Bryan Caplan  

What's in Your Bag?

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Hooper's Law of Drug Developme... Milton Friedman on the intelle...
As a consumer, my experiences are exceedingly pleasant.  I don't just receive endless great products for reasonable prices.  I routinely receive gracious, flexible service with a smile.  Small snapshot: When I buy baked goods or produce at Wegmans, the cashiers don't even bother to look in the brown paper sack.  They simply ask me, "What's in your bag?" - and ring up whatever I declare.

How can profit-maximizing businesses treat me so well?  The easy answer is "competition" - if any one business offered worse terms, I'd take my business elsewhere.  That makes a lot of sense, but dodges the deeper question: Why is gracious, flexible service with a smile the market equilibrium in the first place?

The academically fashionable answer is probably just "trust."  If consumers are generally honest, stores don't need to verify what they say.  That answer, too, is sensible but superficial.  I live in a wealthy area, so consumers have far less motivation to lie to save a few dollars.  Perhaps more importantly, stores can - and almost certainly do - unofficially profile individual consumers to decide how to treat them.  I look like a middle-age, middle-class dad - and businesses treat me accordingly.

The obvious upshot is that my first-hand experiences are rather unrepresentative.  Business gives me the royal treatment, but that's because I frequent upscale areas and project a suitable image.  If you changed either of these conditions, I expect I'd see an uglier side of the market.  If you changed both, it might get downright ugly.  My beautiful Bubble is wonderful, but encompasses only a tiny corner of the business world.

The deeper lesson, though, is that consumers' experiences vary for totally forgivable reasons! Being nice in a rich area is cheap; being nice in a poor area is expensive.  The same goes for individuals: Being nice to mellow middle-age people is a lot cheaper than being nice to surly teens.  If you want to blame anyone for sub-excellent service, you should blame the consumers whose opportunistic behavior confirms negative stereotypes

The final lesson, of course, is that using regulation to mandate royal treatment for everyone would have dire side effects.  There'd be a cost spike throughout the economy; the less upscale the area and the consumers, the sharper the spike.  And as usual, trying to mask cost increases with price controls would provide cheap, high-quality products for some - and shortages for everyone else.  A world where business willingly provided excellent service to everyone would be a big improvement over the world of today.  But a world where business were legally required to provide excellent service to everyone would be much worse.




COMMENTS (8 to date)
Thaomas writes:

I was making these same points in a conversation about why credit card companies absorb the cost of fraudulent use and, in my experience, are so good at detecting and stopping it. [We live in similar bubbles.]

But the general point does not rule out that there might not exist somewhere in the marketing chain a regulation that could nudge things toward a still better outcome?

Jon Murphy writes:

@Thaomas

But the general point does not rule out that there might not exist somewhere in the marketing chain a regulation that could nudge things toward a still better outcome?

Anything is possible. But is it probable? Further, is it probable with a positive net benefit (taking into account all costs including lobbying, consensus-building, administrative/enforcement costs, etc)?

Hazel Meade writes:

If you want to blame anyone for sub-excellent service, you should blame the consumers whose opportunistic behavior confirms negative stereotypes.

The trouble with this is that the consumers who get treated worse aren't the same consumers as the consumers whose opportunistic behavior confirms negative stereotypes. They just happens to (for example) have the same skin color - a fact they can't control any more than they can control the behavior of other people with the same skin color.

Now, I'm not saying that government should mandate equal service. However, I do think (absent some other confirming information about the consumer's character) that people should make an effort to be nice, to treat others and individuals, and avoid prejudgement even if it is expensive. Just because it might be cheaper and easier to assume that all black customers are cheaters who are going to put something else in the bag, doesn't mean you ought to treat all black customers less nicely than white customers systematically. Lots of good things about being a decent human being have costs and require effort.


Dylan writes:

I think there is a lot of truth in this, but I'd like you to take it farther. If you weren't the type of person that could expect that level of service regularly, but instead normally got service more in line with what we associate with the cable company or post office...what would that do to your view of competition ensuring great service?

Roman Lombardi writes:

I find that in a general way, I receive the exact kind of service I deserve. I also believe that regardless of the economic standing of the community I'm in, being nice is still pretty cheap. Like, REALLY cheap and pays dividends. The currency of kindness in the current social climate can go a long way. I'd like to add that I am 6'1", completely covered in tattoos and I'm bald with a beard. My appearance at times can be intimidating, so I've learned to smile a lot and turn up the kindness. Time and again, being especially nice and cheerful will give them every reason to give you what you want and they almost always do.

Henri Hein writes:

In my experience, being treated well by businesses is not exclusive to upscale areas. To be sure, I have had bad experiences, but I have had bad experiences in the full spectrum of neighborhoods, and the chance of a bad experience does not go down just because the area is upscale. If anything, it is probably a little worse. You can sometimes get a condescending attitude in upscale places, like the shopping scene in Pretty Woman. I have only experienced that kind of treatment in Gucci like stores, never in the run-down corner shops next to Greyhound stations.

Seth writes:

@Hazel - A 35-year-old, well-dressed, politely mannered person with any skin color would be treated similar to Bryan most of the time.

It's conceivable that a 17-year-old male, in overly baggy clothes and aggressive or shifty body language of any skin color would not be.

Age, gender, dress and body language are the more common stereotyping factors, but few people recognize this.


@Roman - We all know by now that big, tatted guys are teddy bears.

Also, I agree, being nice is cheap. But, there's different levels of nice. A cashier can be nice, but not trust you to accurately report what's in the brown bag.

I think another factor Bryan should consider is that Wegman's doesn't care what's in the bag. They know it's a high-margin item within a similar price range that doesn't need POS inventory control. So, as long as they're in the ballpark on the price, they're good.

Hazel Meade writes:

@Seth,
It's nice that you can believe that. I'm not so sure. Do you have any data?

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