Let companies set prices

Plus abundance as a “group,” the Greenland gambit, and what we’d be covering if Harris had won

Whether they’re in the best seat in the movie theater or the worst, seat quality almost never affects the price of a ticket. (Photo by Global Images Ukraine)

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I got laid out by the flu over the long weekend and am only recovering recently, so to help ease back into the workweek we’re shaking up the schedule and doing the mailbag today. We’ll be back with a full article tomorrow.

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Marybeth: Why do dog owners not leash their dogs in public where this is required? I find that normal people who generally follow the rules, still seem to find this totally optional even in the presence of clear posted signs. They even act offended when I ask them to leash their dogs (so at that point they can’t even claim they aren’t bothering anyone)

Gotta be honest that I have not witnessed this behavior very often.

But I think we’re seeing here that a lot of folks have the sense that “a criminal” is a certain kind of person, and that kind of person is simply not middle class with steady employment.

So if a middle-class person with steady employment wants to drive 39 miles per hour on a wide urban street with a posted speed limit of 25 miles per hour, it’s unreasonable for a traffic camera to tag them and fine them. After all, it’s not like they’re driving drunk or high or participating in illegal street racing. They’re just in a hurry! By the same token, your unleashed dog owners are probably very caring pet parents. They’re not engaged in illicit dogfighting rings or anything sordid. They just want their dogs to play and have fun and what’s wrong with that?

Well, in both cases what’s wrong with that is that in certain shared public spaces — notably urban streets and parks — having fast-moving cars or unleashed dogs greatly elevates the risk that innocent bystanders will get seriously injured. But the people doing these things feel like it’s okay because they think of themselves as good people who just don’t want to be inconvenienced.

David R: Is there an appropriate form and scope for government intervention to reduce the “complexity tax” on consumers?

Quoting myself from the relevant thread earlier this week: basically *every* market transaction has now been optimized to the point where there’s a massive complexity tax on consumers. Monitor plane tickets costs for weeks and buy at the exact right moment in time. Haggle the hell out of every major purchase, and pray that the good in question isn’t built on a planned obsolescence model or just of poor quality. Evaluate whether this in-network provider is better than that one and try to budget for a routine but pricey procedure with no information. See if you can guess whether this $1000 electronics purchase will fail within five years when half of your other ones have, so you can buy or not buy an extended warranty that is still riddled with holes. Decide which of your six credit cards will maximize your rewards or cash back on a given purchase, or just give up and accept that you’re going to get gouged by a few percent every time.

Even for folks in the class and with the education levels that are prevalent here, this is an aggravation. For the middle-class, it’s just impossible, so you throw up your hands and accept the uncertainty, inability to budget, and extra costs.

James Schapiro: Now that movie theaters almost always sell assigned seats rather than a first-come-first-served free-for-all, why isn’t there more price discrimination? Why does A1, the worst seat in the house, cost just as much as the best one, F9 or thereabouts?

A perfect pair of questions because they illustrate the principle, which I think often gets overlooked in these contexts, that when simplicity reigns supreme it often generates the question of why we are stuck with such an obviously inefficient system.

In terms of movie theaters, I’ve often had this thought specifically about IMAX and other premium large-format screens. I get the idea of charging more for the IMAX ticket. I also understand that it’s not possible for every seat in the house to have an amazing view. But it seems like a bad seat for an IMAX screen should not be more expensive than a good seat for a normal screen.

By the same token, I think it would be a better experience for most diners if nice restaurants charged people for reservations and the pricing of the reservations was done in a dynamic way similar to airlines. It would make it much easier for restaurant owners to monetize high demand for tables as such, meaning it would make more economic sense to try to offer diners a good deal on food and beverage costs. People with flexible schedules or weak preferences would end up getting better deals by eating at off-peak times. Others would find that they almost always can get a table at the restaurant they want on the evening they want, as long as they’re willing to pay. On balance, I think that’s better than the current system. But of course I acknowledge that if you switched to an airline-style pricing system, a bunch of people would complain, just as they complain about airlines today.

Geoffrey G: It’s really striking how many of these questions about annoying things that face consumers are totally irrelevant in a jurisdiction where there’s *actually robust state regulation* (I’m writing this from the EU, where such regulation exists, and, indeed, almost none of these annoying things happen to me... until the minute I enter the United States again). But even the people asking the questions are inherently skeptical about the ability (or even the desirability) of state regulation.

We’ve been stewed in a potent cocktail of self-defeating neoliberal propaganda for decades, folks!

How in the world do you expect that the same enshittified, anti-consumer businesses that give you these annoying examples of poor customer service, price-discrimination, and unrelenting spam are going to be available to help you wade out of it all?

This more than anything else expresses why I am very skeptical of this whole push for regulation to save consumers from “annoying” business practices.

We need regulation to address externalities. It’s useful to have regulation to address information asymmetries. And it’s totally fine to sit around at the bar, complaining about business practices you find annoying and saying, “there oughtta be a law!”

But ought there? As Geoffrey says, we actually know what happens when you get a government that is very responsive to this kind of guy at the bar complaining and the answer is Europe. The downside, which you see in Europe, is that the business sector is considerably less dynamic. There are way fewer large, successful companies in Europe than in the United States — and this isn’t limited to tech. There’s only one European company that’s more valuable than Home Depot, which is only the number-four American retail company.

The result of that lack of dynamism is that Europe has a significantly lower G.D.P. per capita than the United States. It’s true that this is partly about hours worked, but only partly. And the gap is growing rather than shrinking.

Now there’s a lot that’s great about Europe! Some of that is non-policy, like old buildings and pre-automobile cities. But I would rather live under European gun rules, for example, which would save tons of lives. I would rather have a proper national health-insurance program instead of a large implicit tax subsidy for job-based health insurance. I wish the United States did not have such high child poverty.

But part of why I specifically cite those things is that I am confident that American business dynamism does not fundamentally hinge on lax gun laws paired with weak enforcement. This is not relevant to why the United States is a much better place to try to grow a successful company.

By contrast, the impulse to be very responsive on a regulatory level to “there oughtta be a law”-style complaints about business practices clearly is. There is a real value to having a presumption that a company should be allowed to try whatever pricing strategies it wants. It makes it easier to do business and especially makes it easier to achieve high growth if you are allowed to aggressively explore and switch business strategies rather than being bound to someone else’s sense of what’s appropriate.

Honi: What do you think happened with Hochul? I’m very impressed with her decisions lately and how she handled her relationship with Zohran gracefully. I’m amused that both Hochul (in her speech) and Zohran treat abundists as an explicit constituency to court. Do you think “abundists” are now one of the “groups”?

I would treat the abundance issue as somewhat distinct from the more general question of Kathy Hochul. But I think the answer is, yes, that the state’s housing advocates — specifically Annemarie Gray and her team at Open New York but also others — have organized themselves into what reads to politicians as a recognizable constituency.

This group is clearly not Zohran Mamdani’s base, but the constituencies have a lot of demographic overlap and adjacency, and the housing abundance agenda is compatible with his main priorities. And I think the New York City business establishment — which, with good reason, does not love the idea of socialists governing the city — ought to ask itself how it got beaten on this topic. Andrew Cuomo made zero effort to court pro-housing voters even though on the merits pro-housing goes very naturally with pro-business and tough on crime.

The larger Hochul story of how she went from apparently flailing Accidental Governor to successful and dynamic reformist is very interesting and I have to admit that I don’t actually know what happened. I’m waiting for a more Albany-literate reporter to help us fill in the details.

Taylor Smith: Can you steel man the argument for Greenland? I can’t fathom any reason why this is needed. I want to believe that there is some rational reason that I am missing. Also, can you provide some thoughts on what a post NATO world looks like?

I don’t think the argument is that hard to follow. It’s something like:

• Point: Greenland is a strategic weak point in North American defense that the United States needs to be able to defend.

• Counterpoint: By terms of the existing treaty with Denmark, the United States has all the basing rights on Greenland it could possibly need or want.

• Counter-counterpoint: If the United States is going to shoulder the cost of defending Greenland, then as a matter of principle we should reap whatever the upside of actual sovereignty over the territory is.

I think that’s sort of all there is to it. The way the post-WWII American alliance system works is that in most cases, if you look at the arrangements piece by piece, the United States is giving its partners a good deal. To Trump’s way of thinking, that’s America being a sucker country. His view is that if we’re going to help defend South Korea, we should do so on terms that are so painful to South Korea that it’s a very close call for them whether they want to accept our help.

In fairness to Trump, this philosophy has worked pretty well for him in life. If you’d asked me abstractly about the idea of just refusing to pay his contractors back when he was a hotel developer, I would have told you that this kind of short-term thinking can’t pay off for a businessman. Sure, it’s probably true that most of the people you stiff won’t have much recourse in practice. But the damage to your reputation will be too severe to make it possible to continue doing business.

In reality, though, Trump managed to move on from scamming contractors to scamming shareholders to becoming a reality television star. He then did things like run a scam university. And then pivoted into politics and became President of the United States! Trump, at least, has shown that you can get pretty far in life while having a bad reputation.

City of Trees: What’s your take on energy efficiency standards? This crossed my mind after reading Halina lead her Wednesday housing roundup last week with observing how it trades off with regard to housing. What applications do you think it could make for proper policy?

There’s a very strong case for standards in a strict sense. It could make a lot of sense to pay a premium for a more energy efficient product that lowers your utility bills, but there is information asymmetry when it comes to evaluating technical claims. If you go to a restaurant and it doesn’t live up to the hype, you just don’t eat there again. But appliances (to say nothing of homes) are long-lasting, so as a consumer it’s not like you’re constantly purchasing hot water heaters and punishing companies that made overstated claims. So it makes a lot of sense to craft sets of standards that say “you can get certified as an Energy Saver Platinum if XYZ” and then put that before the public.

Where we get the practical conflict is around regulatory mandates, where the government says we’re going to make you use the more efficient appliance for your own good.

One issue here is that it’s very hard to specify the counterfactual correctly. If a person who wants to save water voluntarily purchases a certified water-efficient showerhead, he will almost certainly succeed in reducing his water usage. But if you make someone get a low-flow showerhead that he doesn’t like, he may take longer showers. If a more efficient dishwasher is also much slower, you may get more hand-washing of dishes, which is much less efficient than the older low-efficiency dishwashers were.

It’s not just that mandating something is a steeper policy demand than promulgating a standard; you’re actually entering a different domain of activity. The standard is performing a technical assessment of the appliance’s attributes. The regulation is running into all kinds of Hayekian knowledge problems.

If the issue is that people are overconsuming a scarce resource, the first-order strategy should be to price the scarce resource. With pricing, people start looking for ways to conserve. Adopting more efficient appliances is one way to do that and, with credible standards, people who want to save water or energy or whatever else by buying efficient appliances can do so — and because they are trying to conserve they will use the new product as intended.

In the manufactured housing case, note that formally speaking we aren’t even arguing about what the regulations should say. The issue is whether HUD or Energy should be in charge of writing them. On its face, that’s just a pointless bureaucratic turf war. In practice, the feeling of HUD officials is that Energy does not think about the housing counterfactual correctly because while they have technical expertise in evaluating efficiency they do not have expertise in housing markets. I am inclined to side with HUD about this, but I think it speaks to the larger issue with this genre of regulation, which is that there’s a big gap between the technical assessment and the global evaluation of the policy.

Jeff: What is the housing regulatory landscape like in the Netherlands? When I’ve been there, I’ve seen new housing being built. But the cost of housing has skyrocketed.

Dutch homes are cheaper relative to income than American homes, even though their incomes are about 10 percent lower and their population density is five to six times higher. Concern about the aesthetic value of traditional Dutch cities and towns is also a million times more valid than historic preservation of a Cleveland Park strip mall. A lot of the country is also below sea level, so I have to imagine the objective construction environment is pretty difficult. Without knowing all of the details, I’d be inclined to say that they are probably doing something right — though there’s probably also plenty of room for improvement.

Marcus Seldon: You’ve said on Twitter you suspect wage compression might paradoxically be making people less happy with the economy. Can you sketch out the reasons that might be?

Sure. This was in response to Arin Dube’s research, which finds that during the pandemic period wages grew much faster for the bottom 10 percent of the population than for the 90th or 50th percentile, and that while the wage distribution is no longer compressing, it’s also not de-compressing. That’s the kind of thing that people say they want, but in practice economic sentiment has been very bad during this period.

That could be a coincidence. A lot of other stuff was going on.

But I bet if you looked, you would find that both illegal immigrants and disenfranchised felons are wildly overrepresented in the bottom 10 percent and that among eligible voters the bottom 10 percent skews toward younger people. So essentially, you are talking about an economic shift that is raising the relative status of people who can’t or don’t vote, which is not a great recipe for political success.

Nicholas Sooy: Only alt history that matters: on January 20, 2025 Kamala Harris is inaugurated president. What does the last 12-15 months of Slow Boring content look like? What are your hot takes, beefs with the admin, viral articles, quiet posts that are ignored now but seem prescient in 3 years, in-depth series? What SB content have we missed out on due to this darkest timeline?

The big thing is there would be a ton of debate about staffing a Kamala Harris administration. Elizabeth Warren was complaining last week that Harris should have committed to re-appointing Lina Khan when Reid Hoffman called for her to not re-appoint Lina Khan. I think it’s overwhelmingly likely that Khan would have stayed in her job because she has a very strong personal brand.

But that dust-up was a stand-in for the broader phenomenon that there was a network of Warren-aligned personnel across the economic-policy space in the Biden administration.

One possible trajectory for a Harris administration is that with the senior layer of Old Biden Guys (Mike Donilon, Steve Ricchetti, Bruce Reed) and Chief of Staff Jeff Zients all gone, the Warren Wing people would have been elevated to even greater prominence. But the other — I think slightly more likely — trajectory is that it would have gone the other way, and Harris-administration economic-policy personnel would have shaded in a tech-friendly, tariff-critical “back to Obama” direction compared to where Biden was. That’s not because I think Harris had particularly strong convictions about economic policy; there was just something genuinely a little contingent and odd about where Biden ended up on economics. The Warren-Bernie camp supplied the last of the Biden Dead Enders specifically because they knew that any random shakeup was likely to go against them.

We are of course having this factional argument anyway, but it tends to occur on a fairly abstract terrain (“abundance”) whereas in a Harris administration we’d be getting granular arguments about OIRA and C.F.T.C. jobs and so forth.

The more interesting difference, though, is that if Trump had lost there would be an ongoing story about the future of the Republican Party. He doesn’t seem like the kind of guy who would just accept defeat with good grace and say he was proud of his four years in office but clearly it’s time for the G.O.P. to move on. But what would he do? He couldn’t possibly position himself for another run in 2028, could he? Would he be trying to elevate one of his sons? Running a media empire? Would there be another effort to contest the election? I have genuinely no idea what the coverage would look like because I have no idea what events we’d be seeing in the world.

I think the midwit thing to say about Trump is that Trumpism is a much bigger phenomenon than one man. But while we would definitely see a populist, zero-sum, anti-immigration tilt in G.O.P. politics no matter what happened, there is also something singular about Trump.

You could imagine dozens of scenarios in which the President is a right-wing culture warrior who hates immigration and is skeptical of free trade but he’s not sending letters to the Prime Minister of Norway complaining about the Nobel Prize and making military threats against Greenland. The question of whether Republicans would have — or ever will in our current timeline — come to the view that there is something wrong with Trump as a person, even if you are in broad alignment with him on the issues, is important and interesting.