Tenuous economic lessons drawn from detergent shoplifting

The Tide is turning.

Last year, I wrote about the extraordinary news that Tide – a popular brand of laundry detergent – was being stolen and used as a black-market currency across the United States (I also titled the post Laundered Money which I am still proud of ten months later). The retail price is high, the resale value is only slightly lower, it's impossible to track and everyone uses it. I looked at how well it would work as a unit of exchange:

Crucially, one bottle of it is identical to any other, a quality economists call "fungibility", putting it in the same class as oil, precious metals, or currency itself. If someone lends me a bottle of Tide, I don't have to return the same one to them when my debt is called in – in fact, because there are no serial numbers, it would be impossible for them to tell even if I did…

[Stolen] Tide is also a highly liquid commodity, frequently traded, which will allow a natural, and relatively stable, value to emerge for it.

Now, New York Magazine's Ben Paynter has done further investigation on the Tide-boosting phenomenon, and taken some of the magic out of it. It turns out that while a lot of people are stealing a lot of detergent, there's less evidence of the currency side of it. Crucially, Paynter, who was speaking to police in Maryland, didn't hear the same stories that Kentucky police passed on in March 2012 of people exchanging Tide for drugs, or being offered Tide instead of drugs. Instead, it's just your common-or-garden people-are-shoplifting-something-to-sell-it-and-use-the-money story.

But! There's still tenuous economic lessons to be drawn from the NY Mag piece. The first comes when the Maryland police describe their frustration with the fact that the penalties for a misdemeanour aren't that high:

After [Sergeant Aubrey Thompson's] team busted one area shop owner for taking in stolen Tide, the perpetrator struck a deal for a $250 fine and a form of probation—then turned around and raised the price his store charged for Tide by $3.

What we're seeing here is an example of someone with price-setting power passing on a regulatory cost. Simple models normally wouldn't ascribe price-setting power to the owner of a lowly neighbourhood grocery store, since it's more typically found in examples of monopolistic competition. But in reality, every shop owner has a quasi-monopoly over "shops in this location", which grants them the ability to set prices a bit. (That is: even if you know your corner-shop is charging you 10p more than the supermarket down the road, you still pay up, because you don't want to walk).

That price-setting ability lets the shop pass on costs incurred from regulation – in this case, the regulation which ensures that it cannot resell stolen goods. The owner treats a $250 fine as just another cost of doing business, and raises the price of Tide accordingly.

And yes, laws against reselling stolen goods are regulation. Think of that next time you hear someone railing against "red tape".

The other tenuous economic link comes from Paynter's description of the history of Tide:

When the company released Tide in 1946, it was greeted as revolutionary… Procter & Gamble, naturally, patented its formula, forcing competitors to develop their own surfactants. It took years for other companies to come up with effective alternatives.

It's a good description of the plus-side of patents. Procter & Gamble gets a reward for its innovation by being guaranteed-first-to-market, while competitors, eager to chase that market, develop other surfactants alongside. The pace of human invention speeds up, and after less than thirty years, all that knowledge is released into the public domain for anyone to apply.

It also reminds us what's broken with much of the current intellectual property regime. Imagine if, instead of patenting a surfactant, P&G had patented "a method for cleaning clothes" which described nothing more than "the application of a surfactant to fabric in water". Any other surfactants invented by competitors would then still be covered by the P&G patent, giving the company a monopoly over that entire method of cleaning clothes. Worse still, what if P&G had applied for that patent before anyone had actually invented a surfactant? The company could then sit back, wait for someone else to actually innovate, and then sue them for infringement when they do.

That rather describes the state of patents now, at least in the IT industry. Consider the patent trolls who are asking for $1000 from end-users who have networked scanners:

He said, if you hook up a scanner and e-mail a PDF document—we have a patent that covers that as a process.

The same legal framework which enhanced innovation in the 1940s may well be hindering it now. Worse, it has basically turned into a license for extortion.

But at least our clothes are clean.

Bottles of tide on a store shelf. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Paul McMillan
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"We're an easy target": how a Tory manifesto pledge will tear families apart

Under current rules, bringing your foreign spouse to the UK is a luxury reserved for those earning £18,600 a year or more. The Tories want to make it even more exclusive. 

Carolyn Matthew met her partner, George, in South Africa sixteen years ago. She settled down with him, had kids, and lived like a normal family until last year, when they made the fateful decision to move to her hometown in Scotland. Matthew, 55, had elderly parents, and after 30 years away from home she wanted to be close to them. 

But Carolyn nor George - despite consulting a South African immigration lawyer – did not anticipate one huge stumbling block. That is the rule, introduced in 2012, that a British citizen must earn £18,600 a year before a foreign spouse may join them in the UK. 

“It is very dispiriting,” Carolyn said to me on the telephone from Bo’ness, a small town on the Firth of Forth, near Falkirk. “In two weeks, George has got to go back to South Africa.” Carolyn, who worked in corporate complaints, has struggled to find the same kind of work in her hometown. Jobs at the biggest local employer tend to be minimum wage. George, on the other hand, is an engineer – yet cannot work because of his holiday visa. 

To its critics, the minimum income threshold seems nonsensical. It splits up families – including children from parents – and discriminates against those likely to earn lower wages, such as women, ethnic minorities and anyone living outside London and the South East. The Migration Observatory has calculated that roughly half Britain’s working population would not meet the requirement. 

Yet the Conservative party not only wishes to maintain the policy, but hike the threshold. The manifesto stated:  “We will increase the earnings thresholds for people wishing to sponsor migrants for family visas.” 

Initially, the threshold was justified as a means of preventing foreign spouses from relying on the state. But tellingly, the Tory manifesto pledge comes under the heading of “Controlling Immigration”. 

Carolyn points out that because George cannot work while he is visiting her, she must support the two of them for months at a time without turning to state aid. “I don’t claim benefits,” she told me. “That is the last thing I want to do.” If both of them could work “life would be easy”. She believes that if the minimum income threshold is raised any further "it is going to make it a nightmare for everyone".

Stuart McDonald, the SNP MP for Cumbernauld, Kilsyth and Kirkintilloch East, co-sponsored a Westminster Hall debate on the subject earlier this year. While the Tory manifesto pledge is vague, McDonald warns that one option is the highest income threshold suggested in 2012 - £25,700, or more than the median yearly wage in the East Midlands. 

He described the current scheme as “just about the most draconian family visa rules in the world”, and believes a hike could affect more than half of British citizens. 

"Theresa May is forcing people to choose between their families and their homes in the UK - a choice which most people will think utterly unfair and unacceptable,” he said.  

For those a pay rise away from the current threshold, a hike will be demoralising. For Paul McMillan, 25, it is a sign that it’s time to emigrate.

McMillan, a graduate, met his American girlfriend Megan while travelling in 2012 (the couple are pictured above). He could find a job that will allow him to meet the minimum income threshold – if he were not now studying for a medical degree.  Like Matthew, McMillan’s partner has no intention of claiming benefits – in fact, he expects her visa would specifically ban her from doing so. 

Fed up with the hostile attitude to immigrants, and confident of his options elsewhere, McMillan is already planning a career abroad. “I am going to take off in four years,” he told me. 

As for why the Tories want to raise the minimum income threshold, he thinks it’s obvious – to force down immigration numbers. “None of this is about the amount of money we need to earn,” he said. “We’re an easy target for the government.”

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

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