The recent dustup at Reddit appears to have been largely created by CEO Ellen Pao and her management team.  For those who (like me) mostly ignore anything about Reddit, this is an odd event.  I’ll let the Wall Street Journal tell the story:

Reddit’s Chief Executive Ellen Pao, a first-time CEO harshly criticized by some Reddit users, on Monday apologized to users for how the company handled the Thursday firing of Victoria Taylor, the director of talent who ran Reddit’s popular celebrity question-and-answer feature called Ask Me Anything. She was a key contact for the site’s moderators, mostly volunteers who manage the website’s nearly 10,000 active discussion boards, called subreddits.

After Ms. Taylor was dismissed, hundreds of moderators closed the discussion boards they manage to the public in protest, citing their close ties to her. The moderators, who are considered crucial to the site’s success, were upset that the dismissal of a community liaison they relied upon left them unprepared to host already scheduled events.

The protest extended into Saturday, leading to a homepage littered with headlines linking to subreddits about the controversy. By Sunday, nearly all of the subreddits were open again, the company said. But hard feelings lingered after the weekend rebellion.

Has it occurred to anyone that maybe the folks at Kleiner, Perkins were right in their judgments of Ms. Pao?

Ellen Pao Reddit

CEO Ellen Pao apologized for how Reddit handled an unpopular firing. PHOTO: LAURA MORTON FOR THE WALL STREET JOURNAL

For those interested in the history of Ms. Pao’s (unsuccessful) lawsuit against Kleiner, Perkins, here are links to the Wall Street Journal’s stories:

March 27, 2015: Ellen Pao Loses Sex-Bias Suit Against Kleiner

April 23, 2015: Kleiner Perkins is Seeking Nearly $1 Million in Legal Costs from Ellen Pao

May 8, 2015: Ellen Pao Disputes Kleiner’s Bill for $1 Million in Court Costs

June 1, 2015: Ellen Pao Appeals in Sex-Discrimination Case Against Kleiner Perkins

June 5, 2015: Ellen Pao Asked Kleiner for $2.7 Million After Trial Loss, Filing Says

June 12, 2015: Ellen Pao Fires Back at Kleiner in Court Costs War of Words

June 17, 2015: Judge: Pao Should Pay Kleiner $276,000

June 18, 2015: Kleiner Says It Tried ‘Very Hard’ to Settle With Ellen Pao





Happy to be Wrong About TPA

President Obama Signing TPA, TAA

U.S. President Barack Obama signed into law on Monday legislation to speed trade bills through Congress. JONATHAN ERNST/REUTERS

As of today TPA and TAA are law.  President Obama signed the two bills this morning.  I have mixed feelings about this.  Like every economist worthy of the name I favor free trade.  But I also predicted that TPA would never make it to the Oval Office.  I was wrong, but in this case I’m happy to be wrong about TPA. Mea culpa.

KPCC and the Supermarket Guru Jointly Fail

Confession: I listen to KPCC in Pasadena instead of our local NPR station, KQED.  If you don’t understand that, I invite you to download the NPR player for iOS and try both of them, preferably between 9 am and 1 pm.

In any case, this morning’s Take Two included a segment about rising food prices, specifically beef.  The Supermarket Guru Phil Lempert opined that retail beef prices in the U.S. have not risen as much as wholesale prices because Japan has been importing more U.S. beef.  Mr. Lempert believes beef exporters are passing their increased costs along to the Japanese market.  In this case KPCC and the Supermarket Guru jointly fail.

Economists call this price discrimination.  And we know for sure there are three conditions required for a business to be able to price discriminate:

  1. The buyer must be unable to resell the product.
  2. The seller must have market power.
  3. The seller must be able to identify different buyers (or groups of buyers) at low cost.

It’s surely easy to distinguish Japan’s market from the U.S.  And, while buyers can resell the product, there are significant costs — import licenses from the Japanese government and transportation costs are two examples.  You can imagine a U.S. buyer traveling to Japan with a suitcase full of frozen steaks.  Expensive and probably not profitable.

So there is some wiggle room for price discrimination.  But that second condition is troubling.  Are there really only a few companies exporting beef to Japan?  Are they really managing to avoid competing with each other?  I’m skeptical.

It seems to me there is a simpler and more direct explanation: demand.  Higher prices for any product reduce quantity demanded.  And for a specific item such as beef, demand elasticity is likely to be fairly high.  The reason firms are not raising retail prices is simple: it would not be profitable because they would lose more unit sales than they would gain from the higher price.

Thus ends our microeconomics 1 lesson for today.

The Problems at Staples Are Not Rising Online Sales

The March 7 New York Times included this article claiming that the problems at Staples are caused by the shift to online sales:

New York Times Headline

New York Times Headline

Based on my recent experience using Staples’ online ordering system, I believe the problems at Staples are not rising online sales.  In fact, the online ordering system was so broken that I had to place three separate telephone calls to customer service to straighten out this mess.  Staples has big problems, for sure, but they start with the online ordering system.  (Some of this is based on my memory of the events.  I have provided as much confirmation via e-mails and the web as I have available.)


We own a Ricoh Aficio CL7200 color laser printer.  We bought this beast at the end of 2006.  It still works wonderfully, but finding toner cartridges and other consumables has become a bit of a problem.  I expected a search.  What I did not expect was that the Staples ordering system would cause so much grief.  (For the record, I looked at  Their site was honest enough to tell me that what I wanted was out of stock.)

Ricoh Aficio CL7200

Ricoh Aficio CL7200

The printer needed a new magenta toner cartridge and yellow was getting low, too.  Because the software that reports toner levels has apparently failed, I was getting erroneous reports.  My lovely wife noticed that her color printing was showing defects in the red areas.  Sure enough, the magenta cartridge was empty.

As noted earlier, I started with  The website told me these cartridges were out of stock.  So over I went to  I was cheerfully informed that everything was fine.  I got a confirmation e-mail. (Details in this message and others have been blurred so you can’t steal my identity.)


Email Confirmation February 17, 2014

Email Confirmation February 17, 2014

The Fun Begins

The first problem was the tracking information:

Staples Tracking Fail

Staples Tracking Fail

There is a tracking number there, but no mention of the name of the carrier!  I suppose I should have assumed UPS, but frankly the information given when you click the “Track Shipment” button should be more, um, informative.

Then the real fun started.  Later that afternoon I got two e-mails informing me that the cyan and yellow cartridges were out of stock.  If you look carefully at the three e-mails below you’ll realize that Staples has access to time travel.  The time on my order was 2:38 pm, but the times on their replies were both 1:18 pm.

Email February 17, 2014 Yellow Out of Stock

Email February 17, 2014 Yellow Out of Stock

Email February 17, 2014 Cyan Out of Stock

Email February 17, 2014 Cyan Out of Stock

Thus began my first call to customer service.  Note that the magenta cartridge was apparently in stock, so I wasn’t too worried.  After all, that’s the one I needed most.  The nice lady at customer service managed to track down a yellow cartridge somewhere.  She then said she had a substitute for the cyan cartridge.  I said, “Sure, ship it” while being very skeptical that she had, in fact, found a substitute.

A Word About Staples Customer Service

The Staples customer service representatives could not have been more helpful.  They were calm, courteous, and generally knew what they were doing.  It became apparent, however, that they are using parts of the same website that supports the online ordering system.

Back to the Main Story

On February 19 the yellow and (allegedly) cyan cartridges arrived.  Sure enough, the substitute fort the cyan cartridge was not a cartridge at all.  It was one of the photoconducting units.  (Trust me, you don’t want to know.)   I went online and set up a return for that item.  Note that the web page promises pickup March 7.  Much to my surprise our nice UPS lady showed up February 21 asking for the box!

Email February 19, 2014 Returned Item

Email February 19, 2014 Returned Item

While I was there I checked the status of the magenta cartridge.  Guess what?  The Staples website now reported it was out of stock!

Another call to customer service.  The nice lady gave me $15 off my order.  She also asked me if it would be all right to just void my original order and cut a new one for the magenta cartridge. “Sure, why not?” I replied.  Later that day I got a confirmation e-mail.  Take a close look at this one, too.  Staples promised same-day delivery!  Impressive.  But untrue.

Email February 21, 2014 Magenta Shipped Again

Email February 21, 2014 Magenta Shipped Again

February 25 I got yet another e-mail telling me my most recent order had not shipped.

Email February 25, 2014 Something Not Shipped

Email February 25, 2014 Something Not Shipped

Another call to customer service.  The third nice lady managed to actually track down a magenta cartridge.  It arrived a couple of days later — too late for my wife’s crash project, but at least we could use the printer again.


There are problems at Staples, but they begin with the online ordering system.  Closing 225 stores does nothing to solve the real problem.  I know it will be quite a while before I shop at again.

Yet Another Labor Force Participation Rate Error

Zanny Minton Beddoes

Zanny Minton Beddoes (source:

and that’s been one of the really striking things about the U.S. economy in the past few years is that you’ve seen this very big decline in the share of the labor force that is employed, the share of people that are employed. Now partly that is to do with the fact that the population is aging and the baby boomers are aging. As you get older, fewer people work. But a lot of it probably has to do with the weakness of the recovery itself.

 NPR’s “Weekend All Things Considered” featured a story on the state of the U.S. economy. Titled “The Long-Term Unemployed, the State of the Economy, and What Can Be Done,” the show featured a number of guests.  Among those interviewed was Zanny Minton Beddoes of The Economist who, in turn, featured a lovely British accent.  And, naturally, there is yet another labor force participation rate error.

Interestingly, this passage does not appear in the official transcript.

Regular readers (both of you) will remember that I’ve written about the labor force participation rate before.  In fact, retiring baby boomers is exactly the wrong explanation for the declining LFPR.  The main source of the decline is among the 16-34 age group, but the 35-44 age group also shows a small decline.

The historical data is there for anyone who bothers to look.




Free Lunch, Carbon Tax Edition

A Carbon Tax at the Pump

A Carbon Tax at the Pump

This morning (June 28, 2013) on NPR’s “Morning Edition” reporter David Kestenbaum interviewed Henry Jacoby, “an economist at MIT’s business school.”  Prof. Jacoby, along with his colleague John Reilly, believe they have discovered a free lunch (although they don’t call it that). I’ll call this a free lunch, carbon tax edition.

[Kestenbaum] And lowering income taxes stimulates the economy — enough, Reilly says, that you could offset the drag from higher energy costs.  [Reilly speaking] ‘This is almost magic, right, because in some of the work we’ve done the whole economy actually benefits by that tax swap[?]. You raise the carbon tax, that raises energy costs, but you actually improve economic performance by reducing other taxes. The economy is actually better off.’ … 

Yet Another Carbon Tax Proposal

Their proposal includes a carbon tax that gradually rises from $0.25 per gallon of gas in the first year to $1 per gallon in 2050.  To offset the negative effects on the economy, Profs. Jacoby and Reilly would do something economists all agree with: figure out a way to give the revenue back to the taxpayers, probably via a cut in income tax rates.  Here’s where the conversation goes next: 

For the moment, I’ll ignore the redistribution problems with this plan.  And I’ll even agree that cutting income taxes stimulates the economy.  But what about the tax increase?  If implemented as described, net tax revenue will be zero — and that is also exactly the size of the net tax cut.  And a net tax cut of zero has zero impact on the economy, no matter what size tax multiplier you apply.

A second issue the two ignore is redistribution.  In order to make this scheme welfare-neutral, it has to be true that spending patterns are not affected by the income tax cuts.  That means each household should receive tax benefits that equal the amount they are paying in carbon taxes.  Otherwise the distribution of income and spending will change.  The scheme will no longer be welfare neutral, meaning the economy will be harmed in economic welfare terms.

Finally there is the issue of timing.  Raising the tax to $1 per gallon by 2050 will be too little and way, way too late. If their goal is controlling CO2 emissions, they should propose something much more drastic and immediate.  Atmospheric CO2 is already over 400 ppm.  We were told that 350 ppm was a serious tipping point.  If you believe in anthropogenic global warming (AGW), then the Jacoby – Reilly proposal probably is causing you to laugh out loud (LOL).

Once again, there is no free lunch.  TANSTAAFL. (There ain’t no such thing as a free lunch.)

A Note on NPR’s Morning Edition

A “transcript” of the show is available at However, much of what I’ve quoted above is not included in their transcript.  I did the transcription from the audio version of the show.  Yet another bit of NPR dishonesty.  If you’re going to include a link that says “See full story” it should be the actual full story, not some editor’s idea of what was important.  You are welcome to download my version of the transcript (pdf file).


I have a B.S. from M.I.T. in chemical engineering.  In the past I have occasionally regretted not switching majors to economics.  But after seeing some of the things being said by M.I.T. economists (both Ph.D. graduates of the program and professors), I’m happy I stuck to engineering.  At least us folks can still add and subtract.

What Is A “Rigid Market?”

OilWhat is a “rigid market?”  I’ve been learning economics for four decades and I’ve never heard that term used in technical conversations.  So I went to the source: a story on Marketplace (American Public Media, aired in the greater Silicon Valley area October 2, 2012).  Here’s the relevant part of the story:

“When, in the course of human events, it becomes necessary to go on TV and proclaim freedom from foreign oil, energy pros get upset. “It’s like listening to fingernails against a chalkboard,” says industry veteran Mikkai Herberg. “Because you know better than this.”

So what about the physical supply of oil — the idea we need to drill our own, or get it from nearby friends? Location was what mattered in the energy crises of the 70s.

Herberg, now at the National Bureau for Asian Research, remembers. He could only pump gas then, based on his license plate number.

“We could fuel up on Friday coming over,” he says, “and we could fuel up on Sunday going back — but not on Saturday. Odd-even gas days, and gas lines of 30 or 40 cars, running out of gas while they were in line, pushing their vehicles to the pump.”

Back then, oil markets were rigid. It’s like your cable TV company: you’re locked into a seller long term. And if something goes out, you’re stuck.

Today, we can always buy oil from somewhere. If you pay a high enough price, whistle and it’ll come.”

“Oil markets were rigid?”  I don’t even know what that means.  The real problem in 1973 was the price controls on gasoline that kept the legal ceiling price below equilibrium.  Quantity demanded exceeded quantity supplied and some form of non-price rationing was required.  In this case, it was one of the most common forms, namely queues.  Period.  No economist worthy of the name doubts this.  How Marketplace can get things this wrong is, well, a wonderment.

There’s No Such Thing As a Free Lunch

No Free Lunch“There’s no such thing as a free lunch.”  Who invented this wonderful phrase? NPR’s “All Things Considered” just credited Barry Commoner with inventing the phrase ( accessed October 2, 2012).

Transcription is by me from the mp3 file download.

“The late environmentalist Barry Commoner came up with four laws of ecology:

  1. Everything is connected to everything else,
  2. Everything must go somewhere,
  3. Nature knows best, and
  4. There’s no such thing as a free lunch.”

I don’t much like Wikipedia, but even they got this one right (footnotes omitted, see’t_no_such_thing_as_a_free_lunch accessed October 2, 2012):

“”There ain’t no such thing as a free lunch” (alternatively, “There’s no such thing as a free lunch” or other variants) is a popular adage communicating the idea that it is impossible to get something for nothing. The acronyms “TNSTAFL,”” TANSTAAFL and TINSTAAFL are also used. Uses of the phrase dating back to the 1930s and 1940s have been found, but the phrase’s first appearance is unknown.[1] The “free lunch” in the saying refers to the nineteenth century practice in American bars of offering a “free lunch” as a way to entice drinking customers. The phrase and the acronym are central to Robert Heinlein‘s 1966 libertarian science fiction novel The Moon is a Harsh Mistress, which popularized it.[2][3] The free-market economist Milton Friedman also popularized the phrase[1] by using it as the title of a 1975 book, and it often appears in economics textbooks;[4] Campbell McConnell writes that the idea is “at the core of economics”.[5]

It happens that in my youth I read quite a bit of Mr. Heinlein’s writing.  I can well remember both the novel and the use of that phrase.  Personally, I’ve always preferred TANSTAAFL (There ain’t no such thing as a free lunch).  But, no matter how you phrase it, Mr. Commoner did not invent it.  I seriously doubt that he was the first to use the phrase in environmental discussions.

I won’t comment on “nature knows best” except to say that Mr. Commoner apparently never encountered a rattlesnake, ebola, or an active volcano.  He needed to get out more.

Social Security Fail

Social Security fail.  Below is the top part of the statement I received today.  Dollar amounts have been redacted, but I will say that the amount I would receive if I retired at age 6,508 is about the same as what I’d get at 66.

Social Security Fail

Social Security Fail

I sure hope that means August, 2012 (65 years, 8 months old).  Otherwise, this looks like the Social Security solution to us baby boomers! Social Security fail.

Costco Fail

The latest Costco fail.  I got an offer today to upgrade my account to “Executive” status.  Costco knows very well that my current account has two members.  See how long it takes you to spot the issue in this letter.

Costco Letter

Costco Letter