Today’s mainstream economics branches into two subcategories – macroeconomics, which is the study of the way large political units – like countries – work (or in the case of Greece, don’t work). The other subcategory is microeconomics, which focuses on the economic decisions made by individual businesses, specifically, those businesses which make things called widgets, for which there is an apparently unlimited global demand.
My contribution would be to add a third subcategory to economics: retail economics.
Like traditional economics, retail economics could be expressed in numerical terms, with predictive powers every bit as accurate as today’s traditional economic models. Retail economics requires only an open mind, an insightful nature and a willingness to conceptualize life’s physical limitations like a schizophrenic aborigine on opium.
There are many parallels between existing economics and retail economics. In traditional economic thought, there is the concept of the “Money Multiplier,” which basically says if I inherit $50,000 from my rich uncle and use it to go buy a Mercedes, the car dealer puts the cash I have paid him in the bank. The bank promptly turns around and lends $40,000 of it to my neighbor Sam, who wants to buy a nuclear powered bass boat which can cruise West Point Lake for three years without refueling. The boat dealer deposits that $40,000 back in the bank, and the bank lends $32,000 of it to my other neighbor Bill, who is adding on a Jacuzzi/sauna/indoor swimming pool to his house. The contractor puts the $32,000 back into the bank and so on and so on, until my cousin Blanche borrows the last $60 from the bank for a perm and a pedicure. All of this economic activity is spurred by my original $50,000 purchase. Of course, as recent events have demonstrated, the only one who makes out in the end is Guido, the large hairy repossession guy, but that’s a different article.
The parallel, in retail economics, is the “savings multiplier,” which says, “if you buy enough things ‘on sale,’ you can theoretically save an infinite amount of money.” Imagine the following scenario: You have agreed with your wife that she can spend $100 on a new outfit for an upcoming wedding. So your wife goes to a department store and finds a $100 outfit that she absolutely loves. But guess what? Today it is on sale for 50 percent off! So she finds two more perfect outfits, each also for $100, each also 50 percent off. When you get home, imagine your happy surprise at finding out that your wife has the outfit she wants for the wedding, two more outfits she loves, and has saved you $150 along the way. If you do not have a thorough grounding in retail economics, you might utter a totally inappropriate response, like, “If you save me any more money, I’m going to have to get a second job.” And, by removing “practical need” from a consumer purchase, the opportunity to save money goes exponential. Who here would not feel good about owning an inflatable charcoal grill, a case of Habanera Vinaigrette pancake syrup, or a gross of 5.25-inch floppy computer disks, if they were all purchased at 90 percent discount?
Obviously, I would not expect to receive instant acceptance from the academic community. However, the longest journey begins with the first step, and there is clearly a need to lay out a framework that helps people communicate about economic matters more effectively. Like, how you can go to Home Depot for a bag of potting soil and come home driving a new Toyota 4 Runner. There are scientific reasons for this, and until we deal with them as a science, we will be as backward as the ancients offering sacrifices to placate the gods of rain.
Shane Starr is a contributing columnist and LaGrange resident.