Thursday, September 03, 2015

True Progressivism

A rational activity
We entered the diner after the lunch crowd left. One waitress was restocking condiments. She carefully wiped the outside of each bottle of Tabasco and refilled them from a plastic squeeze container.

Curious about why a rational restaurant owner would view this activity as profitable, I looked up Tabasco's costs:

A 5-oz bottle of Tabasco retails for $3.99. The gallon-size (128-oz) container sells for $55.74, including shipping.

Too much for most individuals, but not a business.
Let's say the waitress makes the California minimum wage of $9 per hour and round that up to $13 for taxes, insurance, and benefits (the $4 difference is the tax wedge).

The restaurant owner could buy 25 5-oz bottles @ $3.99, for a total of $99.75, or she could pay the waitress for one hour's work refilling bottles at $13 + $55.74 = $68.74. The $31.01 difference is the restauranteur's profit. (Yes, sales taxes and wholesale prices have been ignored, but fine-tuning the costs won't change the result in any significant way.)

In a capitalist economy millions of such decisions are made every day by people looking out for their own interests. Not all the decisions are good ones, but progress for society as a whole is ineluctable.

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