But the fact remains that Wal-mart’s business model relies on the fact that it can consume the highway system as a good, and do so in vast disproportion to the actual price paid for that good.
As I showed before, this is far from certain. Actually being able to buy road usage on a private market, launched from the current infrastructure, would also bestow enormous benefits on WM in terms of being able to better plan. And while some of their costs are borne by others, a lot of their taxes going to roads are also wasted. They gain in shifting cost to others, but lose in having the money that would have gone to road fees, go to useless pork road projects instead.
Which effect is greater? I don’t know, which is why I don’t assume one of them is.
And it’s not that I deny the literal truth of the subsidy; I’m just saying it’s a vacuous claim in this context. People bring up subsidies to show one side having an unfair advantage over another, while that doesn’t follow here—WM had to enter the market on equal terms to everyone else, and prices for goods had already adjusted to reflect the impact of the IHS—they just made a better use of it. Had there been no IHS, the fouders of WM would have used their brains to work with whatever was there instead.
So I don’t see how this is an indictment of WM—the harm lies in the shift of the structure of production to a less efficient one, not in a transfer of wealth to the Waltons.
And while some of their costs are borne by others, a lot of their taxes going to roads are also wasted.
This doesn’t make sense, because dollars are fungible. If WM reaps a greater monetary value from the highway system than it spends on the highway system via taxes, WM comes out ahead.
So I don’t see how this is an indictment of WM—the harm lies in the shift of the structure of production to a less efficient one, not in a transfer of wealth to the Waltons.
Then we’re in violent agreement. I didn’t intend the highway bit to be an indictment of WM, but a rebuttal of taw’s comment:
“And yet, in spite of the genuine diseconomies of scale which you mention, economies of scale for Wall-Mart seem ever larger, as it successfully competes in open market”
I was attempting to convey the idea that that Wal-mart’s current (but quite likely ephemeral) success is due to political accidents moreso than “economies of scale”. The only “economy of scale” operating at Wal-mart is logistics and trucking, which doesn’t scale very much: the planning scales somewhat, the trucking has already scaled as far as it can, and the trucking is on more precarious footing than it looks.
Labor doesn’t scale: making a Wal-mart store twice as big requires twice as many workers to keep the shelves full.
Sales don’t scale: selling twice as many goods provides economies of scale to the manufacturers, not to Wal-mart itself. If manufacturing economies of scale were at play, all retail prices would fall to equal those of Wal-mart: with their new infrastructure paid for, the manufacturers can turn around and sell their cheaper products to Wal-mart’s competitors just as easily as they can sell to Wal-mart.
The oligopsony price bullying (i.e. the Vlasic example) is not a proper “economy of scale” in this sense. If Wal-mart had a competitor of equal size, but Wal-mart’s size remained unchanged, Wal-mart’s economies of scale would be unchanged but its power to bully costs down would weaken. An economy of scale depends on size, not on market power.
This doesn’t make sense, because dollars are fungible. If WM reaps a greater monetary value from the highway system than it spends on the highway system via taxes, WM comes out ahead.
No, because they could be getting even more value by spending the same money that they now spend on taxes, but have that money spent specifically for their benefit, rather than have it be thrown at whatever’s politically popular. Yes, they get below cost road usage today, but road costs (due to government management) are also higher.
So it could be that they pay $0.70 to get government to spend $1.00 for 1 unit of road usage, but without government involved in roads, they could buy that same unit of road usage for $0.60. It could go either way.
(Glad to hear we’re in agreement on the sense in which the IHS as such is a subsidy.)
I was attempting to convey the idea that that Wal-mart’s current (but quite likely ephemeral) success is due to political accidents moreso than “economies of scale”. The only “economy of scale” operating at Wal-mart is logistics and trucking, which doesn’t scale very much: the planning scales somewhat, the trucking has already scaled as far as it can, and the trucking is on more precarious footing than it looks.
But the alternative(s?) to trucking are even more scale-dependent. What if they shipped goods by rail? That’s more dependent on finding huge loads to ship at once. Air? Same thing.
As I showed before, this is far from certain. Actually being able to buy road usage on a private market, launched from the current infrastructure, would also bestow enormous benefits on WM in terms of being able to better plan. And while some of their costs are borne by others, a lot of their taxes going to roads are also wasted. They gain in shifting cost to others, but lose in having the money that would have gone to road fees, go to useless pork road projects instead.
Which effect is greater? I don’t know, which is why I don’t assume one of them is.
And it’s not that I deny the literal truth of the subsidy; I’m just saying it’s a vacuous claim in this context. People bring up subsidies to show one side having an unfair advantage over another, while that doesn’t follow here—WM had to enter the market on equal terms to everyone else, and prices for goods had already adjusted to reflect the impact of the IHS—they just made a better use of it. Had there been no IHS, the fouders of WM would have used their brains to work with whatever was there instead.
So I don’t see how this is an indictment of WM—the harm lies in the shift of the structure of production to a less efficient one, not in a transfer of wealth to the Waltons.
This doesn’t make sense, because dollars are fungible. If WM reaps a greater monetary value from the highway system than it spends on the highway system via taxes, WM comes out ahead.
Then we’re in violent agreement. I didn’t intend the highway bit to be an indictment of WM, but a rebuttal of taw’s comment:
“And yet, in spite of the genuine diseconomies of scale which you mention, economies of scale for Wall-Mart seem ever larger, as it successfully competes in open market”
I was attempting to convey the idea that that Wal-mart’s current (but quite likely ephemeral) success is due to political accidents moreso than “economies of scale”. The only “economy of scale” operating at Wal-mart is logistics and trucking, which doesn’t scale very much: the planning scales somewhat, the trucking has already scaled as far as it can, and the trucking is on more precarious footing than it looks.
Labor doesn’t scale: making a Wal-mart store twice as big requires twice as many workers to keep the shelves full.
Sales don’t scale: selling twice as many goods provides economies of scale to the manufacturers, not to Wal-mart itself. If manufacturing economies of scale were at play, all retail prices would fall to equal those of Wal-mart: with their new infrastructure paid for, the manufacturers can turn around and sell their cheaper products to Wal-mart’s competitors just as easily as they can sell to Wal-mart.
The oligopsony price bullying (i.e. the Vlasic example) is not a proper “economy of scale” in this sense. If Wal-mart had a competitor of equal size, but Wal-mart’s size remained unchanged, Wal-mart’s economies of scale would be unchanged but its power to bully costs down would weaken. An economy of scale depends on size, not on market power.
No, because they could be getting even more value by spending the same money that they now spend on taxes, but have that money spent specifically for their benefit, rather than have it be thrown at whatever’s politically popular. Yes, they get below cost road usage today, but road costs (due to government management) are also higher.
So it could be that they pay $0.70 to get government to spend $1.00 for 1 unit of road usage, but without government involved in roads, they could buy that same unit of road usage for $0.60. It could go either way.
(Glad to hear we’re in agreement on the sense in which the IHS as such is a subsidy.)
But the alternative(s?) to trucking are even more scale-dependent. What if they shipped goods by rail? That’s more dependent on finding huge loads to ship at once. Air? Same thing.