Felix Salmon

Wal-Mart does not save families $3,100 a year

Felix Salmon
Nov 10, 2009 15:38 UTC

Jim Ledbetter, it’s very easy to avoid getting into idiotic arguments with Dennis Kneale on CNBC: just stop going on CNBC. But at the same time, it’s worth pushing back much more on the ludicrous claim that Wal-Mart saves the average American family $3,100 a year:

Beginning in 2005, Wal-Mart commissioned the research firm Global Insight to produce a report measuring the impact of Wal-Mart on the overall American economy. Its methodology is, of course, open to debate, but the study tested 26 markets and measured the impact of a variety of economic factors on prices, going back to 1985. Not surprisingly, the study found that the widespread existence of Wal-Mart dating back to 1985 has resulted in about a 3 percent reduction of prices (3.6 percent in the most recent study, which is where the $3,100 figure comes from).

Ledbetter responds:

I don’t reject that finding. But it doesn’t mean that Wal-Mart is the only, or even the largest, economic force responsible for lower prices. As you would guess, the study also measured the impact on prices of many things that have little to do with Wal-Mart: energy costs, population growth, and unemployment. As I read the study, those factors combined are responsible for 89 percent of price variation. Wal-Mart and other factors are crumbs by comparison.

He should reject the finding. Because it’s only Ledbetter himself — and CNBC — who is saying that Wal-Mart is claiming to save the average American family $3,100 a year. If you look closely at the report, it never actually says that*. Instead, Global Insight talks about measuring the “cumulative price impact” of Wal-Mart since 1985. If the average American family has saved $3,100 over that time, that’s about $129 a year, not $3,100. Big difference.

Here’s the CNBC screengrab:


If Wal-Mart were honest, they would have phoned up CNBC and said that the bit about $3,100 a year was completely untrue, by a factor of 24 (the number of years since 1985, which is the base year from which the cumulative savings are being calculated). But of course they didn’t. Which is just another reason not to give them the Nobel peace prize.

*Update: It turns out that Wal-Mart itself is making the claim that it saves the average family $3,100 a year. Astonishing. How can they possibly justify saying this, when their own report says that the figure is cumulative, not annual?

Update 2: OK, this is getting a bit confusing. Various readers are saying that the savings are being claimed to be $3,100 per year, and that they’re growing by about $120 a year. Can you really subtract this year’s consumer expenditures from 1985′s consumer expenditures and call it an annual savings, even though the year you’re subtracting from was 24 years ago? That seems to be the claim.

Update 3: I think this is worth clarifying a bit further. Wal-Mart seems to be saying that the average family spends about $86,100 per year (which itself seems dubious to me) and that were it not for the cumulative effect of Wal-Mart’s low prices over the past 24 years, those expenditures would in fact be $3,100 higher, at $89,200. Or something along those lines. But does that mean an annual savings of $3,100 a year? Not really. According to the report, Wal-Mart reduces consumer price inflation by about 0.15% annually. So if the average family spends $86,100 this year, then next year its expenditure will be about $129 lower thanks to Wal-Mart. That’s what I consider to be an annual savings. Not $3,100.


A better question is, what’s the impact of Walmart on incomes? I would not be least surprised to find out that Walmart’s existence had an effect of a 3.6% cumulative decline in CPI that was evenly matched by a 3.6% cumulative decline in household incomes, every dollar “saved” by a shopper is a dollar not earned by a retailer or a producer. Walmart depressed prices, but it also squeezed out mom-and-pop stores and American manufacturers.

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Felix Salmon
Nov 9, 2009 22:25 UTC

Sky News is using YouTube to host their entire “News Corp will block Google” interview with Murdoch — YouTube

Rick Bookstaber has taken a job at the SEC! This must be good news. Until he gets frustrated and quits. — Bookstaber

Charlie Brooker writes the greatest ever Mac vs Windows column — SMH

90% of people who make economic policy fall into demographic groups where unemployment is comfortably below 5% — Economist

When it comes to supporting same-sex equality, 30somethings look more like 50somethings than 20somethings — Yglesias

Ezra Klein on Nancy Pelosi’s prescience — WaPo

Tim O’Brien worried about Andrew Ross Sorkin hurting the NYT’s “credibility” even as he was publishing Ben Stein — NYM

“Animal Art Fair” to debut in London with “a focus on new talent” — Event

Secret copyright treaty leaks. It’s bad — BoingBoing

The 101st thing a waiter should never do: Try to make off with a half-full bottle of great wine — PEHub

Is Rupert trying to get Bing to pay him for exclusive access to his websites? — BoingBoing

Hershey owns rights to the Cadbury name in the US. Could that hobble Kraft’s expansion plans? — Guardian

Have I mentioned lately how much I love Betsy Kolbert? — TNY

Fun with Google Suggest — Slate

“Borrowers who exhibited lower comprehension and less suspicion were more likely to have adjustable-rate mortgages” — SSRN

How an economic crisis is like a stalling aircraft (and employment is like altitude) — Fallows

Thermodynamics shows US chief executives are paid nearly 130 times too much — Justatheory

The Great Australian Internet Race. Carrier pigeon vs automobile vs ADSL. Who will win? — YouTube

Wherein Barry Ritholtz calls Rolfe Winkler “a thinking man’s Felix Salmon” — Ritholtz


70,405 views so far on the SKY / Murdoch thing (on YouTube) & yet not ONE single comment.
I tried to comment.
It said “Comment Pending Approval”.
Presumably not a single comment has yet been found approval-worthy.
Can’t imagine why.

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Political risk in microlending

Felix Salmon
Nov 9, 2009 21:39 UTC

Elyssa Pachico has an excellent round up of the No Pago movement in Nicaragua, which is threatening the future of microfinance in that country. While most of the reporting on the issue has been pretty one-sidedly in favor of the microlenders, mass protests don’t rise out of nothing, and in this case the initiating outrage seems to have been the arrest of six people with overdue debts in Jalapa by a lender called Pro Credit.

The fact is that there are good and bad microlenders, and that it’s a statistical certainty, given the number of such lenders in Nicaragua, that a pretty large number of them are bad. (Borrowing cheaply in dollars, lending at high rates in local currency, and acting only with an eye on their own bottom line — standard predatory lending, basically.)

Nicaraguan president Daniel Ortega has failed to condemn the protests, which are surrounded by all manner of rumors. You just knew that Hugo Chávez would be involved somehow:

Complicating matters is the widespread suspicion among No Pago opponents that the real intention behind the movement is to drive MFIs out of business, forcing poor farmers to seek credit through Alba-Caruna, a credit union created by Ortega’s government that is partly responsible for handling aid money from Venezuela. In one strange twist of events, a letter supposedly signed by Omar Vilchez was unearthed last January, in which he promised unwavering support for Ortega’s political initiatives in exchange for dismantling the microfinance industry.

“It is necessary to combat the financial system privatized in 1990, to stop depending on MFIs and banks, so that all can work with the people’s bank, with Alba Caruna, which gives us fair interests rather than usurious ones,” the letter states.
Vilchez has vehemently denied that he ever wrote such a letter, even offering to have his handwriting examined by the police so as to prove that his signature was forged. The leaders of the No Pago movement have repeatedly rejected the accusation that they are working in cahoots with Ortega’s government, asserting that they are independently funded and politically autonomous.

My feeling is that microfinance works best when it’s domestic, autonomous, and where the microlenders are cooperatives owned by their own clients. In general I get suspicious when the lenders and the borrowers come from very different populations, and even more suspicious when they come from different countries. If westerners want to support microfinance, they should do so with grant equity, not through loans: the debt in the organization should be local.

I’m beginning to sniff the beginnings of a backlash against microlending: the NYT, for instance, today covers a pretty minor development at Kiva, which has recently changed its documentation to make it more obvious that its US lenders are supporting microlenders rather than lending directly to borrowers. (But they take the full credit risk of an individual borrower, which is one reason I’m not a huge fan of the Kiva model, except as a way of giving ordinary Americans a real connection to policies and people in far-flung countries.)

Microlending can do good, but it can also do harm. And when tens of thousands of borrowers start threatening their local microlenders, that’s prima facie evidence that something has gone horribly wrong. And that the microlending movement, in the country in question, might have gotten rather ahead of itself.


My biggest problem with the MFI has always been the idea of leaning on entire groups of people rather than just one lender. Yunus covered the reasons for this in his book “Banker To The Poor” but I still always found that the most distasteful part of the programs. Otherwise, I agree that organic and locally-owned MFIs are the way to go if just so that people know that they money is not coming from some “faceless corporation” but their own community.

Cash for clunkers datapoint of the day

Felix Salmon
Nov 9, 2009 20:12 UTC

Good on the AP for FOIAing the details of how cash-for-clunkers played out:

The single most common swap — which occurred more than 8,200 times — involved Ford F-150 pickup owners who took advantage of a government rebate to trade their old trucks for new Ford F-150s. The fuel economy for the new trucks ranged from 15 mpg to 17 mpg based on engine size and other factors, an improvement of just 1 mpg to 3 mpg over the clunkers.

It gets worse:

In at least 145 cases the government reported consumers traded old vehicles that got better than or the same mileage as the new vehicle they purchased. A driver in Negaunee, Mich., traded a 1987 Suburban that got 18 mpg for $3,500 toward a new Silverado pickup that got only 15 mpg. An Indianapolis driver traded a 1985 Mercedes 190 that got 27 mpg for $3,500 toward a new Volkswagen Rabbit that got only 24 mpg.

In at least 15 deals in nine states, owners of large pickups cashed in old trucks for between $3,500 and $4,500 toward new Hummer H3 SUVs that got only 16 mpg.

I think this is safely the worst policy implemented to date by the Obama administration: it has almost nothing in the way of redeeming features. Let’s hope it was some kind of weird aberration.

(HT Hiskes, via)


HORRIBLE SUMMARY of the program. The impression conveyed is NOT accurate. YES, the most common specific model to specific model swap was F-150 for F-150, and yes, other truck for truck specific model deals were high on the list, HOWEVER, the appropriate conclusion to draw here is that the Category 2 truck market is concentrated in a few models, while the passenger car market is not. Specific to Ford — Fewer than 28% of the number of category 2 or 3 Ford trucks traded in (the F-150 is among these) were replaced overall by a a category 2 or 3 Ford truck. This was a common trade-in (9.1% of all trade-ins), but they typically went with a lighter vehicle. The percentage of category 2 or 3 trucks declined from 19% to 7%. Note that 85% of trade-ins were category 1,2 or 3 trucks (only 15% passenger vehicles), but that 59% of new vehicles were passenger cars. Most trade-ins were category 1 trucks (lighter than an F-150), and most of these people bought passenger cars.

The idiocy of double secret probation

Felix Salmon
Nov 9, 2009 17:56 UTC

Bill Black makes mincemeat of the idea that the government can and should keep a top-secret list of systemically-dangerous institutions which are subject to “heightened prudential standards”:

I’ll put aside for a later time discussing the obscenity of proposing that the American people be kept from learning which banks are SDIs and can secretly tap the U.S. Treasury and the Fed for unlimited funds. I’ll also mention only in passing the hilarity of Congress proposing that we can successfully create a super secret society of those, including some members of Congress, who will know which banks are on the list – and will never leak.

Here, I want to emphasize the investor. The drafters have forgotten that the SEC mandates the disclosure of material information to investors. The fact that a bank is on the secret list is extraordinarily important to investors. So, the bill as drafted would create a system in which the banking regulators and Congress must keep the DOUBLE SECRET PROBATION list secret – but the banks must publicly disclose that they are on the list. Of course, it’s possible that the Treasury and the Fed – you remember, the folks that tell us constantly about their commitment to “transparency” – are actually so insane that they will propose amending the securities disclosure laws and destroy the entire concept of mandating that publicly traded companies disclose material information to investors.

Obviously, there would be a stigma involved were a bank to go onto this list. But equally obviously, the whole point of having this list in the first place is that such banks are too big to fail. Which means that the banks’ investors can have some little faith that they managed to make a moral-hazard play instead of simply investing in a bank going down the tubes.

In any case, as Black says, it’s hardly the job of regulators to keep from investors the fact that their bank is looking shaky. Either banks are small enough to fail, in which case there are no systemic problems if lots of investors try to exit at once. Or else they’re too big to fail, in which case it’s the job of regulators to reassure the markets that a backstop exists — rather than to try to keep those markets in the dark. The plan as it stands is just idiotic.


There is already precedent for secrecy in that we mushrooms don’t get to know bank CAMELS ratings.

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Chart of the day, unemployment edition

Felix Salmon
Nov 9, 2009 16:45 UTC

Another great chart from the people at nytimes.com: this one shows how unemployment has risen among various different segments of the population, since January 2007. Here’s what’s happened to the 12-month average employment rate for black men without a high-school degree under 25 years old:


Meanwhile, here’s the chart for white women ages 25 to 44 with a college degree:



Mike says the chart shows “confirmation of the differences in productivity across groups”. Doesn’t that just demonstrate the institutionalized lack of equality of opportunity that even “cold-hearted” Republicans have been historically (past tense emphasized) supportive?

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Felix Salmon
Nov 9, 2009 15:50 UTC

In September, Tyler Cowen picked Berlin as his “preferred exile”:

There would be plenty of art and music, lots of smart people to talk to, access to other good locales, and the near-certainty of public order, yet with bearable winters and good health care.

Today, on the 20th anniversary of the fall of the Berlin Wall, he’s not so enthusiastic:

I like spending time in Berlin. But I am never sure I like Berlin itself, West or East. Berlin is Germany being imperial. Berlin is Germany looking toward the east. Today Berlin is Germany pretending it is normal, while not yet having a new identity.

Maybe the change in tone is a function of all the news coverage about Berlin right now, all of it concentrating on the city’s historical importance. But the fact is that for all Berlin is now the capital of the most important country in Europe, it’s still, as its unofficial slogan puts it, arm, aber sexy. (Poor, but sexy.)

I spent four months in Berlin in 2008, and never once did I think of it as “being imperial”. Being grungy is more like it. The most imperial thing in Berlin is the Reichstag, which, after it was wrapped by Christo, was topped by Norman Foster with a transparent dome and opened to the public in as non-threatening and enjoyable a manner as he possibly could. Can Berliners be rude? Yes. But not in an imperial way, more in a sullen way.

Berlin has celebrated mainly itself since the wall went up, and even more so since the wall came down. It was always exceptional in many ways, being divided into quarters given to each of the Allied powers, and being a domicile of choice for young West Germans looking to avoid military service. With the exception of a flurry of construction activity in the early 90s, money has never had much interest in Berlin: it’s much more famous for the Love Parade.

Neither Berliners nor the rest of Germany consider the capital to be particularly German. Instead, it’s a historical anomaly, most of which was literally walled off from the rest of the world for 30 years, and all of which remains a very long way from any other major city. When you’re in Berlin, with its dearth of high-speed rail lines, you don’t feel particularly connected to the rest of Europe: instead, you feel the freedom associated with being distant from the concerns of others. I love the city, and I send it all my love on this special day. Long may it retain its singular character.


For the record: The love parade has been exiled to the Ruhr area for the foreseeable future. I was there in 2002 and fondly remember wading down Tiergarten with garbage almost up to my knees. Good times.

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Putting source documents online

Felix Salmon
Nov 9, 2009 15:26 UTC

Gabriel Sherman has a long profile of Andrew Ross Sorkin, which spends a lot of time talking about Sorkin’s problematic status within the NYT in general and the Sunday Business section in particular. But all big companies have internal politics. What’s interesting is what the story says about the NYT’s devotion, or otherwise, to serving its readers by giving them the information they want.

For instance, here’s Sorkin launching DealBook:

It was a radical idea for the Times. The paper had never aggregated outside news under its flag before, and Sorkin had to convince his skeptical bosses that the paper could point its readers to competitors.

And here’s Sorkin asking a NYT colleague, Tim O’Brien, for information a pair of fellow reporters had FOIA’ed:

“I also told him that my reporters on the piece, Don and Gretchen, would probably be uncomfortable simply handing over documents to him that they had spent a lot of time and energy to find, analyze, and report on,” O’Brien told me by e-mail.

As John Cook notes, this is silly at best:

The grand irony of this flap is that much of it would have been rendered moot had the Times simply done what Sorkin did so effortlessly: Put the documents at issue online… That’s another Timesworld disconnect between the youthful web-focused culture and the old-school diggers—after Van Natta and Morgenson spent months working to get access to the documents, they apparently didn’t think to push their editors to share the originals with their readers.

I’m constantly amazed at the number of stories in the NYT which are based on primary sources the paper refuses to put online. In a tiny handful of cases, revealing the document might endanger a source or otherwise be inadvisable. But there’s no good reason not to publish documents received as the result of an FOIA request.

The NYT tends not to publish documents it uncovers as part of its investigations; one NYT reporter told me once that editors, when asked about the policy, mumbled something about copyright. It’s an untenably old-school approach, and serves mainly to promote turf wars and jealousies. The NYT has the best newspaper website in the world; its reporters should be encouraged to make full use of it.


I’m absolutely with you on this. It’s particularly bad with court documents, which are publicly available (in the US) but hard for the general public to obtain. It’s very hard to summarise a complicated case in the amount of space an NYT reporter gets to do so – I should know, having reported on many. Why doesn’t the NYT include a link to the PDFed court filings when they write about a civil case?

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Ken Lewis and the regulators

Felix Salmon
Nov 9, 2009 14:40 UTC

The WSJ has an interesting Ken Lewis profile today:

If there was a bank executive who seemed to have the mettle to withstand today’s regulatory and market pressures, it was Ken Lewis. The Mississippi native clawed to the top of Bank of America. After succeeding his mentor, Hugh McColl Jr., as chairman and CEO in 2001, Mr. Lewis kept up a blistering pace of acquisitions and tight control of operations at the bank, which expanded to $2.3 trillion in assets from some $620 billion.

But I think this misses a crucial point. Ken Lewis was always a momentum play, as most acquisitive CEOs are. So long as things are going well, they’re going great. But the minute their stock starts dropping and they lose that sense of inevitable global domination, things can fall apart very quickly indeed.

This is partly a function of scales dropping from the board’s eyes, as Carrick Mollenkamp and Dan Fitzpatrick explain. But it’s also a question of character: some CEOs are emboldened when their companies go through a rocky patch, while others are weakened — and Lewis is clearly one of the latter. (John Mack, who famously told Tim Geithner to “get fucked” at the height of the crisis, would be one of the former.)

In other words, Lewis never had the mettle to withstand regulatory pressure, should it ever arise. Other acquisitive CEOs like Sandy Weill are the same way. They’re like central banks intervening in currency markets: they can push regulators to move further in the direction they’re already moving, but they can’t push back once regulators become aggressive. That’s why Weill stepped down, and that’s why Lewis stepped down too.