Sunday, December 12, 2010

We're Addicted To Junk

Might as well face it, you're addicted to junk
Might as well face it, you're addicted to junk
Might as well face it, you're addicted to junk
Might as well face it, you're addicted to junk

Rail Freight Shows a Trend

We can learn some interesting things about the current state of the economy by analyzing the rail freight data published by the American Association of Railroads. If you look at the Carload data that includes minerals, lumber, chemicals, etc. (stuff you use to build things), it shows an economy that is better than 2009, but still considerably weaker than 2008. And there is an even wider gap between 2010 carload freight and the peak years of 2006 and 2007. This data is very consistent with the trends in the general economy.

But if you look at the Intermodal freight numbers you get a very different picture. Intermodal freight is shipped in containers that can be efficiently transported long distances by rail and then easily transferred to trailer chassis and hauled by truck to its final destination. Much of this type of freight is imported consumer goods from China and other countries that arrive by ship to the west coast ports. Intermodal freight surprisingly is back to the same level it was in 2008. If you look at this data, you would conclude that the economy had made nearly a full recovery and unemployment had already fallen to reasonable levels.

Of course intermodal freight growth is fuel by increases in consumer spending. And this increase in spending does help the economy grow --- in China. And it does create many jobs --- for Chinese workers.

Yes, we are doing it again. One of the things that got us into this mess is a vociferous appetite for cheap, imported, consumer goods. The result of this behavior (and trade policies) first resulted in the exporting of production line jobs and now we are also exporting many professional, manufacturing, support jobs.

Happy Campers?

So why are we returning so quickly to the damaging behavior of the past? Didn’t we learn our lesson? What is causing this relapse? Could we be addicted to this junk?

I was pondering this last question a few weeks ago when the annual news stories hit about the people camping out at retail stores three days before “Black Friday” in order to be at the front of the line for the hot sales items. What is your opinion of these people? Do you find them amusing? Do you say to yourself, “I wouldn’t do that, but I understand their desire to save money at Christmastime”?

I believe there has to me more going on here. Economists use the concept of opportunity cost to assign a value to what you give up by taking an alternative action. The opportunity costs of spending three days camping in front of Best Buy are huge. You are basically sacrificing three days of your life that you could be enjoying doing other things. Even if you spent Tuesday and Wednesday working, you may be able to earn more money than you end up saving (which in the spirit of Thanksgiving would please the Puritans). Spending Thanksgiving in a tent instead of sharing a great meal with your family would also be a great opportunity cost for most people.

No, something more is at work here. Researchers report that when day traders make a profitable trade it causes a physiological brain reaction very similar to a heroin high. I believe the people camping out achieve a similar high by “scoring” this big hit when they buy their sale items.

Now consider this: If someone announced that they would be selling discounted crack cocaine in a parking lot Friday at 8 a.m., you would expect crack addicts to begin lining up days in advance. It would not be a surprise, because after all they are crack addicts. You would not find it amusing, because they are crack addicts. You might even think that these people should get help, because they are crack addicts.

The reason we can’t see this with our Black Friday campers is that most of us in this culture literally buy into this mass consumerism. We may not be as bad as the “junkies” (what an appropriate term), but you might as well face it, you’re addicted to junk. And as you look around your house and see all the things you have accumulated that you either didn’t really want or really didn’t need, it isn’t difficult to understand that there is a pleasure in the act of purchasing things that often exceeds the utility provided by the products.

Marketers have figured this out just like pushers in the inner-city. The heroin pipeline begins in Afghanistan and the junk pipeline begins in China. I don’t have an answer for this one. And if you look at my Visa statement surely you would understand (shout out to Leslie Nielsen) that this is an observation and not a judgment.

Once there was a rouge economist that claimed that a person’s life does not consist in the abundance of his possessions. That life is more than food, more than clothes, and yes, more than junk. He said don’t worry about material stuff because there are more important things to focus on (Sounds like he really does understand opportunity costs). But of course this guy doesn’t have any credibility when commenting on how we choose to celebrate Christmas in 2010, does he?

I wish everyone a Very, Merry, Christmas!

Refuge of Hope

My friend (and fan of this blog) Duane manages an outreach shelter for the needy in downtown Canton. You can provide a Christmas dinner for a table of hungry people for a small donation of $25.Click here to donate.

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