Steal this Article!

Wednesday, 27 Feb 2013 07:42 AM

By Gary Jakacky

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Headlines and Op-Ed pieces dealing with economics, finance and investments tend to be macroeconomics oriented. In a way, this makes sense. News about the budget deficit, income tax changes, the unemployment rate or gross domestic product growth dominate the front pages. These macroeconomic variables set the national stage, and even more, set the national mood. Just ask Mitt Romney.

We forget, however, that the macro economy consists of millions of consumers, businesses and investors making individual decisions and responding to incentives. Such activity is the privy of microeconomics, the oft-neglected child in our profession.

This thought came to me when I watched a buddy of mine try to open a collection of small flashlights and batteries (always included here in Canada. What a country!) . Perhaps you know the drill. The several parts and accessories were shrink-wrapped into a solid cardboard base. But this plastic is the plastic from Hades. A 16th of an inch thick and tougher than rawhide. We had to take a pair of shears and cut the plastic from one end to the other. No way you can tear this stuff. To do so would require the grip of Hercules. If your hands slip the plastic edge would slice you open better than a surgeon. The end result is that a few small items end up in a package six inches wide and nearly a foot in length.

What needless waste of trees to make the cardboard and of oil to make the plastic.

Oops! I sound like an environmentalist. I am not and never will be. (A conservationist, yes. Big difference.) But I AM amused that liberals and environmentalists are among the first to decry the packaging waste in our manufacturing and shipment industries.

Do you know what the losses are to retailers from shoplifting and pilferage? About 1.7 percent of sales on average, sometimes more.

This doesn't sound like much until you realize that profit margins at many clothing and food retailers (the biggest victims of "five-finger discounting") are often in the single digits as well. Thus, maybe one-third of your profit disappears into the hands of shoplifters.

So the use of bulk packaging, which makes items harder to conceal for shoplifters and can contain markers to alert storeowners when an item is being pilfered, has a very sound microeconomic basis. Horrors! In fact, if we treated shoplifting as a more serious crime — something akin to zero tolerance, which has worked so well reducing petty crime in America's cities — everyone would benefit. Stores would have increased profits, honest buyers would have lower costs and less waste would clog our landfills or need to be recycled. Less crime, less pollution. A no brainer.

When will it occur to liberals and environmentalists that their policies distort microeconomic incentives, often leading to the very sort of behavior they disapprove of? Shoplifting is certainly the small tip of a very large iceberg, but it is a visible part.

Want to reduce waste and reduce crime, to boot? Give a copy of this article to an environmentalist. On recycled paper, of course.

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