Friday, March 10, 2017

Random reflections on readings

This is an honest title for a post, that could have been the title of many.

A couple of weeks ago The Economist had a story about unexpected effects of the adoption of renewable energy on the fundamental economics of providing electricity.  Basically, the argument is that renewables bring down the cost of electricity and make it harder for utilities to make the investments they need to maintain the infrastructure needed to make sure everybody has electricity whenever they need it. Because when the sun ain't shinin and the wind ain't blowin, it's gotta come from somewhere. Increased storage capacity (see Tesla's superbatteries) and usage optimization can help, but only to a point. In sum, it turns out that somebody's got to plunk down a lot of money to make this transition. And realistically, that can only come from the public sector.

Which means somebody is going to have to make some complex sales to make that happen. Again, it will be a question of leaders creating a shared vision and making society feel like its interest will be aligned with it. It is so complex it's hard to see it happening. Most likely, a non-trivial number of poor people will need to die from our failure to do this before people will be able to get it.

Today in the Wall Street Journal there's a story on restaurants adding labor surcharges to checks to account for rises in wages rather than raising the prices on entrees, appetizers, etc. There is perceived price inelasticity for food. Some restaurateurs are even calling the surcharge things like "California Mandate" as a political statement to let people know why the cost is rising. I get that, sounds like a first amendment thing to me.  I can even envision other restaurant-owners putting in surcharges like "Charge for driving out illegal immigrants" on their bills.

It will be interesting to see how this plays out.  For one, from a process and accounting perspective, rather than folding all the costs into the cost of food, adding a line item adds complexity, it could even stretch the capacities of many Point of Sale systems at restaurants.  Secondly, and more importantly, it poses the question of how much sausage-making and transparency people really want. With financial advisors, there is a great hue and cry at all times about all the various fees and how outrageous it is, but people are not as interested in seeing line-itemization of costs for other things. Imagine if, for every cheeseburger and fries plate, if providers broke out all the different labor and materials charges that went into it. It would be insane. Nobody but nobody wants that. I predict that the labor surcharge in dining establishments will be short-lived.

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