Matthew Nussbaum of Politico tweets that:
There are 50,000 coal miners in the United States. There are 520,000 fast food cooks. Coal miners seem to loom a lot larger in our politics. Wonder why.
If Mr. Nussbaum had read pages 36 and 37 of The Armchair Economist, he’d know the answer. Coal mines are in pretty much fixed supply; new fast food joints are created all the time. Therefore new coal mining jobs are far harder to create than new fast food jobs.
So if conditions get better for coal miners, that’s good for existing coal miners. By contrast, if conditions get better for fast food cooks, more people will become fast food cooks, driving down the wages of existing fast food cooks and negating the improved conditions.
That makes it worthwhile for coal miners to lobby for better conditions, but not for fast food cooks. What’s relevant is not so much the current population of coal miners, but the ease with which that population can expand.
Here’s the relevant passage from The Armchair Economist:
Throughout the world, farmers have managed to appropriate disproportionate shares of government largesse. In the United States, farmers are routinely paid to leave land uncultivated, whereas nobody would think of paying motel operators to leave rooms vacant. That’s a riddle: Why the asymmetry? Some say that farmers have successfully capitalized on the romance of the family farm. But is the family farm inherently so much more romantic than the mom-and-pop grocery store? Why do we subsidize the vanishing life- style of the small farmer while allowing the corner grocery to fade into the mists of nostalgia?
The Indifference Principle suggests an answer: Motel owners and grocers don’t bother mounting the kind of lobbying effort that farmers do because they are well aware that they stand to gain very little from government subsidies. If motels were paid to keep rooms vacant, room rates might rise initially but new motels would soon appear in response. Before long, the motel industry would be no more profitable than it ever was. Motels are not a fixed resource, so nothing can make motels more profitable than, say, gas stations. But if there is a fixed quantity of farmland, then farmers are at least partially exempt from the Indifference Principle. New farms can’t arise to take advantage of farm subsidies. Therefore farmers can gain from a change in economic conditions, and it is worth their while to work toward the changes they prefer.
This is a nice little reminder that economists actually do understand a lot of things that most people don’t. Even a pretty sophisticated observer like Michael Nussbaum found the asymmetry between coal miners and fast food cooks mysterious, though pretty much any economist could have explained it to him in an instant.
Wouldn’t that argue that coal mine owners should lobby for subsidies? I don’t think farm workers benefits much from farm subsidies, it’s mostly farm owners.
So I don’t think this explain why coal miners are lobbying so much, I don’t think there is a fixed supply of them…
@acarraro 1
Embrace the healing power of “and”. Mine owners do so lobby. Directly, and by proxy: through the workers. I will give my miners better conditions and higher wages with (some of) that nice fat subsidy. So they too will lobby. For the reasons Steve explained, restaurateurs cannot so effectively lobby by proxy.
This argument works even better for coal miners than farmers, right? Farmland isn’t quite fixed, considering the US used to have much more of it. And if farm subsidies were high enough, entrepreneurs would start buying up land used for other purposes, demolishing their buildings, and starting new farms. This would take time, but so does building a motel. So there is some sort of implicit time frame being used for the “short run” to make this work for the examples given.
1, I assume it takes a lot more effort and cost (due in part to restrictions such as age for social reasons gender) to become a coal miner. You also have to live in certain parts of the country whereas fast food cooks can basically live anywhere.
I think you overestimate the ability of most economists to understand their craft.
Landsburg may have sound arguments in support of his point—although I’m not clear on how finite the supply of coal miners is. Still, I would attribute the focus on coal miners to two other factors
First, whether or not the supply of coal miners available to fill jobs is fixed, I suspect that the supply of jobs that coal miners are willing to fill is pretty small. That is, these ex-miners feel trapped because they find themselves unable to maintain employment as miners, and unqualified to do anything else.
And this leads to the second point: Coal miners (and auto workers) are seen as symbolic of the plight of working class white men generally. They had the kind of jobs that paid good wages to people without much education. The economic foundation has eroded out from underneath their feet.
This differs from fast food cooks in three important ways. First, fast food never paid middle-class wages, so people would not feel the loss of such jobs as keenly. Second, those jobs aren’t disappearing, so people have no cause to feel the loss of such jobs at all. Third, those jobs often went to non-white people, so they don’t work as a symbol of the loss of white male working-class power.
(Fun fact: More Americans are employed in the solar electric industry than in the fossil fuel electric industry—and by some counts, twice as many.)
It always struck me as sightly odd that coal mining is described as awful, backbreaking work that causes ill health yet we lament its decline. We should perhaps celebrate its end.
In the UK the number of coalminers has very little to do with the amount of coal available. If it were economic there could still be millions of miners employed to dig it up – or at least lots more than there are. Increasing the number of mines and miners would not be that difficult. The problem seems to be that it is not economic to dig it up.
From wikipedia on coalmining in Britain
“After 1970, coal mining quickly collapsed and practically disappeared in the 21st century.[1] The consumption of coal -mostly for electricity- plunged from 157 million tonnes in 1970 to 37 million tonnes in 2015, nearly all of it imported. Employment in the coal mines fell from a peak of 1,191,000 in 1920 to 695,000 in 1956, 247,000 in 1976, 44,000 in 1993, and a mere 2,000 in 2015”
That is quite staggering – consumption fell from 157 million tonnes in 1970 to 37 million tonnes in 2015, but it was not because we ran out of coal. Coal production peaked in about 1912 with nearly 300 million tonnes.
In the USA it is different. The production of coal increased steadily from 1960 to about 1.1 billion tonnes in 2008, since when it has dropped, but nothing like to the extent in the UK.
I suspect that coal in the US is simply following the trend in the UK. It is the fuel of the past and nothing can be done to bring it back without massive subsidies. Going back to my first point, if we do want to subsidize something it probably should not be the unhealthy and unpleasant coalmining jobs. At least farms do have some romance attached.
“Two elderly women are at a Catskill mountain resort, and one of them says, ‘Boy, the food at this place is really terrible.’ The other one says, ‘Yeah, I know–and such small portions!’
Well, that’s essentially how I feel about life: full of loneliness, and misery, and suffering, and unhappiness–and it’s all over much too quickly.”
Woody Allen, Annie Hall
“Motels are not a fixed resource, so nothing can make motels more profitable than, say, gas stations.” There s a solution – regulation and licencing! Simply limit the number of motels and they become a fixed resource. Are motel owners lobbying for such regulation? If not, why not?
#8 Or in the words of The Smiths,
“I was looking for a job, and then I found a job
And heaven knows I’m miserable now”
The plausibility of this story as an explanation for lack of lobbying by grocers and hoteliers seems to hinge on grocers and hoteliers explicitly understanding this. However, you would think that if they did, they would also understand that when the minimum wage increases, not only they but all their competitors would also have to raise the minimum wage, thus allowing them to raise prices, mitigating most of the harm of increasing the minimum wage.
Yet in practice, when an increase in the minimum wage is proposed, we hear from a great many small business owners who appear, judging from the extent of the carnage they predict, to be looking at their books and assuming that they will not be able to raise prices to deal with the higher wage costs.
To be sure, there are more sophisticated criticisms to be made of the minimum wage, but my point is that many (most?) small business owners seem not to understand that subsidies and regulations affect their competitors as well, and that this changes the equilibrium market clearing price, making the effect on profits much weaker than a naive a static analysis would suggest.
Something’s not making sense here. Are you talking about coal mines or coal miners?
The argument makes sense for farm worker who own their farms. If they don’t, then farm workers will not necessarily benefit from subsidies.
If the government artificially increases the demand for coal, then coal mine owners will benefit. They may need to hire more workers in which case if the supply of coal miners is fixed, then their wages would go up. But if the supply of coal workers is not fixed, then their wages would not go up, since more workers will move to the coal industry just like more motels entering the market in your example.
I tend to agree with Brandon Berg #11 here. Given Nussbaum doesn’t understand this what makes it obvious that Coal Mines and Fast Food Owners do? Or is there some reason that they don’t need to understand it explicitly and yet somehow adapt anyway?
@Jonathan Kariv 13
I humbly submit this was answered in 2. Miners, their families, the limited number of towns they live in, all can benefit from direct and indirect subsidies in a way that current and prospective waiters and short order cooks cannot.
It’s also wrong to argue from what the owners allegedly do not understand. They probably understand a lot, but in any case their trade organizations and the lobbyists they hire most assuredly do understand.
It is not from the economic acumen of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.
And now a word from everyone’s favorite economist:
West Virginia went overwhelmingly for Donald Trump in November…. And it may seem obvious why: …Trump promised to bring coal jobs back….
But ….coal country isn’t really coal country anymore, and hasn’t been for a long time….
Coal … did indeed employ a lot of people. But the number of miners began a steep decline after World War II…. This was mainly because modern extraction techniques — like blowing the tops off mountains — require far less labor than … pick-and-shovel mining. [Then] fracking led to competition from cheap natural gas.
[So] it has been a quarter century since [coal mining] accounted for as much as 5 percent of total employment.
What, then, do West Virginians actually do for a living these days? Almost one in six workers is employed in the category “health care and social assistance.”
[W]here does the money for those health care jobs come from? …Washington.
West Virginia has a relatively old population, so 22 percent of its residents are on Medicare, versus 16.7 percent for the nation as a whole. It … benefited hugely from Obamacare, with the percentage of the population lacking health insurance falling from 14 percent in 2013 to 6 percent in 2015; these gains came mainly from a big expansion of Medicaid. [Republican policies would be catastrophic for West Virginia.]
“Coal country” residents weren’t voting to preserve what they have, or had until recently; they were voting on behalf of a story their region tells about itself, a story that hasn’t been true for a generation or more.
Their Trump votes weren’t even about the region’s interests; they were about cultural symbolism.
There are still a number of things wrong with the argument. First, according to the Census Bureau, the coal industry employs about 76,000 people (including sales staff, office workers, etc…) This is similar to the number of people employed at travel agencies. In each case, the industry is being wiped out not by government regulation, but by competitive market forces. The price of coal is down, automation is up, and those jobs aren’t coming back. The travel industry could make the same argument, but no one seems to be interested in changing regulations to try to save them.
The second half of the argument was that supply and demand will keep coal pay high and fast food (or travel industry) pay low. This is silly. Coal pay is high because it is dirty and dangerous. The people who work in office jobs at coal companies are paid the exact same (or less than) their “clean energy” counterparts. The fact that coal mines are a limited quantity keeps the pay low, not high. (When there are only 22,000 jobs, and 50,000 people trying to get them, the market drives the wages down, not up.) Coal miners demand more money because they know the coal miner retirement fund maintained by the Federal government is empty, and the odds of the coal companies (or the feds) stepping up are worse than the odds of getting black lung.
Although the travel industry employees make less than coal miners, it is an economic wash, because the travel industry hasn’t been systematically cheating their employees out of health care, life insurance, and retirement benefits for 100 years. In addition, travel agents haven’t been poisoned by polyacrylamide (“flock”) for 30 years.
Although it is true that anyone who wants could open a travel agency, that is not what is keeping their pay down. What is keeping their pay down is that everyone wants to do it, the perks are fantastic, and you never get trapped a mile below surface without air. Even if the start-up costs were a billion dollars, the hourly pay would still be less than minimum wage.
The GOP seems to believe that if you just allow coal companies to pollute more, and cancel the health insurance from their employees, then the number of jobs will double overnight. An examination of mining practices in the US will easily disprove the “pollution creates jobs” claim, and the health insurance claim is absurd on its surface. Healthcare is going to add 4 million jobs in the US in the next ten years according to the BLS. Even in West Virginia where coal was king, the number of health care jobs is already greater than coal ever was. From an economics point of view, cancelling Obamacare would be a much worse hardship on West Virginia than all the environmental regulations of the last 20 years put together.
Economists are famous for this kind of analysis. They are straining at gnats and ignoring camels.
SL: “By contrast, if conditions get better for fast food cooks, more
people will become fast food cooks, driving down the wages of existing fast food cooks and negating the improved conditions.
That makes it worthwhile for coal miners to lobby for better
conditions, but not for fast food cooks. What’s relevant is not so
much the current population of coal miners, but the ease with which
that population can expand…
The Indifference Principle suggests an answer: Motel owners and
grocers don’t bother mounting the kind of lobbying effort that
farmers do because they are well aware that they stand to gain very
little from government subsidies.”
Interesting, but I think you overlook a crucial point: the pizza cooks must be consciously aware of this principle, prior to their
lobbying effort. Concur, it does apply, in the long run, but the
lobbyists would need some erudition in economics, of supply
and demand curves, able to foresee consequences. My experience
with chicken fryers tells me they’re about 30 IQ points shy of such
analysis.
Your example of SanFran vs. Omaha is more luminous. There, the
options and costs are transparent. The actors naturally make
informed decisions, without book learning. The indifference
principle applies, as sure as the law of gravity.
In this case, more likely is the fact that the cooks are
unorganized, there’s no union hand to apply pressure. The miners
have a long, strong union tradition. They’ve learned the strategy
of war: concentrate force at the critical point. In our system,
that means identifying and buying key committee members in the state
and national legislatures, while speaking with a single voice.
You know, the recent United passenger bump thing seems tailor made for someone who advocates markets. The should have bought back the seat from a willing passenger in an auction. Designating a bumpee at random is akin to the draft, and similarly unfair and inefficient, and requiring of enforcement.
My understanding is that United DID conduct a mini-auction. Specifically, they offered to pay people (in United vouchers) to sacrifice their seats, and three people accepted. The price reached $800 without a final taker (and I surmise United was matching this offer with the three volunteers). At that point, with the clock running on getting the flight going and getting a crew to the NEXT flight full of passengers, United elected to exercise its right under the ticket contract and remove a passenger at random.
For what it’s worth: The behavior of passengers might seem odd. Out of an entire plane, we couldn’t find more than three passengers that were willing to take a later flight in exchange for an $800 voucher? If people value air fare so much, perhaps United should raise the price of all its tickets to $800?
Probably not. Clearly United faces competition from other carriers at the time it is selling the original flights; at the time it is seeking to get people out of their seats, they only face competition from later United flights.
Moreover, many people will have developed plans related to a given flight schedule.
But in addition, this behavior is consistent with the Endowment Effect, whereby people demand more to sell than they would be willing to pay to buy, even in the absence of any retail costs. This demonstrates that, contrary to the assumptions of the Rational Actor model, consumer preferences are inconsistent and malleable based on circumstance.
@20
You are missing an important point. Once booked and at the airport the calculus changes. You might have a hotel or rental, might have limited time off work, etc. So there is nothing crazy about rejecting United’s offer (which I read was 250 actually, so it’s not clear.) But in any case if the auction had continued we still would have a better outcome for all involved. Including the taxpayers who paid for the cops.
Still, too bad we don’t have any professional economists who write popular explanations of economics available …
Didja see United Airline’s new app? It’s like their old app, except this version “supports new drag and drop feature.”
Ha! Consider that joke stolen.
I’m trying to imagine the argument for how a pure auction is not the best social outcome…because the passengers can collude to hold out and divvy up the windfall?
This would also be an interesting case for a business strategy class – is the DOT compensation “law” a floor or a ceiling? Assuming kicking people off flights without adequate compensation wasn’t really a viable status quo ante, I don’t see passengers getting too much here. However if the industry had wanted something that sounded like “consumer protection” (e.g. “4x your ticket price”) while providing legal cover against unfavorable auction situations, this seems like a pretty clever way to do it – as I understand it they can pay the lesser of an auction result, 4x the *cheapest* ticket sold, or $1350. Not hard to imagine situations where that’s not so attractive to a given planeload of people, with weak correlation between ticket prices and reservation prices.
The way they handled it was a massive mistake in hindsight. They usually do the auctions before boarding, so that was the first cock up – presumably they did not know the staff were going to arrive until the last minute. Once on board, the logistics may be more difficult and time cnsuming than at the gate. Missed slots cost lots of money, I believe, so they probably thought that a quick solution was necessary, and kicking people off would be quicker than continuing the auction. May have turned out to be the right short term choice if they had not picked this passenger.
Long term message – don’t abuse your legal powers, and do whatever it takes to get people to agree with the fact that YOU as the airline want to pull out of the deal you have with them.
Iceman,
Collusion is a theoretical possibility only. Hundreds of passengers, from different places, who have never met. And this was not an oversold flight either. The airline wanted the seat to save money — flying a crew member to another flight was their lowest cost approach. No reason at all they should have any rights here. Can GM repossess your car if an engineer needs a lift to get an assembly line back in production an hour quicker?
I’m with you but are you still inclined to push people in front of trolleys? In this case apparently it’s even in the fine print of your “contract”.
Surely at this point they wish they had continued with the auction, but they viewed it as a repeated game and were reluctant to set precedents.
BTW what if it was not just their lowest cost approach but the *only* way to prevent another couple hundred passengers from experiencing delays / cancellations…like standing in the path of the trolley…
The interesting thing about the trolley problems is not so much that people think diverting the trolley onto the track with one person is something that *ought* to be done, but that many also think that pushing a fat man into the path of the trolley is something that *ought not* be done, although the outcomes are apparently identical. These problems do not tell us what ought to be done, only what people think ought to be done.
Comparing this to the airplane overbooking, it might be that people simultaneously believe that bumping someone from a flight ought to be done to save 200 people from a similar inconvenience, but that the doctor ought not have been dragged screaming from the flight with a broken nose.
A related thought – it’s interesting to me how once it became clear security was literally going to pry a shrieking man out of his seat, no one — including many who loudly and visibly expressed great anguish over the incident — got up to say “alright, you know what, for $800 I’ll volunteer to stop this from escalating into senseless mayhem.”