David R. Henderson  

The Joys of Yiddish and Economics

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518PQyCjX5L._AC_UL160_.jpgGeorge Mason University economist Dan Klein has a fun paper, about to be published in the Independent Review, titled "The Joys of Yiddish and Economics."

Dan writes:

In The Joys of Yiddish, Rosten's method is to introduce each Yiddish term, define it, and provide a story to illustrate it. Many of the stories occur in a setting of work and trade, and many illustrate economic ideas. Besides illustrating ideas of textbook economics, they often illustrate the rich vitality of economic life beyond the textbook.

I had known, from reading Two Lucky People, that Leo Rosten was a friend of Milton and Rose Friedman. I hadn't known that in the 1930s, he had attended a class taught by Friedrich Hayek at the London School of Economics.

The whole thing, which is short, is worth reading. My favorite is this one, my own version of which I've used countless times when discussing price controls but hadn't known it was from Rosten:

bialy
Pronounced bee-OLL-lee, to rhyme with "fee dolly."
A flat breakfast roll, shaped like a round wading pool, sometimes sprinkled with onion.
"Forty cents a dozen for bialies?" protested Mrs. Becker. "The baker across the street is asking only twenty!"
"So buy them across the street."
"Today, he happens to be sold out."
"When I'm out of bialies, I charge only twenty cents a dozen, too."

Here's my version (and the point I made with it), from my Mercatus study titled The U.S. Postwar Miracle:
Prices, which had been repressed by these controls, shot up. Between mid-June and mid- July, food prices rose by 12.9 percent and meat prices rose by 29.6 percent. Of course, these do not represent real price increases because price controls on meat and other foods had caused shortages. Indeed, a butcher joke makes the point that it's small comfort to have "cheap" meat (or indeed any other good) when the very fact that it's cheap is what makes it unavailable:

Customer: What do you charge for filet mignon?
Butcher: $8.99 a pound.
Customer (outraged): $8.99 a pound? Why, I can get filet mignon from the butcher across the street for $7.00 a pound.
Butcher: Then why don't you buy it across the street?
Customer: Because he doesn't have any filet mignon left.
Butcher: Well, when I don't have any filet mignon left, I sell it at $6.00 a pound.


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CATEGORIES: Price Controls




COMMENTS (5 to date)
Tom West writes:

I quite like the story.

However, when involving human beings, it's often not reality that's important, but our interpretation of reality.

I've seen people who are a lot happier about something that will never actually be available than the rather prosaic reality of something they can actually buy.

As this story illustrates, if customer satisfaction is the ultimate goal, the customer is often happier to not have something at a cheap price than to have it at a higher price that they'd have been willing to pay.

Of course, that's only for some cases, and you can't build a science on it. But it is part of the "real reality" for anything involving human beings.

David R. Henderson writes:

@Tom West,
As this story illustrates, if customer satisfaction is the ultimate goal, the customer is often happier to not have something at a cheap price than to have it at a higher price that [I think you mean “than”] they'd have been willing to pay.
This story doesn’t illustrate that at all.

Yaakov Schatz writes:

I once noticed at a book fair that when the sellers were asked for the price they would quickly state "the price is X instead of the regular price of Y". Since I really did not care what the "regular price" was, I since then would tell sellers that I would agree to by the book if it were sold for "X instead of Z", where Z is a price substantially higher than Y.

But, as stated in the remarks by others, psychology does play its role and that is why the book sellers do make a point to state Y.

Ken Balakrishnan writes:

Like the old joke about the kid (Scottish in the original telling) who comes home and says "Papa, I saved 50 cents today by running home behind the bus instead of riding it!", and Papa slaps him and says "Spendthrift! Why didn't you run behind a taxi and save three dollars?!"

T.L. Brink writes:

Yiddish humor, like rabbinic wisdom, is based upon reframing to indicate that original intentions will not be achieved if foolishly pursued.

This example about food price controls could also be applied to rent controls, minimum wage laws, or any contrived scarcity frustrating the free market.

OK, let's reframe that point from economic science. Is a cheap price, a high wage, or even the consumption of a material good or pleasurable service the ultimate point of life? Do you want the cheapest brain surgery? Do you want your child's high school AP teacher to be the one who offered the school board the lowest wage contract?

Maybe the two bakers' bialies are not of equal quality. I write this from my home in Acapulco, where I walk an extra block (and pay an extra peso) to buy my tortillas from the Sanchez tortilleria instead of the closer and cheaper Rodriguez tortilleria. Maybe Sanchez is friendlier about by small (quarter kilo) order. Maybe his tortillas taste better. It's not just about the price (or even the convenience). That is the real wisdom of Yiddish humor (to be found in other ethnic proverbs and folktales as well).


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