An ounce of inefficiency

by John Quiggin on January 24, 2006

Belle’s post on the fact that the US appears unlikely ever to go metric prompted me to try and put together some thoughts I’ve had for a long time.

When I lived in the US around 1990, I was struck by all sorts of minor inefficiencies that seemed to be sanctified by tradition. In addition to its unique system of weights and measures (similar to, but confusingly different from, the Imperial system I had grown up with), there was the currency, with no coin of any substantial value, thanks to inflation (this particular inefficiency was subsequently enshrined in the Save the Greenback Act), and the practice of quoting prices net of sales tax, so you always had to pay more than the marked price. And then there was a huge, but ill-defined, range of activities where tips were expected, apparently regardless of the quality of service. In all of these cases, Americans seemed much more willing to put up with day-to-day inefficiency in the name of tradition than Australians would be, and much more resistant to government action that would sweep such inefficiencies away in the name of reform.

Bigger issues like creationism can be fitted into this picture. As far as I can see, very few supporters of creationism (or intelligent design or what have you) have any desire to see it taught in university biology departments [there are a handful of exceptions, like Bob Jones, that are resolutely stuck in the pre-Civil War era on most things] or applied by oil geologists. Their big objection is seeing evolution stated as fact in museum displays or taught in high schools. Broadly speaking the position seems to be like that with the metric system – scientists are welcome to be evolutionists as long as they don’t try and ram it down the throats of our kids. Obviously, this is costly; as with metric and traditional measures, the two systems are bound to clash from time to time.

Then there’s the inefficiency that seems to be built in to the US system of government. When I lived there, I was subject to four different levels of government (town, county, state and federal) with multiple overlapping responsibilities, and procedures that seem designed to achieve maximal inconvenience for citizens (not to mention resident aliens!).

All of this of course, was set against the background of a general level of technology in advance of very other country in the world, and an economic system in which the pursuit of efficiency wasn’t much hindered by concerns about equity. At least for the upper-middle class to which I belonged, these things produced a very high standard of living.

How much do these minor inefficiencies matter? In one sense, I think, quite a lot. In another, they don’t matter very much at all, and can in fact be defended on cultural grounds

The direct costs of the inefficiencies I’ve mentioned are all small, but taken together I wouldn’t be surprised if they added up to several percentage points of national income, or hundreds of billions of dollars per year. I think, for example, that a payment of a dollar a day would be a bargain for an average American adult if it could deliver a sensible coinage and posted prices that actually corresponded to the amount to be paid. Multiplied out, that’s around $60 billion a year or 0.5 per cent of national income. And requirements for goods to be made in non-metric measures amount to a kind of trade barrier which seems likely to have a similar cost.

Even more than this, the attitude underlying the adherence to traditional measures is that the US is rich enough and important enough to do what it likes, and the rest of the world can like it or lump it (an attitude not unique to this issue). There’s a lot of truth in this, and it helps to explain why the US is pretty much self-sufficient in a wide range of cultural services. On the other hand, it’s not conducive to success in export markets for goods. Now that the US no longer has a big technological lead, the lack of interest in what foreigners think is one of the factors explaining big trade deficits with almost every other country in the world (Australia is one of the few exceptions).

So, in these ways, adherence to inefficient traditions matters quite a lot. On the other hand, taking the long-term historical view, they scarcely matter at all. Suppose inefficiency costs 6 per cent of national income. With productivity rising at a rate of 2 per cent a year, that means that the average living standard that might have been reached in 2006 will in fact be reached in 2009. For any given person, this trend effect will be swamped by year to year fluctuations in income and expenses. And in most households, there are probably inefficient arrangements that cost a fair bit, but are maintained because that’s the way things have always been done in the family.

Moreover, looking around the world it seems that nearly every country has its sanctified inefficiencies. France has its heavily protected agriculture, as does Japan, and Britain has a whole set of hangovers from the class system and reactions against it. I don’t buy general claims about Eurosclerosis, but there are clearly plenty of features of European social welfare systems that don’t stand up to close scrutiny. In Australia, although agricultural protection is pretty much gone, we spend a lot of money ensuring that much the same bundle of services is available everywhere in the country at the same price, regardless of the cost of delivery.

In a world where the level of technological development and the basic pattern of consumption are much the same in all developed countries, such idiosyncratic differences between countries are an important barrier to a completely globalised uniformity.

{ 153 comments }

1

catchy 01.24.06 at 3:33 am

better try again there with your last para.

2

John Quiggin 01.24.06 at 3:51 am

Thanks. Fixed now I hope, though still not the greatest last para I’ve ever written.

3

bad Jim 01.24.06 at 4:09 am

We Americans last flirted with the metric system back in the Nixon era. All we got out of it was engine displacement measured in litres (British spelling courtesy of the auto industry) and the odd weapon’s barrel diameter denominated in millimeters rather than by gauge.

Since few Americans travel abroad (less than a fifth own passports) few of us ever encounter a challenge to our assumption of superiority, and, since few of us can handle other languages, most travel in groups with guides who translate mensuration and currencies as well as speaking for them. I’d guess that a minority even of them are more than nominally aware of the disparity.

For decades integrated circuits were manufactured all over the world in packages whose pins were a tenth of an inch apart. It was noted that 2.54mm was a perfectly acceptable metric standard.

I remained comfortably unaware of the inscrutability of American coinage until a Welshman pointed out that there is no “5” on a nickel, nor a “10” on the dime, or a “25” on the quarter. That we don’t have a usable dollar coin is probably a worse failing, but we’re used to failures of common sense.

4

Scott Martens 01.24.06 at 4:10 am

Inasmuch as such things are of no enduring importance, I don’t suppose they matter much – although I suspect the British left-hand rule of the road is probably a bigger inefficiency than the American use of obscure measures. I don’t think French agricultural policy is a national fetish – it’s the result of an economic community mobilising directly in their own support. If only French workers had their act together as well as French farmers.

Lumping creationism in with traditional units though – that’s a bit too far. Creationism is all about authority. Teaching evolution directly attacks the notion that religious authorities are uniquely legitimate sources of truth. Intelligent design is an attempt to recast evolution in order to use claims to scientific authority to support the validity of religious authority.

Opposition to the metric system and to dollar coins are just fetishes. They may be uniquely American fetishes, but that kind of fetishisation is, as you point out, commonplace enough. Creationism is a different animal – it is the fault line in a real conflict over the legitimate sources of authority in people’s lives.

5

abb1 01.24.06 at 4:18 am

And what’s with all bills being the same size and color?

6

Peter 01.24.06 at 4:34 am

The bigger problem IME is with the “Can Do” attitude which infects Americans like a virus. Because of this attitude, insufficient attention is paid to good preparation or risk avoidance or learning from experience, since people think they can always wing it. I undertook numerous consultancy assignments in the 1990s with hi-tech American clients, and I was struck by how often people relied on luck seeing them through. This is evidence of both naivity and arrogance. The lack of preparation for post-invasion Iraq came as no surprise to me.

7

H. 01.24.06 at 4:58 am

You forget the cost of changing over to metric, which would be absolutely phenomenal.

8

Chris Bertram 01.24.06 at 5:13 am

Puzzled by Scott’s comment about driving on the left. After all, it isn’t just the British, but the Japanese and the Indians too. In fact about 1/3 of the world’s population. What inefficiencies?

9

Syd Webb 01.24.06 at 5:14 am

John wrote:

In Australia, although agricultural protection is pretty much gone,

Formal protection. In the world of income tax there are various concessions, including accelerated depreciation and two different forms of income averaging (Income Equalisation Deposits and rebates). There are also payments in the forms of flood and drought assistance that are rarely available to urban businesses.

And does the infamous ‘single desk’ count as protection?

h. wrote:

You forget the cost of changing over to metric, which would be absolutely phenomenal.

It would be? So that’s why the Whitlam government ended in stagflation! (The reason for the co-incidental stagflation of the Ford administration will be left as an exercise to the reader.)

10

Alex 01.24.06 at 5:46 am

As far as I can see, very few supporters of creationism (or intelligent design or what have you) have any desire to see it taught in university biology departments [there are a handful of exceptions, like Bob Jones, that are resolutely stuck in the pre-Civil War era on most things] or applied by oil geologists. Their big objection is seeing evolution stated as fact in museum displays or taught in high schools. Broadly speaking the position seems to be like that with the metric system – scientists are welcome to be evolutionists as long as they don’t try and ram it down the throats of our kids.

A considerable majority disbelieve in natural selection. 80% of the members of the National Academies of Science and Engineering believe in it.

Beyond their hallowed portals, I can see two possible explanations: either the US runs a clue deficit with the rest of the world, importing people with a clue, or a large proportion of its technocrats are living in false consciousness, applying entirely different standards to their professional and political lives.

11

bad Jim 01.24.06 at 5:47 am

Wasn’t the channel tunnel delayed for decades for fear that the right- and left-hand traffic would collide head-on in the middle?

12

Tim Worstall 01.24.06 at 5:53 am

Having sales tax added at the point of sale might be a conscious decision: show people exactly how much they are paying in tax. A good thing, no?

The tenth of an inch and 2.54 mm resonates. Back in the 90s Russia was awash in 286 chips that had been brought in to be inserted into Soviet manufactured motherboards a few years earlier. But the engineers had stated, the place being entirely metric, that 2.54 was ludicrous and 2.5 would be used. Thus, of course, the imported chips didn’t fit.

That’s the story anyway, and whether it’s true or not we did buy up several thousands of the chips to refine for their gold content.

I also recall a screaming match with a seller of nickel. He simply refused to believe that the US could buy and sell the metal in anything so stupid as pounds avoirdupois. Couldn’t work out why I kept tapping 2.204 into the calculator when discussing prices. Had to show him a copy of the WSJ with the market quotations before he would believe me. And then when people tried to sell pgms…troy ounces and kilos Gaaahh!

13

abb1 01.24.06 at 5:58 am

Wasn’t the channel tunnel delayed for decades for fear that the right- and left-hand traffic would collide head-on in the middle?

Should’ve been shaped as a moebius strip.

14

Matthew 01.24.06 at 6:03 am

I think Scott’s point is probably that the fact cars in countries near to the UK, such as Belgium, were always much cheaper than in the UK, but because back in Britain they were sub-optimum there wasn’t really the free competition to drive prices down.

15

soru 01.24.06 at 6:09 am

Should’ve been shaped as a moebius strip.

But would the sign for the minimum speed limit you need to keep up in order to avoid falling off the road as it flips over be in imperial or metric?

soru

16

a 01.24.06 at 7:03 am

Every nation has its own inefficiencies. The big one in the U.S. is not the metric system or creationism (!), but the legal system.

France has unions, the British a class system and royalty.

17

John Emerson 01.24.06 at 7:05 am

“The practice of quoting prices net of sales tax, so you always had to pay more than the marked price….”

Retailers resent sales taxes, and they don’t want them to be invisible. Their message is something like, “I’d like to sell you this for $10.00, but I have to charge you $10.50.”

18

John Quiggin 01.24.06 at 7:17 am

I’d be happy enough with this if the marked price was $10:00, but it’s more usually $9:95, which sends me the message

“Until you remember that the retailer is trying to con you, you’ll think that this item costs less then $10. In fact, it will cost some amount > $10 that will take 30 seconds of mental arithmetic to compute, so you may as well hand over $11 and hope for the best”.

19

abb1 01.24.06 at 7:22 am

I don’t want any messages from the seller especially expressed in the form of an incorrect price tag.

20

chris y 01.24.06 at 7:45 am

Wasn’t the channel tunnel delayed for decades for fear that the right- and left-hand traffic would collide head-on in the middle?

Should’ve been shaped as a moebius strip.

There was a letter in the Times in the early 1970s, suggesting that France-bound traffic should drive on the right, while Britain-bound traffic should drive on the left.

21

Ray 01.24.06 at 7:45 am

Or at least put both prices on the tag – the price they’d like to sell things at and the price the evil government is making them sell things at.

22

Stefano 01.24.06 at 7:50 am

Wasn’t the channel tunnel delayed for decades for fear that the right- and left-hand traffic would collide head-on in the middle?

No. It’s a railway tunnel, and railways keep left-hand on the Continent too.

23

David B 01.24.06 at 7:55 am

It is arguable that driving on the left is safer. Britain and Japan both have relatively good road safety statistics, though it would be dificult to prove that driving on the left is responsible for this. But it makes sense that turning across traffic (i.e. a right turn if you drive on the left, and a left turn if you drive on the right) should be done with the maximum of hand-eye coordination. Since most people are right-handed and ‘right-eyed’, this arguably favours driving on the left.

24

Jamie 01.24.06 at 7:56 am

A price tag that doesn’t include sales tax isn’t incorrect. It’s correct. A price on an Amazon book doesn’t include shipping, but that doesn’t make it incorrect.
I don’t believe that prices without sales tax are inefficient. I’m sure they are somewhat inefficient if you’re used to reading prices with the tax included, but we aren’t, so we have no problem.

I also doubt that tipping is inefficient, unless you were thinking that allocating more money to service employees might be an inefficiency.

But you’re definitely right about the coinage.

25

abb1 01.24.06 at 8:02 am

amazon.de doesn’t charge for shipping. And they have ‘books in English’ section. That’s one good amazon.

26

notjonathon 01.24.06 at 8:20 am

Submit to foreign rule? Never!

Although there is a serious side to this, such as butchers in England being fined for selling beef by the pound. An interesting thing that I have noted (as an expatriate American living in Japan–now a metric country) in watching BBC World is that the correspondents reporting from the U. S. stubbornly use Fahrenheit degrees, feet and inches, miles and pounds and ounces. In one sense, the only place an Englishman or woman over 40 can feel at home is in the U. S.

And I still have to maintain a dual consciousness in these matters. When the news tells me it’s 35 outside, I can tell by the hum of the air conditioner or the heat waves rising from the road that it’s hot, but unless I remember that means it’s 95, I won’t really grasp it.

27

Ray 01.24.06 at 8:29 am

If you’re buying stuff on Amazon, then i) before you pay, you’ll see the total price, including shipping, and ii) you’ll be paying with a credit card, rather than sorting out notes and coins. Also, the cost of shipping on Amazon is not fixed – it depends on how many things you buy, and any ongoing offers (‘buy three and ship free’ kind of thing), but the sales tax is always applied, and is always the same.

There’s an undeniable cost in efficiency when customers have to calculate sales taxes themselves rather than just read the full price off the label.

28

notjonathon 01.24.06 at 8:30 am

David B–

Japan has terrible accident statistics. Especially when you factor in the slower speeds on toll roads and the amount of time it takes to travel short distances, highway deaths are criminally high, as a result of tin can minicars (my son calls them you stack, you die) and a serious reluctance to strap up in rear seats; even though baby seats are reqired for small children, I see the kids bouncing around in the back or between the seats all the time.

29

Matt 01.24.06 at 8:37 am

This was my favorite “metric? Doh!” moment in a while:
“NASA lost a $125 million Mars orbiter because a Lockheed Martin engineering team used English units of measurement while the agency’s team used the more conventional metric system for a key spacecraft operation, according to a review finding released Thursday.”
http://www.cnn.com/TECH/space/9909/30/mars.metric.02/

At least is wasn’t a manned ship!

30

Barry 01.24.06 at 8:48 am

Another, about the Chunnel: “Should’ve been shaped as a moebius strip.”

Soru: “But would the sign for the minimum speed limit you need to keep up in order to avoid falling off the road as it flips over be in imperial or metric?”

Inifinity. No units. Simple, impossible, perfect.

31

Doug T 01.24.06 at 9:00 am

The lack of sales taxes on posted prices and the overlapping units of government you cite as inefficiencies might be related. Any even mosdestly-sized chain retailer (and that’s most of them, at this point) is going to have stores in dozens of places with different sales taxes.

If you posted the prices w/sales tax, then every single store would need its own catalogs, it’s own database of item prices, and probably some other problems I can’t think of.

32

Jamie 01.24.06 at 9:01 am

Ray (27),

Yes, and (i) and (ii) are also true when I buy a circular saw at Home Depot. The price on the tag doesn’t include sales tax. But when I go to the register, they do actually tell me how much to pay, and I pay by credit card. So I don’t understand your point.

By the way, there is a (very small) efficiency cost involved in including tax on the price tag: since you can’t (or anyway don’t) put fractions the smallest unit on the tag, you have to round off. And when you round off, the prices don’t always add properly. Seven items each costing $.14 exclusive of the 6% tax should cost $1.04 with tax, but include the tax in the price and it will be $.15 apiece for a total of $1.05.

33

John Isbell 01.24.06 at 9:02 am

” I don’t think French agricultural policy is a national fetish – it’s the result of an economic community mobilising directly in their own support.”
Both, if you’ve watched the French media much covering farmers’ activism, like dumping manure into town halls.

34

Slocum 01.24.06 at 9:02 am

I have to say that your list of ‘inefficiencies’ seem more like ‘things that seem odd to you’ rather than ‘things that cost Americans money’.

Consider sales tax–how does not quoting prices including tax cost money? Purchases have to be totalled up anyway — it doesn’t cost extra for the electronic register to calculate sales tax at the same time. Or do you think that, if sales tax were included in prices, people would keep a running mental total and have exact change ready at the register? Well, it wouldn’t matter if they did–since most of us use credit or debit cards anyway.

Or consider multiple levels of goverment. One has to keep in mind the scale of the U.S. — is it inefficient for Australia and New Zealand to have independent governments? California has more than twice the population of Australia, several more states are roughly as large, and quite a few more are in the same ballpark. In terms of population, New Zealand would be a small state in the U.S. (smaller than Maryland, larger than Connecticut). The idea behind multiple levels of government is that overall efficiency is enhanced by having local decisions made locally. Or are you proposing that centralization is always more efficient?

Coins? Well, there is some cost involved in that bills wear out faster so more printing is needed. But I’d rather have light paper dollars in my wallet than a jumble of heavy coins making a lump in my pocket. In any case, the only inefficiency there is at the mint, not at the level of the individual.

Metric system? In terms of road miles and lumber sizes, it was obviously more efficient to stay with existing units. Which American export industries (agricultural products, commercial aircract, software, semi-conductors, music, pharmaceuticals, hollywood movies) are burdened by the U.S. not using the metric system? Even if you can find an industry where both systems have to be supported, those costs are imposed on both U.S. producers who want to export from the U.S. AND any foreign competitors who want to export to the U.S., so no special inefficiencies are imposed on U.S. firms that their foreign competitors don’t also have to bear.

Creationism? In terms of education, the big difference is that the U.S. has no national curriculum. But is this efficient or inefficient? Would education be better managed if it were all done from Washington rather than countless local school boards? Would a huge centralized bureacracy cost less (Because it certainly wouldn’t do as good a job of satisfying local needs and values).

Do we have inefficiencies? Sure. Don’t get me started. Agricultural subsidies of various forms, for example (hey, let’s provide subsidized water to farmers to grow rice and cotton in the California desert–now there’s a winning idea. Or how about let’s have big tarrifs on sugar which will simultaneously impoverish growers in the 3rd world, jack up prices to U.S. consumers, AND drive candy makers out of the country–a rare trifecta).

Or how about, let’s subsidize tobacco growing for decades and then, instead of simply ending the subsidies and raising cigarette taxes, let’s go through the charade of having the states form a compact to sue the tobacco companies for damages incurred during those decades (even though smokers actually save us money by dying earlier), give trial lawyers a huge cut of the settlement, and then have each state spend the windfall as if it were manna from heaven all the while averting our eyes from the obvious fact that the ‘settlement money’ is not coming from the pockets of evil tobacco companies (who, after all, don’t have billions like that in their pockets) but from higher cigarette prices paid by addicted smokers who, by and large, tend to be low income people. The big tobacco companies are unscathed (actually, they benefit and were complicit in the deal, but that’s a complicated argument), the trial lawyers make out like bandits, the states waste billions of ‘free money’, and working class smokers pay through the nose.

Yeah, we got inefficiencies, you just have to know where to look.

35

RS 01.24.06 at 9:15 am

Have to agree that things like not reporting prices including tax, or having to tip for everything, are simply national idiosyncracies – not inefficiencies – annoying for the visitor, but fine if you have grown up with them. [Actually, more than annoying, bloody irritating, but I digress.]

But this interested me “I undertook numerous consultancy assignments in the 1990s with hi-tech American clients, and I was struck by how often people relied on luck seeing them through.”

As a British scientist, I’ve often heard it remarked that American scientists carry out a lot more experiments but with much less planning (probably partly a measure of more money for reagents) – ending up with a similar level of productivity.

36

Ray 01.24.06 at 9:16 am

Two differences between the Amazon checkout and the Home Depot checkout. Its very easy to go to the Amazon checkout, see the total price (including shipping) and decide to cancel the order. Not so easy if you have to carry things around and join a queue. The related difference is that there’s no time pressure on Amazon – you can leave the checkout price up for half an hour while you consider the cost. This kind of behaviour is actively discouraged in most shops.

Paying with a credit card does cut out the problem of sorting out the correct change, but credit cards account for a smaller portion of real-world purchases than of online purchases.

37

RS 01.24.06 at 9:19 am

“Well, it wouldn’t matter if they did—since most of us use credit or debit cards anyway.”

America is the last outpost of the cheque book, now that is inefficient.

38

abb1 01.24.06 at 9:26 am

The bottom line is: they aren’t showing correct price for an item, simple as that. If you aren’t local, you have no idea: there may or may not be state sales tax, city sales tax, even, I think, county sales tax. In some places food and clothing are taxed, in other places exempt – why do I need to know all that? It’s between the retailer and the government.

39

abb1 01.24.06 at 9:28 am

Although the Europeans have the same (if not worse) problem with plane tickets…

40

JR 01.24.06 at 9:34 am

Re #29: I believe that errors un conversion occur all the time. The Mars orbiter was only the most prominent one. I myself have run across errors like this from time to time. The reason is that engineers in the US are trained to use English units while scientists use metric units. American engineers use such units as foot-pounds, horsepower, and BTU’s. From long usage, they know the formulas and constants associated with these units, and switching to metric (although it has taken place to some extent) is a strain. So when a project includes both scientists and engineers, conversions are required, which introduces chance of error.

41

Ray 01.24.06 at 9:35 am

In Ireland at least, the Advertising Standards Code says that “prices quoted should normally include VAT and other taxes, duties or inescapable costs to the consumer.”

42

Jamie 01.24.06 at 9:51 am

abb1,

The bottom line is: they aren’t showing correct price for an item, simple as that.

No, you’re wrong. It is the correct price. It’s just that here, the correct price does not include the tax, just as the correct price on Amazon doesn’t include shipping. (Interesting that amazon.de doesn’t charge for shipping, but neither here nor there.)

Slocum, I think you’d change your mind about coins if, say, nickels were replaced by notes. I like having pound coins or Aussie two dollar coins, although I guess it’s true that there isn’t much inefficiency at the personal level.

43

Scott Martens 01.24.06 at 9:54 am

Chris (#8), I don’t have statistics, but I suspect that the number of traffic accidents due to the lack of a Europe-wide standard has to be significant. I certainly notice a statistically significant amount of cluelessness in navigation in front of the British School in Brussels. I have to wonder how many people have died due to German lorry drivers in Kent looking the wrong way before changing lanes. I never heard of an American dying due to lack of correct metric conversion, although we did come awfully close in Canada once, so it’s possible.

44

Ray 01.24.06 at 9:58 am

Amazon can’t show you the correct price -the price you actually have to pay for the product – until the checkout, because it depends on how many books you’re buying (and how you want them shipped, etc). Home Depot can show you how much it will cost you to buy the product, but choose not to.

45

Ray 01.24.06 at 10:03 am

Surely one of the costs/dangers of English and continental drivers driving on different sides of the road is that this means the drivers sit on different sides of the car. And English tourist driving their own car to France is at a disadvantage on the road, as is a French trucker in England.

46

Chris Bertram 01.24.06 at 10:31 am

Scott, not sure how we’d evaluate the counterfactual, but the road accident record of the UK is pretty good compared to much on continental Europe:

http://en.wikipedia.org/wiki/Traffic_safety

My guess would be that people driving on what is for them an unfamiliar side of the road compensate by being significantly more cautious.

47

mick cohen 01.24.06 at 10:32 am

who knows? seems like a lot of fuss over nothing. maybe i’ve spent too long here in swansea? it does that to you, you know!

48

Zadfrack 01.24.06 at 10:37 am

You’re all completely missing the true advantage of the dollar bill over the dollar coin.

A dollar coin cannot be tucked into the G-string of a stripper.

49

Tom T. 01.24.06 at 10:53 am

Re 45: “The French trucker in England” sounds like the beginning of a naughty story.

Tipping is a pain, particularly since there is such a strong social custom to tip a specific percentage regardless of the quality of service. Still, is this really uniquely American? The tipping guide on Fodor’s.com suggests a 10-12% restaurant tip in Australia, 10% in Ireland or the UK if no service charge is added, and 1-4 euros in France. In Italy and Greece, it’s recommended to tip 10% on top of the service charge, while in Germany, one tips the bartender but need not ever tip the waiter (but one should hand the money for the bill to the waiter; leaving it on the table is rude).

Fodor’s also notes: “A potentially unpleasant feature of the Swedish restaurant scene is that you must often check your coat or sports jacket, regardless of whether you wish to do so; the tip (or cost) for this is usually SKr 10.” How’s that for inefficient? :-)

Many of the European entries also show a varying list of other tipping obligations that may include taxi drivers, hairdressers, bellhops, and museum guides.

50

chris y 01.24.06 at 10:54 am

An account of the switch from left to right in Sweden in 1967 is here, FWIW:

http://www.answers.com/topic/dagen-h?method=5&linktext=Dagen%20H

THe effect on the accident rate seems to have been trivial. But the other associated costs were horrific.

51

Ginger Yellow 01.24.06 at 11:05 am

Re: tips. It’s true the expecation of a tip is much more widespread and higher in America (as high as 20% sometimes). But at the same time the general level of customer service (in particular the prevalent “customer is always right” approach) is vastly higher, certainly compared with the UK.

52

Tom T. 01.24.06 at 11:07 am

By the way, John Q, until the Aussies learn to play football with an efficient 11 people on a team, I’m not sure that you all should be picking at our excesses. ;-)

53

Glenn Bridgman 01.24.06 at 11:13 am

“much more resistant to government action that would sweep such inefficiencies away in the name of reform.”

Clearly we need some sort of central commitee to implement these changes, preferably headed by one person who can make sure that all of their suggestions are implemented briskly and effeciently, with no interference from counterrevolutionaries. Perhaps they could issue plans detailing their sweeping reforms, maybe in increments of five years?

Ok, that was a cheap shot, but whenever anybody says stuff like this, I get a powerful urge to channel Burke, regardless of how good the reforms are individually.

54

abb1 01.24.06 at 11:14 am

No, you’re wrong. It is the correct price. It’s just that here, the correct price does not include the tax, just as the correct price on Amazon doesn’t include shipping.

Jamie, shipping a separate service, separate item. You can buy 3-day shipping or two week shipping; shipping to US or to China.

It would’ve been the correct price if the Home Depot was charging you their price at their cash registry and then you had to go to a separate counter and pay sales tax to a G-man there. But this is not how it works: you pay all to the retailer and the retailer deals with the government.

For the retailer this is just another one of his expenses, his costs; just like electricity, rent, cleaning, whatever. What if the retailer said: the price is $10 plus 5% sales tax, plus 3% for electricity in the store, plus 7% to pay cashier’s salary.

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Ginger Yellow 01.24.06 at 11:34 am

Glenn, you’ve got to admit that institutional resistance to reform of, for example, the absurdly inefficient healthcare system, or social security (whichever view you take on it), or the electoral college, is remarkably strong. The American system seems to give disproportionate power to those with a vested interest in keeping such inefficiencies. Even in Britain, which has inefficiencies that have been left around for hundreds of years (say the Chiltern Hundreds), within a couple of years of New Labour arriving in power we had the independence of the Bank of England, devolution in Scotland and Wales, and abolition of hereditary peerage halfway accomplished.

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Ray 01.24.06 at 11:35 am

I think the more important distinction is that the cost of shipping is always different. Amazon can’t say “This books costs $9.99 (assuming standard shipping options)” because that’s only the price if you buy nothing else. If you buy a TV and a book, the book will cost 8.50, if you buy two books the second one will cost 9.25, if you buy three books the shipping is free so the book only costs 8.10. You can’t have all that information on the book’s page, so you have to say “$8.10 (plus shipping)”.
The sales tax doesn’t change. Buy one book and the price including tax is $8.99, even if you have ten books and a car in your basket.

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Ginger Yellow 01.24.06 at 11:37 am

The point should also be made that the resistance to government action in many such cases was/is anti-democratic, not democratic. It’s not that reformers necessarilywant a politburo (although Blair apparently does), but rather that the will of the people not be thwarted by lobbyists and the Congressmen in their pocket.

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Thomas 01.24.06 at 11:42 am

For some of the reasons given above, I have a hard time thinking of sales tax computations or coinage permutations as inefficient in the US. I don’t carry coins, when I can avoid it, and usually don’t pay with paper, so whatever gains would come from, say, a $1 or $5 coin are purely hypothetical for me. Fortunately, I guess, the city where I’m sitting has a sales tax that is closing in on 10%, making it so much easier to calculate! Think of the efficiency gain…

Multiple overlapping levels of government, however, are often inefficient, and this is particularly true at the local level, where there may be fewer good reasons for the practice. For example, where I live we have both county and city governments, with overlapping responsibilities. There doesn’t seem to be any reason, other than historical accident, for the continued operation of a county sheriff’s department alongside a city police department, but we pay for both.

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mpowell 01.24.06 at 11:51 am

I agree w/ Slocum that there are vastly greater inefficiencies in our society than our system of weights and measures.

John Q, are you actually saying that getting rid of these inefficiencies would result in 8 percent productivity growth? B/c that would be a really big deal if it were true. But there’s just no way changing a few cultural details could result in such astronomical growth.

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Slocum 01.24.06 at 11:52 am

For the retailer this is just another one of his expenses, his costs; just like electricity, rent, cleaning, whatever. What if the retailer said: the price is $10 plus 5% sales tax, plus 3% for electricity in the store, plus 7% to pay cashier’s salary.

But that’s not true — the tax is not like electricity. If you buy a product and have it shipped out of state (as opposed to taking it with you) then you don’t actually owe the tax. You do owe the tax in your home state where you receive the product (though many don’t pay it — which is a big issue for mail-order and internet commerce). People visiting and buying expensive jewelry in New York routinely do this to avoid the high taxes (and sometimes the retailer gives the customer the item anyway and ships an empty box, and sometimes they get caught doing it).

But really, this is a political issue — not one of efficiency. Do you want to expose the tax, which may generate anti-tax sentiment? Or hide the tax in order to suppress it (as in the fictitious ’employers share’ of the social security payroll tax).

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Slocum 01.24.06 at 11:55 am

For example, where I live we have both county and city governments, with overlapping responsibilities. There doesn’t seem to be any reason, other than historical accident, for the continued operation of a county sheriff’s department alongside a city police department, but we pay for both.

The reason is that many people live in the county but not in the city and need some level of police protection nonetheless. Well then why not just have county police and no city police? Because the point of forming and living in cities is accepting higher taxes for higher-levels of services (including police), and living in rural areas outside involves making the opposite choice.

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Steve 01.24.06 at 12:00 pm

Curious that very few have commented on the most dramatically strange part of the post: the attempt to tie in ‘creationism’ to economic inefficiency (and in particular, economic inefficiencies like metric systems, driving practices, etc).

This is good example of the inappropriate (and unconscious) bias in academia that conservatives are railing about. Because, while tieing ‘creationism’ into ‘tax practices’ could be technically correct (I suppose an argument can be made for it), it in fact just doesn’t ‘feel’ right. Its not at all clear that creationism has anything at all to do with economic inefficiency-rather, it sounds like a stretch-just kind of a weak attempt to slam creationism while discussing national habits.

Furthermore, when an academic is discussing economic inefficiency, you just know he’s going to mention something like creationism, or tax cuts for the wealthy, or something similar. One could just as easily mention the inefficiencies related to affirmative action (which are frankly far more related to economics than creationism is-and far higher), or tax burden, or failures of public schools and the burden of unionized teachers, or excessive control by the courts, or excessive environmental regulation-any of a number of ‘conservative’ viewpoints. But that would never happen.

Its not that big a deal, its not insulting or anything, but throwing in creationism just seemed so ‘tone deaf,’ so odd, yet so expected (“lets see; a post on tax pricing, driving preferences, layers of government, and whatelse is it going to be thrown in for a cheap dig? Military spending? Failure to understand other nations? American laziness in learning foreign languages? Oh, creationism. Ok. Mentally ignore this part-it doesn’t fit, but its the mandatory ‘academic slam of some conservative view’ addendum”).

Steve

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Ray 01.24.06 at 12:08 pm

But really, this [price tags without sales tax] is a political issue—not one of efficiency.

No, it’s one where efficiency is sacrificed to make a political point. (I’m not saying the sacrifice may not be worthwhile, I’m saying there definitely is a sacrifice. Showing only the pre-tax price imposes a real cost on the customer. )

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Hogan 01.24.06 at 12:08 pm

For example, where I live we have both county and city governments, with overlapping responsibilities. There doesn’t seem to be any reason, other than historical accident, for the continued operation of a county sheriff’s department alongside a city police department, but we pay for both.

It’s even worse than that. Local government also includes school districts (who have independent governance and taxing authority) drainage districts, mass transit authorities (who often have their own police), port authorities, etc., none of whom necessarily have boundaries that coincide with those of political entities like cities, counties, townships, boroughs, or even states. And that’s not counting special service districts, quasi-private agencies within cities that sometimes have what amounts to taxing authority.

I think it was R. R. Palmer, talking about local government under the ancien regime, who said that until the French Revolution nothing had been abolished in a thousand years; they just akept adding more. For the eastern states especially, it’s been about three hundred years. It’s infuriating and measurably inefficient, and it’s not going to change because of anything short of a revolution.

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Ray 01.24.06 at 12:10 pm

If I were a conservative, I’d be desperately trying to distance myself from creationism, rather than arguing that an injury to one is an injury to all, but there you go…

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abb1 01.24.06 at 12:17 pm

It’s true that inter-state component of the sales tax is a mess; I’m talking strictly brick&mortar retail stuff. As far as it being political – sure, but it’s also a matter of convinience and efficiency. In this case political and marketing considerations trump common sense convinience and efficiency.

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Sebastian Holsclaw 01.24.06 at 12:23 pm

“hey, let’s provide subsidized water to farmers to grow rice and cotton in the California desert—now there’s a winning idea.”

Please don’t raise my pet peeve. It just makes me soooo angry. We in California spend so much money on water to make rice farming in the desert work. Arrgghhhh.

The sales tax issue seems to be encapsulated in comments like

“The bottom line is: they aren’t showing correct price for an item, simple as that. If you aren’t local, you have no idea: there may or may not be state sales tax, city sales tax, even, I think, county sales tax. In some places food and clothing are taxed, in other places exempt – why do I need to know all that? It’s between the retailer and the government.”

and

“Two differences between the Amazon checkout and the Home Depot checkout. Its very easy to go to the Amazon checkout, see the total price (including shipping) and decide to cancel the order. Not so easy if you have to carry things around and join a queue. The related difference is that there’s no time pressure on Amazon – you can leave the checkout price up for half an hour while you consider the cost. This kind of behaviour is actively discouraged in most shops.

Paying with a credit card does cut out the problem of sorting out the correct change, but credit cards account for a smaller portion of real-world purchases than of online purchases.”

(BTW, I think that last sentence is true but misleading. Credit card purchases in the real-world are surely a smaller portion when compared to online purchases, but they are a huge portion of off-line purchases.)

If it is inefficient, it is inefficient at the level of having multiple levels of taxation in different locales. WalMart doesn’t want to set a different price on that blue lamp for every different city it does business in. Furthermore, if you are the kind of person keeping a penny-exact tally of purchases while you walk through the store, you can handle the tax issue too. Most people just keep a general idea of approximate price, and the tax issue doesn’t screw that up.

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eudoxis 01.24.06 at 12:27 pm

There is very little inefficiency in odd measuring systems because calculators are ubiquitous and cheap and students in the US learn multiple systems at an early age. Foreigners may have difficulty (I was one, once) as they might with a foreign language or customs. The easy facility with units of measurement is not just inherent in the base 10 system but also in how and when the system was learned. Measurements seem to be as ingrained as counting or multiplication tables are in native languages or denominations. Elementary students who learn multiple systems early, as they do in the US today, wouldn’t have to deliberately and consciously think about them. And with caculators, conversions are not difficult or time-consuming. The switch to a different measuring system, if weighed against the total cost involved may not present a net benefit.

The US has plenty of oases of efficiency. These are voluntary associations of individuals who strive for excellence and institutions with great leadership. However, as with the highly efficient institution where I am currently, there is a bland uniformity that, I think, has resulted from optimized efficiency that is in stark contrast to the chaos and simultaneous moments of brilliance that I encountered at various other institutions.

Don’t get me wrong. There is much room for greater efficiency and there should be a constant modification of present customs to optimize for that. I do hope our present administration does not start speaking of efficiency, discipline, and cleanliness.

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abb1 01.24.06 at 12:33 pm

WalMart doesn’t want to set a different price on that blue lamp for every different city it does business in.

I dunno, I’m sure they’re paying different wages in different states and different property taxes in different cities and yet somehow they manage to figure it out and set their prices. I don’t see why sales tax is such a huge conundrum.

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rilkefan 01.24.06 at 12:35 pm

From the post:

“to try and put”, “try and ram”

Where are John Emerson and abb1, prescriptivists, when we need them?

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abb1 01.24.06 at 12:51 pm

Frieden, Rilke Fan.

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finn 01.24.06 at 1:03 pm

I’m quite happy the US doesn’t have high-value coins. I can’t be the only person who dislikes coins, and refuses to carry them (except to carry them home and them dump them in a jar or some such). Dollar bills are light, unobtrusive, and fit comfortably into a wallet. None of these facts hold true for coinage.

Actually, I thought that pretty much all men took this position. Lacking a purse, the idea of lugging around a bunch of coins in one’s pockets is annoying. Especially when said pockets already have cell phone, wallet, keys, and sometimes glasses.

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Slocum 01.24.06 at 1:08 pm

Showing only the pre-tax price imposes a real cost on the customer.

How does it? They pay the same either way. The shopping takes the same amount of time either way. If it doesn’t cost them time or money, and it doesn’t cause 99% of shoppers anything in terms of frustration either (since they’re completely accustomed to the system), where is the efficiency cost?

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Francis 01.24.06 at 1:13 pm

Actually, growing rice in the Central Valley is incredibly efficient. So efficient, in fact, that Central Valley rice growers can successfully sell rice in Japan despite rice tariffs.

now, if you want to argue that the Central Valley Project and State Water Project should have never been built because they were a waste of taxpayer dollars, that’s one issue. the quick response is (a) too late now or (b) the projects have paid for themselves many times over in building the economic engine that is California.

If you want to argue about the nuances of federal water pricing now that the Projects do exist, the quick answer is once again that the California ag industry pays for itself many times over in employment, taxes, food security, low cost food, food variety, etc.

If you want to complain specifically about rice growing (as opposed to, say, dates or alfalfa), I refer you to the comment above about 5 year plans. Who, precisely, should be determining what farmers plant?

It’s not surprising that it’s a San Diegan who’s whining about water pricing. Of all the rapidly growing California cities, San Diego has done the least in developing water supplies. It has a beautiful natural groundwater basin that goes largely unused. Instead the city files meritless lawsuits against its regional water supplier. San Diego for years has not done what is necessary to deal with wastewater. Now that it’s under the gun, water bills are going up more quickly than they would had San Diego engaged in proper planning.

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John Emerson 01.24.06 at 1:23 pm

Rilkefan, there’s nothing at stake in the examples you just gave. There was something at stake in our other argument, and that’s where the heat came from. I’m not saying I was right any more, but what was at stake wasn’t prescriptivism.

Nice to hear from the California Farm Bureau’s official rep here, but growing rice in California is bad water policy.

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FMguru 01.24.06 at 1:24 pm

One reason that US retailers don’t add the sales tax to the price is that not everybody pays sales tax. If you’re buying something for the purpose of reselling it, or you’re buying something for a non-profit organization, you’re exempt from paying sales tax. Also, there’s a coordination problem. If McDonalds decides to reprice their menu to include sales tax, then suddenly the price of their burgers and shakes jump 8.25% (in my area) – what incentive does Burger King have to do the same? I imagine the number of people pleased by the gain in efficiency and transparancy would be dwarfed by the number of people driven away by the perceived jump in prices. Also, localities fiddle with their sales tax rates quite a bit – here in California, it seems like there’s always some ballot measure to fund something with a .25% hike in the sales tax. Imagine the Home Depot manager who has to re-label everything in the store every time someone takes out a special assessment for school repairs or a new sewage plant.

I can think of one US institution that shed a fussy old inefficiency to enter the modern era – the NYSE, which replaced it’s old fractional stock prices with decimals about a decade ago.

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abb1 01.24.06 at 1:24 pm

Efficiency cost comes, for example, when you have to pay $1.04 and $2.07 all the time.

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abb1 01.24.06 at 1:31 pm

FMguru, they don’t have to re-label, just as they don’t have to re-label when the minimum wage or their electricity bill or their CEO’s salary go up.

It’s just another expense, expenses fluctuate all the time.

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Sebastian Holsclaw 01.24.06 at 1:42 pm

“Actually, growing rice in the Central Valley is incredibly efficient. So efficient, in fact, that Central Valley rice growers can successfully sell rice in Japan despite rice tariffs.”

That is because they pay a deeply subsidized cost for water.

“now, if you want to argue that the Central Valley Project and State Water Project should have never been built because they were a waste of taxpayer dollars, that’s one issue. the quick response is (a) too late now or (b) the projects have paid for themselves many times over in building the economic engine that is California.”

That has absolutely nothing to do with the price you pay for water delivered by the system.

“It’s not surprising that it’s a San Diegan who’s whining about water pricing. Of all the rapidly growing California cities, San Diego has done the least in developing water supplies.”

Actually I developed my opinion on the water issue when I was growing up in Northern California. I don’t notice water prices particularly one way or another in San Diego. I just pay my relatively small bill and move on. My complaint is a macroeconomic and subsidy complaint. It is similar to the French CAP issue.

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Jeff R. 01.24.06 at 2:01 pm

abb, the sales tax is not an expense of the seller; it is an additional fee to the (state,local) government paid by the buyer. So pricing the way we do here is the only honest way to price.

(This is, arguably, a difference between a sales tax and a VAT.)

Now, if you want to talk fetishistic inefficiencies, how about the retention of the mil ($0.001) in gasoline prices…

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Francis 01.24.06 at 2:10 pm

Returning to the original post’s theme of inefficiencies, I remain baffled by the idea that bringing cheap water via taxpayer support to highly productive soil is inefficient.

Given the nature of the soil and the amount of sunshine, California’s Central Valley and Imperial County had the ability to be some of the most productive farmland in the world, if the water supply could be managed. Through a series of huge projects (including two somewhat more famous dams on the Colorado River), this supply was assured. And any legitimate analysis of the total benefits accrued to the US economy demonstrate that the water systems have paid for themselves many times over.

Does federal funding of the Interstate system through Montana make any more sense? Just to be contrarian, I’d argue that deeply-subsidized (ie, free to the user) highway transport through low-population states makes less sense than water projects in California.

The very moment you write that the water is “deeply subsidized” you have already assumed your conclusion. To what other use should the water be put? Environmental? Residential?

p.s. For those interested in credentials, I’m a solid democrat. I just get annoyed when people talk about Western water policy from a position of ignorance.

p.p.s. Enjoy your salad today. If you live in the US, it’s likely that most of it came from California.

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Dan Simon 01.24.06 at 2:27 pm

Looks like we have a new irregular verb:

I’m doing things the sensible, fair, natural way.

You’re thoughtlessly accepting a bunch of silly, petty inefficiencies that are each of little importance, but that add up to a nontrivial drain on your economy.

He’s imposing a set of patently unfair, economically ruinous “traditional” practices that enrich the entrenched interests for which he’s either an unwitting dupe or a scheming collaborator.

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abb1 01.24.06 at 2:36 pm

Jeff R, true, but that’s just a technicality; the states could’ve collected the same amount by taxing the seller, the same way credit card companies do. Why don’t they do that?

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Andrew 01.24.06 at 2:39 pm

“Since few Americans travel abroad (less than a fifth own passports) “
Americans do not need passports to travel within the western hemisphere. I was amazed that my wife could go to Mexico, Canada, and even Chile without even bringing her passport.

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JLS 01.24.06 at 3:05 pm

“France has unions, the British a class system and royalty.”

In fact France has the lowest percentage of people in unions in develelopped world (7% or 9%) 4% in private company.

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rollo 01.24.06 at 3:11 pm

Inefficiency, like a lot of moral designation, is goal-directed. It gets its meaning from the place toward which efficiency aims.
Since that’s never clearly and succinctly proposed, these terms skate around with an assumption of consensus they may or may not have. Same with moral systems.
The reluctance to lubricate further an already exponentially-shrieking feedback cycle of naked efficency stripped of any kind of organic human governance has been ridiculed since the beginning of the 20th century.
I grew up on images of country folk made fun of because they doubted the sense of progress to planes and automobiles, and pesticides – their homes were portrayed as little more than shacks and shambles, their accents derided and the overall impression was of dirt and inefficiency contrasted with gleaming slick sterility and ever-quickening progress.
Hey hey my my.
There are larger contexts in which the term “efficient” can be applied. And smaller too.
An efficient thermonuclear device. The efficient distribution of white phosphor on civilian populations in areas of stubborn resistance.
Draining swamps and paving wetlands has had decades of adulation as an efficient use of resources. And, because of this unquestioning reverence toward immediately recognizable efficiency, there are still people around who won’t get the bitter irony of that.
Royal measure isn’t the sticking point, and the real conflict isn’t between biblical metaphor and scientific brickwork. The larger context is what gets too little attention, but it’s where all this takes place.
Efficiency toward what?
And then defend that stated goal as worthy of the sacrifices this “progress” has demanded.

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John Quiggin 01.24.06 at 3:18 pm

Lots of interesting comments, but I’ll just respond to a couple. Glenn Bridgman, you appear to take it that I expect automaticc approval for government action labelled as “reform”. I thought it was pretty clear from the post that I’m, at best, ambivalent about “reform”.

A few more thoughts, here.

To lots of people who say that complicated ways of doing things are fine if you grow up with them, that’s my point, pretty much.

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John Quiggin 01.24.06 at 3:22 pm

Also, I like Dan Simon’s irregular verb.

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Bill McNeill 01.24.06 at 3:34 pm

I’m all for the metric system because dividing by twelve is hard, but I think there is an efficiency built into the American coinage system. In America, paper currency is worth something and coins are not. You can reach into your pocket and get an immediate tactile sense of whether you’re dealing with real money or vending machine fodder. This doesn’t work in a country that has coins of significant denomination. For this reason, I find that tipping the barista in Vancouver takes an extra half second of deliberation that is not required in Seattle. I’m not sure what percentage of the GNP this amounts to.

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Sebastian Holsclaw 01.24.06 at 3:38 pm

“Given the nature of the soil and the amount of sunshine, California’s Central Valley and Imperial County had the ability to be some of the most productive farmland in the world, if the water supply could be managed. Through a series of huge projects (including two somewhat more famous dams on the Colorado River), this supply was assured. And any legitimate analysis of the total benefits accrued to the US economy demonstrate that the water systems have paid for themselves many times over.”

How is this relevant to the discussion? I’m not objecting to the delivery of water. I’m objecting to the delivery of water and a vastly reduced price compared to other people who get their water delivered through government-funded aqueducts.

“The very moment you write that the water is “deeply subsidized” you have already assumed your conclusion. To what other use should the water be put? Environmental? Residential?”

This is where we are having a problem communicating. To what other uses ought the water be put? If everyone were paying the same price we would find out. The problem is not that the government delivers water. The problem is that it delivers water at a vastly lower price to one set of water consumers compared to another. I am not assuming the conclusion. I am using the normal meaning of “subsidy”. This obviously deforms the market of water consumption toward the subsidized use. This leads to rather weird and wasteful situations like rice paddy farming in the desert. If the soil is so fertile, I’m quite confident growing would continue despite higher water prices. It is the growing of rice that would probably not continue on that land. I’m sure flooding the farmland every year is an extremely efficient use of resources for the farmer if he gets the water at an incredibly cheap price compared to everyone else. But that doesn’t make it efficient overall for the economy. It is very possible that the water would be BETTER used doing something else. But the subsidy for the flooding rice farmer keeps more efficient uses out of the equation because they are artifically made more expensive relative to flooding for rice farming.

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Francis 01.24.06 at 4:04 pm

“I am using the normal meaning of “subsidy”. This obviously deforms the market of water consumption toward the subsidized use. This leads to rather weird and wasteful situations like rice paddy farming in the desert.”

now, would someone else please substitute the other federally subsidized goods for the idea of “water” and tell me what’s wrong with SH’s analysis?

e.g., the feds don’t charge anything to get on an Interstate, no matter how much a rich person would pay to keep a poor person off it! The transportation subsidy creates rather weird and wasteful situations like suburbs!

or

Military bases provide a massive local subsidy, due to spending by soldiers in the community. The feds should levy a tax on the community equal to the subsidy, so that a “market” for military bases develops. The base subsidy creates weird situations like the City of San Diego.

Comparisons to other federally subsidized goods, and the ability (or inability) of our economic system to price those goods accurately or fairly (for any definition of fair you chose) are welcome.

meanwhile, enjoy your salads.

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soru 01.24.06 at 4:32 pm

Three more chosen inefficiencies:

1. not having id cards

2. drugs being illegal

3. a fair proportion of the criminal justice system

soru

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Foskin Fred 01.24.06 at 5:07 pm

“The metric system needs some popular culture love to ultimately prevail.”

I think that’s right. Prior to the conversion in Australia we were exposed to race callers and sports commentators using metric distances for quite some time prior “the day”. And if those boofheads could cope everybody else could.

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Robert Merkel 01.24.06 at 5:19 pm

I suppose the real question is whether an inefficiency imposes a one-time cost, or whether it imposes a constraint on growth. I suspect a lot of American boosters would argue that continental Europe’s inefficiencies (for instance, the less flesible labour market) directly impact economic growth, making it lower than the US.

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mpowell 01.24.06 at 5:25 pm

Francis, I’m sorry but I don’t buy your argument. There are certainly many ways in which our government subsidizes certain activities creating market distortions- that doesn’t mean its generally a good idea. And it certainly doesn’t prove that any activity our government subsidizes is desirable. You start w/ the argument that CA is a great place for growing rice- this is vulnerable to the concession that water prices are subsidized for those farmers in a way you are refusing to recognize.

It is a simple fact that if it were cheaper to grow rice somewhere else if water in CA for farming was not subsidized then it would be cheaper for the economy overall to do so. And markets can accomplish that if aided, not hindered by government involvement.

The total economic cost of producing a salad will probably be reduced if you remove those subsidies.

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John Quiggin 01.24.06 at 5:37 pm

On growth vs one-time cost, I think there’s pretty strong evidence that all the developed countries are moving pretty much in parallel, and have much the same level of productivity (Europeans work less hours). So I think nearly all things are level effects.

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John Quiggin 01.24.06 at 5:43 pm

Tom T, the goal-scoring rate of the 22 players in the football code you describe is a long way below world’s best practice – a typical output of about 0.1 goals per player per game. Some microeconomic reform is clearly needed here.

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Ray 01.24.06 at 6:27 pm

WalMart doesn’t want to set a different price on that blue lamp for every different city it does business in.

I’m afraid I don’t understand this point at all. Are WalMart products the same (pre-tax) price in every store across the country? Are the price tags applied centrally?

How does shopping impose a real cost on the customer? A customer can’t just look at a price tag to find out how much something costs, they have to look at the price tag and then calculate the after-tax price.

Not everyone has to pay the sales tax, but most people do. I don’t think stores display the pre-tax price because its more convenient to the small minority of customers, and less convenient for the majority. (There are some stores where most customers don’t pay the text. It would make sense for them.) And tax levels may change, but they’re hardly the most volatile element of an item’s price.

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radek 01.24.06 at 6:42 pm

“e.g., the feds don’t charge anything to get on an Interstate…or…Military bases”

The difference between the two examples above and water is that defense and use of highways are non-rivalrous goods (highways only up to some point of course) and water isn’t it. Since non-rivalrous goods by definition have a zero marginal cost of provision efficiency requires that they be provided at that cost exactly. The same thing isn’t true of water, so slocum’s right here. In other words water does not meet the definition of “public good” whereas defense and highways do (as a matter of degree of course).

(The fact that highways aren’t totally non-rivalrous, and are excludable would be more of an argument for their privatization if anything)

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Sebastian Holsclaw 01.24.06 at 6:44 pm

“Military bases provide a massive local subsidy, due to spending by soldiers in the community. The feds should levy a tax on the community equal to the subsidy, so that a “market” for military bases develops. The base subsidy creates weird situations like the City of San Diego.”

Miltary bases have to be put somewhere in the US. In theory rice doesn’t have to be produced in the US at all.

By the way, I’m not sure you realize it, but your argument proves too much. You seem to be setting up a situation where one government outlay validates all government outlays. You suggest that either all are legitimate or none are. I don’t think that is logically necessary. You aren’t registering the difference between charging different consumers different prices for a government service and charging everyone the same price. Roads are built, and everyone can use them. The building of the roads is equivalent to the building of the water systems. Charging farmers less for water is different from building an access system. It would be like letting some people travel $1 per 100 miles on the highways while charging most people $1 per mile.

Subsidizing the infrastructure is one thing. Having the government differentially charge consumers is another. Both are ‘subsidies’ but only the latter is a preferential subsidy.

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Francis 01.24.06 at 6:44 pm

mpowell: The federal government allocates limited resources under its control in a number of different ways. Space on the Interstate is first-come, first-served with no right to exclude. Radio spectrum is auctioned off pursuant to rules which I don’t even pretend to understand. The Army Corps manages the river systems on which barge traffic moves pursuant to a complex set of rules which are supposed to respect both commercial and environmental values. Weapons are purchased and military bases located based largely on pure political power. Timber sales seem largely captive of the industry.

The point, such as it is, is that the allocation of limited federal resources, be it dollars, E-M spectrum or water, is an inherently political process. While maximizing federal revenue is one possible goal, it is not the only legitimate goal.

Looking at the matter in a completely different way, there’s really no such thing as a market for water. How much would you pay if you were dying of thirst? [every last penny.] In times of shortage, should everyone in a community suffer equally or should the rich be able to water their lawns while the poor can’t afford showers? [equality.] Is universal access to safe, affordable and reliable water now just an inherent municipal service, much as we americans expect police protection and trash pickup? [yes.]

Here’s the real bottom line: virtually no community in California is water-short for the population that it has. But there is now more land than there is water, so really for the first time in a long time decisions about land use and growth are being limited by water availability. So pro-development elected officials and their developer backers are now talking about the outrageous waste that is rice farming in the Central Valley.

Spare me. The California Water Code has provisions for challenging water waste. If you really think that rice farmers are “wasting” (as defined by California law) water and you’re willing to put money where your mouth is, hire me and we’ll try to prove up the case. Oddly enough, though, I mostly hear a lot of posturing.

[now, the practice of rice farmers fallowing their fields, taking their water allocation then flipping it to a water buyer and pocketing the difference is an outrage. but that’s only a small part of the story.]

102

Francis 01.24.06 at 6:55 pm

Responses to intervening posts:

anyone who thinks highways are non-rivalrous goods doesn’t live in Southern California. Here, they most certainly are; virtually all planning decisions being made in both the private and public sector consider traffic.

military bases are clearly rivalrous goods; why shouldn’t bases go to the highest bidder? How much should the citizens of San Diego pay for the privilege of having the Navy in their community?

103

Quo Vadis 01.24.06 at 7:03 pm

There are some very good reasons for state and local government autonomy. As a resident of San Francisco who grew up in a rural community in Texas, I can assure you that attempts to harmonize laws and regulations and practices down to the level of local ordinances would create tremendous conflict and considerable unnecessary sacrifice.

This flexability gives me some degree of freedom to choose how I want to live without having to leave the country. I could go into the differences, but they are so many and their implications so varied that it could fill a book.

The independent government organizations that provide services (police etc.) are necessary to implement state and local laws and their funding is necessarily local as well.

104

radek 01.24.06 at 7:22 pm

As far as costs of having dollar bills rather than dollar coins (using numbers from Dept. of Treasury):

# of 1$ bills printed by Engraving Office per day:
16,650,000

per year:
6,077,250,000

Cost of printing a bill = 4.2 cents = .042$

Total cost of printin’ all them bills in a year:
25,524,4500

(Note this assumes that the 4.2 cents represents a real opportunity cost of production foregone by printing the bills)

Now suppose that we were to do a once for all switch to 1$ coins, which we’ll assume last for ever. Assume also that this switch is costless (the coins are free to mint) just cuz I don’t feel like looking the relevant data up. How much is the cost of having 1$ bills?

According to the Doh’T 95% of all newly printed currency is made to replace old worn out bills. Assume this applies to 1$ bills specifically.

So total cost of a once a year replacement of old bills is: .95*25,524,4500= 242482275

As percentage of GDP:
US GDP in current dollars = 11,750,000,000,000

Cost of replacement as % of GDP = .00002%

Per capita (cost of replacement/pop=295,734,134) = .82 or

82 cents per person per year

Personally I’m quite happy to shell out the 82 cents per year so that I don’t have to carry around more heavy, jingling, easy to lose change.
(And as % of median income it’s even less than the .00002 due to the fact that income distribution is not symmetric and some other stuff)

105

radek 01.24.06 at 7:50 pm

More cost/benefit analysis of coins vs. bills

From the NY fed we learn that:
It costs about .05$ to mint a quarter. Assume the
same would hold for a dollar coin.
There are about .75 of a Trillion dollars in circulation. From the Doh’T we learn that about .45 of these are dollar bills. So .375T of dollar bills.
Also note that the cost of existing paper currency is already sunk. So to replace all them 1$ bills it’d cost us
.375T*.05=.01875T or 18.75 million

What’s the present value benefit of making the switch?
Take the number above – .25T as per year savings from having coins instead of bills. Discount that sucker off into infiity (again I’m assuming coins last for ever) at say 3% (which is what’d a private person get a at a bank, maybe more, hence represent the opp cost of money for most people)
PV(Benefit):
This year we save nothing since currency already printed.
Next year and every year after that we save .25T from not having to replace the bills.
So PV=(.3/.7)*.25T=.107T= 107 million

So from a purely fiscal view (i.e. assuming that the utlity of coins and paper is the same, and one just lasts longer than another) this seems like a good deal, although, again as % of GDP it would be a drop in an ocean.

One more issue – the, admiteddly small – cost of minting coins over printing bills (5 cents vs. 4.2 cents) would show up as a cost over time as the money supply is expanded by the Fed. So growing the number of 1$ coins every year by say 2% could really add up but in the other direction you gotta discount this too. So this would lower the benefit though I don’t think it would reverse the sign of PV(Benefit)-PV(Cost) though I’m too lazy to do the math right now.

All these are off the cuff calculations and may very well be mistaken.

106

radek 01.24.06 at 7:52 pm

and of course in the first post “cost of replacement” should read “cost of paper money vs. coins”

107

Marc 01.24.06 at 7:54 pm

The real cost of not having useful coins is something that is intuitive to folks who have them.
There are a lot of things that can be automated if you can feed coins into a machine; it’s more complex to feed paper bills into a machine. Vending machines, bus/train tickets, etc. go more smoothly.

The addition of sales taxes after the fact is a purely politcal decision. It lets retailers make things appear cheaper than they really are, and it feeds resentment of taxes. Note that gasoline, cigarette, and alcohol prices all have big tax components, and strangely enough the only tax bill that is computed separately for them is the sales tax. There are plenty of cases (order a beer in a bar, for example) where the sales tax is included in the price; I guess intoxicated people have trouble with mental math. People justify our odd practice here because it has always been that way, not because you’d design it that way on any logical grounds.

Metric conversion would have a clear short-term inefficiency, so it is different – people would have to do a lot of mental math to convert to units that they understand. Over the long term the advantages would be pretty large, but I do understand the reluctance to switch. And I speak as a scientist who uses metric units in his work every day.

108

Karen Cox 01.24.06 at 10:05 pm

I can’t comment on the water use or dollar coin issue, but one reason for not posting sales tax on prices is that there are so many different rates and varying exemptions. Texas has a state sales tax, but also all the big cities have a local one as well. Arizona doesn’t have one for clothes. I understand that most chain stores program pricing for their checkout scanners from a central location. Including a zillion sales tax rates would be much more inefficient than to use the system we’ve got.

As for why companies use $9.95 instead of the much more rational $10, I have no idea.

109

radek 01.24.06 at 11:59 pm

” there’s really no such thing as a market for water. How much would you pay if you were dying of thirst? “

You’ve just showed that the demand curve for water is downward sloping. There certainly is a market for water. Not a competitive, free, market, rather a natural monopoly-government monkey business market, but a market none the less.

“In times of shortage, should everyone in a community suffer equally or should the rich be able to water their lawns while the poor can’t afford showers?”

And this makes water special exactly how? And what do rice farmers have to do with this? Are they dying of thirst?

” Is universal access to safe, affordable and reliable water now just an inherent municipal service, much as we americans expect police protection and trash pickup?”

Maybe, but even so since unlike police protection water is rivalrous and excludable there is no reason for government to supply it – aside from natural monopoly considerations. Again, what’s this got to do with anything?

As far as highways – it’s obviously a matter of degree.

More fundementally I think you’re confusing accounting cost with opportunity cost, esp. when you say that those water subsidies paid for themselves many times over. But the fact that the rice production has made a profit and generated revenue greater then the cost of the water doesn’t mean anything in and of itself. The appropriate measure is the alternative use that the water could’ve been too.

110

John Quiggin 01.25.06 at 12:20 am

“One reason for not posting sales tax on prices is that there are so many different rates and varying exemption”

On the contrary, this is a major reason why sales tax should be included. The store knows what the sales tax is (otherwise the cash register wouldn’t work). The customer doesn’t.

In areas where there are customer-specific exemptions (not many, AFAIK) it’s not so clear, but unless most people are exempt, it would be better to post the tax-inclusive price.

111

Thomas 01.25.06 at 12:47 am

Marc, your argument for the advantage of coins is rather dated. If one is looking for convenience, a system of stored value/credit/debit cards would seem to have advantages.

I certainly agree that the decision whether to include sales tax in the price or charge it separately is largely a political one: do we want to disguise the taxman’s take, or make it apparent? I’d think an analysis of the efficiency of that choice would have to take into account the macro effects, but I’m a simple country lawyer, so I’m likely wrong there. But, in any event, I’d note that gasoline, cigarettes and alcohol do have large tax components, but those tax components are excise taxes, not sales taxes, and that efforts to break out the excise taxes separately to charge to a consumer are, in many cases, illegal.

112

abb1 01.25.06 at 2:55 am

In areas where there are customer-specific exemptions (not many, AFAIK) it’s not so clear, but unless most people are exempt, it would be better to post the tax-inclusive price.

In the rest of the world, of course, if you’re exempt you still pay the full price and then ask the authorities for the refund. This way retailes don’t have to be experts in the tax law.

113

abb1 01.25.06 at 3:07 am

Oh, and also: Jeff R. said:
the sales tax is not an expense of the seller; it is an additional fee to the (state,local) government paid by the buyer. So pricing the way we do here is the only honest way to price.

It seemed like a very good point at first, but consider the actual law: if you’re buying across state lines you’re only paying sales tax when the company you’re buying from has physical presence in your state. So, it’s not, in fact, true that this is purely buyer-related tax.

114

Tim Worstall 01.25.06 at 5:37 am

# 101

“[now, the practice of rice farmers fallowing their fields, taking their water allocation then flipping it to a water buyer and pocketing the difference is an outrage. but that’s only a small part of the story.]”

That, in itself, shows what is wrong with the current subsidy system. Obviously, such a farmer would only do that if they made a larger profit by doing so rather than growing rice. So the water subsidy to growing rice but not whatever he flips it to is an inefficiency, moving the resouce (water) from a higher value use to a lower, thus impoverishing the nation.

115

a 01.25.06 at 6:53 am

“In fact France has the lowest percentage of people in unions in develelopped world (7% or 9%) 4% in private company.”

If you think that statistic is relevant in determining the inefficiency caused by French unions, you have not lived in France.

116

Ginger Yellow 01.25.06 at 9:01 am

Re: creationism. While I agree that it is a bit odd to include it in a list of essentially economic inefficiencies, I’ll play devil’s advocate. Creationism is an artificial restriction on the number of science graduates (particularly in the fields of biology, geology, and cosmology). In addition it damages the science that is done by the creationists who do get science degrees – eg in biology (Michael Behe, say) or in archaeology. If you’re committed to a 6,000 year old earth, your analysis of a neolithic find isn’t going to be particularly good. Consequently creationism, and the relatively easy ride it gets from prominent non-creationists, distorts the market for scientists and lowers the average quality of scientific output. Textbook inefficiency.

117

MJ Memphis 01.25.06 at 9:48 am

I’m a pretty frequent traveller to Thailand (from the US), so I get to use a currency where coins are actually worth something. I have to say, I rather like it. For 2 coins, I can ride the subway across town, or buy a small meal from a street vendor, or a big bottle of water from the 7-11. I only have to shuffle through the paper money when making a relatively big purchase, eating at a fancy restuarant, or when I don’t have change. They also include taxes in an item’s sale price (Thailand uses a VAT tax), which is really easy for us foreigners.

118

Bro. Bartleby 01.25.06 at 9:53 am

Juche 95
Gregorian 2006

Now what is more inefficient than our calendar year with the costly four digits that cause countless billions of extra keys being stroked on countless keyboards daily, and this is not even considering the countless billions of extra megabytes of storage space that four digits take, as compared with the much more efficient Juche calendar dating method, which takes two digits. All the world taps on their keyboards today ‘2006’ while the ultra efficient North Koreans tap on their keyboards ’95’ … uhh, make that the North Koreans tap on their refurbished Underwood typewriters ’95’ (clack, clack … ding)

119

Ray 01.25.06 at 10:13 am

You don’t actually save on storage space. Oh, you could save the data as ’95’ rather than ‘0095’, but there is a rather obvious problem.

Anyway, while we’re talking about US money, what is the deal with the identical notes?

120

hirvi 01.25.06 at 10:22 am

“….is the last outpost of the cheque book, now that is inefficient”

Indeed. Why does anyone still use them?

121

chris y 01.25.06 at 11:32 am

“….is the last outpost of the cheque book, now that is inefficient”

Indeed. Why does anyone still use them?

To pay bills. I have a credit card to make on-line purchases, but I prefer to pay for utilities from my current account directly, against the possibility of accidentally accruing interest on the credit card (Unlike some people, I don’t find financial transactions remotely interesting intrinsically, so this is possible). And no way am I going to expose my debit card to the internet in its present state of security. I could use a direct debit, but this involves subsidising the utility companies to the tune of any interest on their habitual overcharge. No thanks

122

jlw 01.25.06 at 11:42 am

I see the North Koreans are facing a Y1C crisis by decade’s end. Will it be enough to finally bring down the regime?

123

jlw 01.25.06 at 11:53 am

By the way, when I was living in Eugene, Oregon, and desperately poor (lived within spitting distance of the 7-Eleven at Fifth and Blair, Mr. Holbo) I was greatly relieved that Oregon didn’t have a sales tax so that I could keep track of the grocery bill right down to the penny. (Mostly because I generally only had a few hundred pennies to work with at any time.)

Even today, in different circumstances on the opposite side of the continent, I prefer to pay cash for all non-durable goods and would greatly prefer a system that had both dollar coins and tax-inclusive pricing. This discussion has been interesting in that the experience of poverty has been almost entirely absent. Paying for all purchases with credit cards–madness!

124

Thlayli 01.25.06 at 12:50 pm

I remained comfortably unaware of the inscrutability of American coinage until a Welshman pointed out that there is no “5” on a nickel, nor a “10” on the dime, or a “25” on the quarter.

120 comments later, it seems none of the American readers reached into their pockets to check this.

While the nickel indeed does not have the numeral “5” on it, it does bear the word “five”. Same goes for the penny and the wrod “one”. The dime is marked with “one dime” and the quarter with “quarter dollar”, which (thinking back to the recent discussion of the guinea) allows for a recalibration of the monetary system. For instance, the dime could be made the smallest unit, with three dimes to the quarter and four quarters to the dollar.

There are a lot of things that can be automated if you can feed coins into a machine; it’s more complex to feed paper bills into a machine. Vending machines, bus/train tickets, etc. go more smoothly.

The transit vending machines in both New York and London (and I assume elsewhere) take plastic. With fares at $2.00 in the former and £1.20 and up in the latter, the utility of small change in this context is dwindling.

125

Bro. Bartleby 01.25.06 at 1:40 pm

“North Koreans are facing a Y1C crisis by decade’s end”

I think not, all the Remingtons and Underwoods will continue to tap, tap, tap forever, and who knows, with an infinite number of North Koreans tapping an infinite number of Underwood typewriters, will some day they type the complete screenplay “Bedtime for Bonzo”?

BTW, has anyone else noticed Kim Jong Il’s tiny feet?
http://www.vuw.ac.nz/~caplabtb/dprk/KJI_EKF1.jpg

126

Jeff 01.25.06 at 1:48 pm

-“As for why companies use $9.95 instead of the much more rational $10, I have no idea.”

As any Marketing 101 professor will be happy to tell you, psychologically, consumers think of $9.95 as “$9”, not the more accurate “$10”, and are more likely to think of it as a relative bargain. The same logic applies to sales tax – why make customers think your products are more expensive than they are?

As a postscript, I have to say that I really hate currencies with significant value coins. Walking around with heavy pound coins in Britain drove me crazy, both from a weight and a storage perspective. I love being able to slip and fold lightweight paper money, and if they ditched coins entirely I wouldn’t mind at all (although the inflation as businesses uniformly rounded their prices up to the next dollar would be annoying for a little while).

127

Doug G. 01.25.06 at 4:46 pm

It seemed like a very good point at first, but consider the actual law: if you’re buying across state lines you’re only paying sales tax when the company you’re buying from has physical presence in your state. So, it’s not, in fact, true that this is purely buyer-related tax.

In this case, the buyer, is, in fact, supposed to pay the sales tax by filing a form and submitting payment to the state or local government. It’s usually such a small amount that enforcement isn’t worth the effort. But for big ticket items like cars, you will not avoid sales tax by buying out of state, whether or not the seller has a presence in your state. The sales tax is a tax on the buyer, not the seller, but the seller normally acts as an agent of the government in collecting the tax.

128

Dave Menendez 01.25.06 at 5:54 pm

Comment 124:

While the nickel indeed does not have the numeral “5” on it, it does bear the word “five”. Same goes for the penny and the word “one”. The dime is marked with “one dime” and the quarter with “quarter dollar”

Back when the US monetary system was created, the units were: eagles, dollars, dismes (dimes), cents, and milles. Each was worth ten times as much as the previous one. The 1792 Coinage Act created coins for each unit, half of each unit (the nickel used to be the half dime), quarter dollars, and quarter eagles.

That being said, there’s no good reason for modern coins not to have numerals on them. In fact, I’m not convinced that we need dollars and cents as units. Surely one or the other is sufficient.

129

Dave Menendez 01.25.06 at 5:56 pm

The 1792 Coinage Act created coins for each unit

Except the milles. I don’t know if there were ever mille or half-mille coins.

130

dearieme 01.25.06 at 7:42 pm

“Walking around with heavy pound coins in Britain drove me crazy”: well you should have used Scottish one pound notes instead. Wonderful, the diversity of a non-federal system.

131

radek 01.25.06 at 8:38 pm

“As any Marketing 101 professor will be happy to tell you, psychologically, consumers think of $9.95 as “$9”, not the more accurate “$10”, and are more likely to think of it as a relative bargain.”

Yeah, except I don’t think this is really true. When I see 9.95 I think 10. Everyone I know seems to think the same way. Yes, I know, not a random sample. Still I really don’t think people are that naive. Buying stuff is something we do every day and even a dunce would eventually figure out that 9.95 is closer to 10 then to 9.

Having said that I don’t have much of an alternative explanation for the .95 or the .99 price phenomenon to offer. Maybe long ago some marketing hot shot made this assertion (without support) and MBA types (who can be more foolish than a village idiot) ate it up in their arrogant smugness (we can fool the little people!). And it persisted.

132

Slithy Tove 01.26.06 at 12:25 am

If a Boeing 767 runs out of fuel at 41,000 feet what do you have? Imperial/metric conversion confusion also contributed to the Gimli Glider incident.

133

TheDeadlyShoe 01.26.06 at 1:10 am

I should say that there is a nontrivial number of dollar coins in circulation in the US. the primary use I’ve seen them put to is as change from vending machines for $5 bills. In fact, my regular source of dollar coins (or susan b anthony coins as they’re sometimes called… sure, its long, but its pleasant to say, dammit.) is from feeding $5 bills into the library vending machines.

i would say the tip culture in the US is diminishing. People finds tips somewhat embarassing. I know I certainly do. Why a couple months ago I even had a pizza guy refuse a tip. Although I think that’s just because I am incompetent at offering tips. (I avoid tip situations whenever possible, in fact I typically pick up pizza rather than get it delivered.)

the big obviously valid criticism of the US monetary system i’ve seen is that the bills are all the same size. It’s nice in some respect but they really should be different in some way for the blind and legally blind to tell them apart.

I think it would be really kind of cool to reuse the Eagle designation for a 5 dollar coin, though.

134

chris y 01.26.06 at 3:44 am

Maybe long ago some marketing hot shot made this assertion (without support) and MBA types (who can be more foolish than a village idiot) ate it up in their arrogant smugness (we can fool the little people!).

It must have been very long ago then. I can remember my dad buying a car at £499/19/6 (Nineteen shillings and six pence = 97 1/2p) in 1960. In those innocent days, before MBAs had ever been heard of, marketing was incredibly naive and it’s just possible that somebody believed people were going to think they were getting a car for £400 and change, but I suspect it’s more likely that this habit grew up to enable advertising slogans ending in “… all for under £500!” or whatever sum applies.

135

nick s 01.26.06 at 6:52 am

Yes, the US economy is sustained by numerous inefficiencies, in particular the use of humans in unnecessary jobs or ones that might be supplanted by machines.

GAP greeters. Bag-packers. Parking attendents who sit in a little booth and take your money rather than ticket machines that eat your money and force you to pay double for your space.

And, y’know, the lack of high value coinage — unique in the developed world — is such a pisser. But the copper industry and the bill-reading industry has very good lobbyists.

I’d rather have light paper dollars in my wallet than a jumble of heavy coins making a lump in my pocket.

This is a common misconception: in practice, you tend not to load up on coinage. Americans simply don’t know how to use high-value coins because they’re used to having coins that can’t buy anything of value. Instead, they habitually pocket their change and chuck it in a jar, which eventually gets rolled up or bunged in a Coinstar machine (at a 7% loss).

As ‘mj memphis’ pointed out, you don’t open your wallet unless you’re making a significant purchase: that cup of coffee, newspaper, etc. is a pocket-purchase. And I’d rather have a few coins worth a decent amount of money in my pocket rather than finding out that my stuffed wallet contains the grand total of $8 in singles.

136

abb1 01.26.06 at 7:27 am

I’m with Nick here. The smallest note in Switzerland is the 10-franc bill, and the smallest coin in real circulation is 10 centime (there’s a 5c coin, but you almost never see it). No god-damned pennies! Usually you have one 5-franc coin in your pocket, a few 2 and 1-franc coins and some small change, and that’s how you pay for your coffee, croissant, parking, all that kind of stuff. You don’t have to open your wallet all the time.

Also, 100 and 200-franc bills are very common, people use cash a lot more than in the US.

137

nick s 01.26.06 at 9:18 am

The sales tax question is grudgingly more efficient: when you have state sales tax and local sales tax, and various exceptions that change according to state and local law, forcing vendors to mark up items at after-tax prices would be time-consuming and expensive. It’s weird and annoying if you’re a visitor, but that’s all.

On high-value coinage: I once did a straw-poll among my British friends to see how much change they had with them, and most had around the value of the lowest note (i.e. £5) in their pockets.

The ‘weighed-down pockets’ phenomenon is a rarity, unless you’re an American visitor who’s used to thinking that the change in your pocket can’t buy you any more than a pack of gum.

However, the introduction of the Euro has made life a little more inefficent in places like the Netherlands, where the smallest guilder-cent coins had been discontinued and the total rounded up or down.

138

Bro. Bartleby 01.26.06 at 9:30 am

Oh no, you besmirch the honorable Lincoln penny! Perhaps you don’t understand the real purpose of the puny penny, certainly not to be jingled in your pocket, but pennies are placed strategically throughout the American landscape, and are simply watched. Rain, hail, snow, wind, sleet, or burning sun, the penny awaits its moment, and that moment is when someone who really understands Ben Franklin’s maxim on living, “a penny saved is a penny earned,” stoops to pick one up.

139

serial catowner 01.26.06 at 10:06 am

How could it possibly matter?

I go to the grocery store, buy the items with reduced prices, slide a debit card while the cashier punches buttons, and get a tape that lists each item, and the total tax calculated on the basis of what is taxable and what the local rate is.

Y’see, in America grocery stores also sell items that are taxable along with food items that may not be. And, wrong as it may be, Americans prefer keeping government as local as possible.

So where is the savings in “knowing” what the price will be with the tax?

And that, in a nutshell, is why we don’t care. Miles, kilometers, the distance stays the same doesn’t it? Lots of us go to Canada and somehow survive the imperial gallon. And remain blissfully unaware that higher minds calculate distances in factions of lightyears.

140

Ray 01.26.06 at 10:07 am

The sales tax question is grudgingly more efficient: when you have state sales tax and local sales tax, and various exceptions that change according to state and local law, forcing vendors to mark up items at after-tax prices would be time-consuming and expensive

Why? The vendor is going to know what taxes and exceptions apply better than the customers – they have to, since they have to know how much money to collect at the register. And its not like the goods come from some off-shore warehouse pre-tagged – each shop is going to put the price tags on anyway, so why not put the post-tax price on?

141

Ray 01.26.06 at 10:11 am

Catowner, that’s another good reason for the store to put the post-tax price on the tags. They have to know which items the tax applies to, while the customers don’t. The ‘savings’ is in knowing how much something will cost you to buy.

142

tom brandt 01.26.06 at 10:20 am

Ray,
Actually, in many cases the goods are pre-tagged with the retail price, especially those going to the large chains like Target or Sears.

143

Ray 01.26.06 at 10:41 am

Do toasters, for example, sell for the same (pre-tax) price in every Target store nationwide? That would make a difference, but I didn’t think it happened.

144

tom brandt 01.26.06 at 12:47 pm

I believe they do, except for the occassional local store mark-down for some special reason. In that case, the mark-down usually noted by a special coupon or sign on the shelf. The price tag on the item still has the regular retail price.

145

JLS 01.26.06 at 4:01 pm

“In fact France has the lowest percentage of people in unions in develelopped world (7% or 9%) 4% in private company.”

If you think that statistic is relevant in determining the inefficiency caused by French unions, you have not lived in France.

I’m French and I live in France.
I have workef in ten companies I have never seen an union.

JLS

146

Ray 01.26.06 at 4:07 pm

That sounds weird to me. For context, the food in supermarkets in Ireland tends not to have price tags at all, there are signs on the shelves instead. Larger ticket items are individually priced in store. But if that’s the way things are generally done in the US, that is a good reason for not including sales tax in a price.

147

John Quiggin 01.26.06 at 5:51 pm

148

BM 01.26.06 at 7:31 pm

Moving to USA from Israel, the best thing was the lack of significant coins – now I can go “coinless” and actually have a wallet that fits in my pocket.
I don’t know how I’d even be able to live somewhere else.

Regarding tax, this seems to be a general thing that in the US you are more aware of sales tax, income tax etc. while in Israel they try to make the tax as transparent as possible (everyone quotes the prices and salaries after tax, many people will not even be aware how much tax they are paying). Perhaps it’s not a coincidence that Israeli taxes are higher.

That said, I doubt I’ll ever be able to understand what is an oz (and how you pronounce it).

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Matt McIrvin 01.26.06 at 8:26 pm

Small cultural differences abound. By US standards, in most European restaurants it takes forever for the bill to come. Even in fairly nice restaurants, the modern US custom is to present the bill quickly when it becomes clear the customers don’t want to order anything else, so that they can divide up the damage over dessert and coffee and get out of there whenever they like. One side effect is that Americans will go out for lunch on fairly tight schedules and often expect to be finished in much less than an hour, even if it’s a sit-down place.

In most European countries, the idea seems to be that there’s something vaguely inhospitable about this, as if the proprietors are pushing you out the door, so the bill typically arrives in a more leisurely manner.

Anyway, when I was recently visiting Spain with some other Americans, one of them told me a story about this: he once visited Ireland unaware of both European restaurant service customs and European tipping customs, and got so irritated by the slow-arriving bill that he decided to leave a miserly tip–and, of course, ended up leaving a completely appropriate tip for completely appropriate service, entirely by accident.

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Ray 01.27.06 at 6:49 am

oz is ounce, pronounced like ‘bounce’ without the ‘b’.
16 ounces is a pound, and 14 pounds is a stone, and 8 stone is a hundredweight (because it contains 112 pounds, you see), and 20 hundredweight (or 2240 pounds) is a ton. Easy!
Or 1 oz is just under 30 grams, which is just under .03 kg, or a little under 30,000 mg, if you can remember all of that without your heading exploding from the sheer complexity of it all.

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perianwyr 01.27.06 at 8:35 am

Miles, kilometers, the distance stays the same doesn’t it?

Converting from cm to mm is a mere jump of a decimal point, whereas converting from feet to inches requires an actual math operation. Also, there isn’t a convenient unit beneath the inch.

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tom brandt 01.27.06 at 8:43 am

John,
I am a software developer with clients who supply products to large chains like Target. For many (not all) items, my clients pre-tag the packages with the retail price.

153

hirvi 01.27.06 at 12:46 pm

“However, the introduction of the Euro has made life a little more inefficent in places like the Netherlands, where the smallest guilder-cent coins had been discontinued and the total rounded up or down”

Nick: I don’t know what happens in NL, but we have never had 1 or 2-cent coins at all (except in collectors’ packs) and everyone I know is pleased not to have worthless coins in his pocket. We see this as efficiency, not inefficiency.

Btw, the ’rounding’ isn’t quite what it looks. If you go in a supermarket and buy 20 items, it’s the end-price that’s rounded, not the price of every item – and the end-price is only rounded if you pay cash: if you pay by card, you pay the exact amount.

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