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.

A pro-union march in 2014. Photo: Getty
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The legacy of sectarianism is still poisoning the air of Scotland

Ruth Davidson has reinstated two Stirling councillors who posted anti-Catholic and racist messages on social media. That this kind of cretinous guff still goes on in my hometown in 2017 raises my hackles.

Kenny Dalglish was a bluenose: as a boy in the mid-60s, he and his father would make the short journey to Ibrox to cheer on Rangers, then Scotland’s most successful team. With the football allegiance came a cultural one, too. Or, probably, the other way round.

Wee Kenny could play a bit, obviously, and dreamed that his beloved Gers would sign him up. But, as Richard T Kelly writes in Keegan and Dalglish, his enjoyable new double biography of the two footballing greats, "Rangers had a certain preference for big lads, or else lads with an obvious turn of pace; and Dalglish, despite his promise, had neither of those easy attributes."

Rangers’ loss was Celtic’s gain, but it took some effort. The former, writes Kelly, "was the club of the Queen, the Union, Scotland’s Protestant majority… founded by Freemasons and members of the Orange Order, strongly tied to the shipyards of Govan. Glasgow Celtic was the team of Irish Catholic patriots, revolutionary Fenians and Home Rulers, begun as a charitable organisation… a means to bolster the faith and keep the flock out of the clutches of Protestant soup kitchens. It was going to be a serious step across a threshold for Dalglish to accept the overtures of Celtic."

In the end, Jock Stein dispatched his number two, the unhelpfully named Sean Fallon, to meet the young starlet’s family. "Fallon entered a domestic environment he felt to be 'a bit tense' -  a Rangers house, a lion’s den, if you will. Fallon even picked up the sense that Bill [Dalglish’s father] might rather his son pursue [an] apprenticeship in joinery."

The deal was done ("My dream was to become a professional footballer – the location was just a detail," Dalglish would later say) and the most gifted player Scotland has ever produced went on to make his reputation kitted out in green and white stripes rather than royal blue -  a quirk of those difficult times for which those of us classed as Fenian bastards rather than Orange bastards will be forever grateful.

Growing up in west and central Scotland, it was hard to avoid being designated as one type of bastard or the other, even if you supported a team outwith the Old Firm or had no interest in football at all. Thanks to 19th century immigration, the terrible religio-political divide of Ulster was the dominant cultural force even in Stirling, the town around 25 miles from Glasgow where I grew up and where I now live again. If you went to the Catholic school, as I did, you were a Fenian; if you went to the Proddy (officially, non-demominational) school, you were a Hun. You mostly hung around with your own, and youthful animosity and occasional violence was largely directed across the religious barricades. We knew the IRA slogans and the words to the Irish rebel songs; they had the UVF and the Red Hand of Ulster. We went to the Cubs, they went to the Boys’ Brigade. We got used to the Orange Walks delivering an extra-loud thump on the drums as they passed the chapel inside which we were performing our obligatory Sunday observance.

At the time – around the early and mid 80s – such pursuit of identity might not have been much more than a juvenile game, but it was part of something more serious. It was still the case that Catholics were unemployable in significant Scottish industries – "which school did you got to, son?" was the killer interview question if your answer began with "Saint". This included the media: in the late 90s, when I joined the Daily Record – the "Daily Ranger" to Celtic fans (its Sunday sister, the Sunday Mail, was known to Rangers fans as the "Sunday Liam") – vestiges of this prejudice, and the anecdotes that proved it, were still in the air.

The climate is undoubtedly better now. Secularisation has played its part - my own daughters attend non-denominational schools – even if, as the sportswriter Simon Kuper has observed, many are "not about to give up their ancient traditions just because they no longer believe in God". The peace process in Northern Ireland and important gestures such as the late public friendship between Ian Paisley Sr and Martin McGuinness have made a difference. And I suppose the collapse of Rangers as a footballing force, amid financial corruption that saw them dumped into the bottom tier of Scottish football, helped.

But the sensitivity remains. The 2014 Scottish independence referendum broke down in part across tribal lines, with many Celtic supporters, once Labour, now SNP, loudly backing a Yes vote, while Rangers fans were on the No side. The prospect of Brexit creating a significant border between the north and south of Ireland, which could inflame recently and shallowly buried tensions, makes one shudder. And even locally, the old enmities continue to raise their grubby heads. Ruth Davidson, leader of the Scottish Tories, is currently taking flak for allowing the reinstatement of two Stirling councillors who had posted anti-Catholic and racist messages on social media prior to their election. The pair have apologised and agreed to take part in diversity training, but I confess that this kind of cretinous guff still goes on in my hometown in 2017 raises my hackles. The rawness remains.

That this is so was brought to me a few years ago when I filed a column containing the word ‘sectarianism’ to a Scottish newspaper. Though the context had nothing to do with Catholic/Protestant or Celtic/Rangers, the editor asked me to remove it. "It’ll be deliberately misunderstood by one side or the other, and probably both," he said. "It’s not worth the hassle. In Scotland I’m afraid it never is."

Chris Deerin is the New Statesman's contributing editor (Scotland).