your rent so he can continue to pay his mortgage or does he take three weeks to repair your toilet using an unqualified plumber?

I'm starting to like your hypothetical question. I think it makes my point better than it makes yours.

The Whited Sepulchre said...

Doctor,
I'll admit that it's deeply flawed, but I like the idea of a small group of people acting as a microcosm of our present situation.

1) The first situation implies that everyone except the butcher and candlestick maker is saving money on candle and sausage purchases. Therefore as long as my bread is preferable to the Chinatown apartments brand, I as the baker should still be doing ok.

2) Does anyone really need a "local" source for candles? iPods? Cuckoo Clocks? Sombreros? Tulips? Coffee? Etc?
But if the landlord won't allow any products in from other apartments without a high penalty, that's the price the unfortunate residents of Sepulchral Apartments will have to pay.

3) I guess this would depend on the reason for the apartments being vacant. Are the residents leaving the complex for apartments with a more liberal purchasing policy? If so, the landlord needs to change his ways.
Or is it a situation where the apartments in Chinatown have a comparative and competitive advantage in Candles and sausages? If that's the case, the remaining residents should consider going into the bakery business. Kinda like textiles left the U.S. several generations ago, but the service industries have flourished.

And I am shocked (!) SHOCKED ! ! to see that you think that I have a point to make in my totally open-ended, Socratic Dialogue/hypothetical questions.

Dr Ralph said...

The simplicity of your original question is beginning to become more complex as we start picking away at each others assumptions. Pretty soon it will resemble US tax code.

It also sounds like the size of the apartment complex has grown considerably, from what sounded initially like a 12-plex to something resembling the state of Rhode Island.

1) Dangerous assumption on the part of the Baker. If his fellow residents are going all the way to Chinatown Apartments for candles and sausage, they might as well save on bread while they are there, too.

2) Not all the residents of Sepulchre Apartments (or is it Tombs?) may have vehicles. For them, a local source of candles is pretty important. And there may be times you don't want to drive all the way to the other side of town for one candle. But guess what -- your local candlemaker has gone out of business.

3) I'd say the apartments are vacant because the Butcher, the Baker, and Candlestick Maker (and their peers) can no longer afford rent. They are now sleeping on the benches in Recession Park. Everyone now makes bread? Who can afford ovens? Plus Chinatown Bakers are already undercutting prices (since the landlord pays for their ovens).

So...services are all that's left? As someone once said, you can't build an economy based on everyone delivering pizzas to one another.

As to your Socratic method -- actually you have a gift for it. Too bad we as a society undervalue teaching (unless you can also coach winning football teams).

The Whited Sepulchre said...

Doctor,
I believe the main difference between us is as follows, and please correct me if I'm putting words into your mouth that are contrary to what you're saying.

Your opinion is that protectionism has a long-term benefit for consumers.

I believe that all tariffs, import quotas, duties, subsidies, and outright bans are put into place to protect producers, not consumers. Producers, not consumers, are the ones lobbying for all of the above. The benefit per candle, loaf, or sausage is massive for the individual producer, minimal for the consumer.
No consumer is going to form a trade association to save .20 cents on a candle. Or a pound of sugar. But you can bet that Florida's Fanjul family (my favorite example on the subject) is willing to postpone any and all recreation to lobby congress to keep out sugar produced in other countries. Or apartment complexes, in this case. (I guess there's a small patch of cane behind the parking lot.)
Ever since Adam Smith started typing away in the 1770's, people have known that there are massive advantages to trade. The people, groups, counties, states, and nations who trade the most are the ones who prosper the most.
If two people want to swap for each other's stuff, a political boundary (or highway between apartments run by different landlords) doesn't eliminate any of the advantages that people see in the exchange.

fembuttx said...

Hookers would live in the vacant apartments. They would get paid in candlesticks (big ones), bread (french) and probably would get their pipes cleaned reguarly by the good ole plumber.

If the landlord wants to raise the rent, he is going to have to either take pu**y or the extra candlesticks or bread.

But then the candlestick maker and the baker would be screwed ( in two senses) because the merchandise they have traded for a peice of a** would then be used by the landlord, there fore cutting into their ability to sell their goods.

I suggest renting to a couple of pot smokers...they have a ravenous appetite for all types of carb type foods and they could watch the candles burn all night long.

Fembuttx has spoken

fembuttx said...

Oh, I did not mention that the butcher would be a frequent pervayer at the little whore house in sepulchreville. I mean, he has got the meat.

fembuttx said...

And they could pack all of their goods in some of those over sized chinese condoms. Any reputable hooker would appreciate that.

TarrantLibertyGuy said...

OK - late to the conversation, but that's what I get for working. The scenario is adequate for Whited's question. However, there is a flaw in *gasp* Dr. Ralph's logic. Please allow me - - -

Here's more likely what would happen without the tariffs:

- The butcher sells excess beef fat and tallow to the candlemaker allowing her to be more competitive. She now wholesales her candles to all the restaurants and shops in Chinatown.

-The school teacher finds that the "Pork Only Butcher" niche is quite lucrative, especially living in the same building I live in and she gladly changes jobs since nobody uses her teaching services due to poor customer service. Mmm. Pulled pork.

-The increase in pork consumption helps the doctor's and mortician's business!

-The Truck Driver converts to Islam (thanks to the freedom of religion at this complex) and he gives up drink and pork. Since free trade is allowed between apartment complexes, his job flourishes and buys two new trucks and hires the mechanic on full time.

-The Native American Chief has organized a cross apartmental logistics service to orchestrate all of the free trade coming into, between and out to other apartment complexes. (who would've even THOUGHT about such a job??)

-The Dentist finds that operating a for-profit school is more lucrative than his dental practice and becomes a Headmaster (thankfully Fembuttx probably won't read this).

IMHO, the flaw in Dr. Ralph's hammer and sicle-era thinking is laborers cannot change the mode of labor. I say, if you are a laborer and somebody somewhere else does your job more effectively or efficiently, you may either starve, change jobs, or invent a way to do the job even MORE effeciently. Is that so crazy? Am I off base there?

Dr Ralph said...

It is difficult to follow in the footsteps of such deep thinkers as TarrantLibertyGuy and especially Fembuttx (oh how we've missed you!) but I'll force myself.

First, a confession.

I like my $100 sneakers that some Chinese villager was paid a dollar to make (if that much). I'll probably go to hell for it, but they are comfy.

Unfortunately in the examples I'm seeing by my noble debating partners, they've changed the rules to suit their ideology without consulting with anyone. Or they announce the existance of a set of conditions that were not previously disclosed.

This seems to be much of the problem in the real world, too.

WS - You assume I'm interested in protecting the producer at the expense of the consumer. The flaw in this is that in most cases, the consumer is also a producer. How else does he fuel his raging acquisitiveness?

This has been my point: out-source too much production and you kill the consumer. How much is too much?

TLG - I get burned as well by not being able to throw in a quick reply because I'm at work. Tsk.

To your point about laborers changing, I say some can and some can't. In my 35+ year work life, I've changed careers 5 times at least, some for the better, some not. I'm pretty adaptable. Not everyone is, because of age, education, intelligence or other circumstance they may or may not have any control over.

"Let'em starve" is not a very good solution to a social or economic problem, regardless of whether you are a bleeding heart or made of flintier stuff. Don't fool yourself: none of us is any more than one disaster away from homelessness.

fembuttx said...

Everybody left out the hooker. She could be a school master too. "How to blow hard 101". If things get bad for the whore, all she has to do is change positions. If on her back will not do, a** in the air certainly will.

And as a side note, pulled pork is really good.

TarrantLibertyGuy said...

OK then, Dr. Ralph... I guess the question was "How much of a tariff should be placed on those purchasing goods and services outside the building?" and not "What would happend should you not penalize those living within the building for purchasing outside goods and services?" - Instead of saying, "20%", I thought I'd take it one step further.

With that said, what a wonderful life it is in that apartment building where you aren't forced to purchase shoddy consumerables. Consider, in a 'protected environment", the candlestick maker decides to charge an extra 19% because there's a tariff on outside candles of 20%. Still cheaper, but now alternative candles are now more expensive - so she can!

Now, the mortician who features candles in his services must increase his prices to cover his costs. The truckdriver, depressed over his lack of business (he can't ship anything out) drinks until he dies of liver disease, so his wife has to pay the new higher mortuary costs. She would sell the truck, but selling to outside the building has made that a cost prohibitive alternative.

Sadly, she goes to each apartment asking for a little help. At each apartment they tell her to go to the landlord. They pay their high rents each month, after all, and she has the right to a funeral! The landlord says to ask the tenant board and if they're OK with it...

The tenant board meets and decides that although the truckdriver was a bit of a slacker/drunk, he has a right to a funeral - his wife does anyway. They take some money out of the portion of the general tenant fund that they have access to - which is supposed to be used for fire equipment and private security - and give it to her.

Next week, the private security service bill comes in and the landlord goes to the general fund... and it's not there! The only option here: RAISE RENT!!

Oops. Went ahead and made up new rules again. And, also - I don't say, "Let them starve", I say that starving is one of their options that they may freely choose. When you remove that option, by a lifetime guarantee of full bellies, that allows them to wait until that perfect job as a buggy whip braider comes up rather than adapt! Temporary care and feeding of the poor and hungry should be the domain of charities/churches/etc. In this instance, the butcher would probably throw her some left over meat since charity (Zakat) - is one of the five pillars of Islam.

And I know for sure that I'm just a disaster away from homelessness. I'd - and likely, you too - would hit up my family and friends first, then my church and then local charities while I rebuild, swap work for supplies and money... Heck, maybe even camp out for a while, but I'm telling you I would NEVER EVER NEVER take taxpayer funded alms.

By the way, that 'not changing the rules to suit your ideology' bit sounds like the ideological crutch of the oppressed. Free your mind, Dr. Ralph, and the rest will follow (Paraphrased from En Vogue).

Note: last night at a Chinese restaurant, our server began talking to my wife about her many travels to China. It comes out in the conversation that she's an MBA who worked at a large employer that laid her off. She was a college professor in another country.

I was VERY VERY impressed that she was working as a waiter until something came up. Nothing sad here (well, just a little) - but I felt proud of her rather embarrassed or whatever as there is no shame in honest work. I'm making an assumption here, but I believe her Asian heritage provided her a spirit of thrift and work ethic over a feeling of entitlement that we Americans have generally adopted. I gave her a bit of a better tip - not out of almsgiving necessarily - she was just good!

Dr Ralph said...

TLG - Like you, I'd look to family and friends if I lost my job. Not everyone has that option. And frankly, if push came to shove, I'd swallow my pride and take government assistance if that's what it took to feed my family.

Since our mythic apartment complex is now the size of Rhode Island, I would be surprised if we had but one candlestick maker, butcher or mortician living there. Are we now saying the only competition is to be found outside Sepulchreville?

Tariffs? Have I ever mentioned tariffs in this whole thread?

My point throughout has been about the consequences of looking at life solely through the lens being a consumer. The problem with this whole argument is the fact that the focus is almost entirely about consumption.

Is that how we now define ourselves and our lives? By how much we consume? By how much we pay for something?

How incredibly sad.

The Whited Sepulchre said...

Dr.,
Let's use a different set of terms, then.

Perhaps this is a false dichotomy, but I've been saying that we have a choice between protecting Producers or Consumers.
Another more palatable way of syaing the same thing ? Our government has a choice of protecting large organized cartels of manufacturers, or protecting disorganized customers.

Doing the former involves lots of government activity, accompanied by large campaign donations. The latter means that government pretty much stays out of the picture and more people benefit.

Dr Ralph said...

WS - I agree: different terms. The original metaphor has begun to outlive/outgrow it's usefulness.

I'm not necessarily arguing for or against tariffs or any other form of protectionism (a term I find slightly pejorative). I'm also not in favor of protecting manufacturers per se.

I would like to know what happens to the employees of affected manufacturers.

Like I said, I enjoy my $100 Chinese made sneakers. Out-sourcing my shoes, however, didn't make them any cheaper: the cost to manufacture went down and somebody other than a (now un-employed) factory worker collected the difference. This is one of the reasons the spread between the richest and poorest in our country is so great.

Large organized cartels of manufacturers? Well duh. Big is encouraged in this country. Most of these got big driving smaller competitors out of business. So what do you expect? Believe me, I'm no fan.

My main concern is the human cost to the folks who work at these places.

Someone else said, "Change jobs." Well Duh again.

While I agree at least one of the big three automakers probably needs to go down, the problem of all those displaced workers will remain. If Chrysler dies, how many people in Detroit are going to be chasing the same few jobs? And I repeat -- I agree this may well need to happen.

The issue is how do we achieve a globalized economy (which I happen to agree is a good thing) and make sure the benefits are available to all citizens (which I'm not seeing addressed except in Pollyanna-esque free-market groupspeak).

I'm just looking for more than a few pat, simplistic bumpersticker responses here.