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.

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Voters are turning against Brexit but the Lib Dems aren't benefiting

Labour's pro-Brexit stance is not preventing it from winning the support of Remainers. Will that change?

More than a year after the UK voted for Brexit, there has been little sign of buyer's remorse. The public, including around a third of Remainers, are largely of the view that the government should "get on with it".

But as real wages are squeezed (owing to the Brexit-linked inflationary spike) there are tentative signs that the mood is changing. In the event of a second referendum, an Opinium/Observer poll found, 47 per cent would vote Remain, compared to 44 per cent for Leave. Support for a repeat vote is also increasing. Forty one per cent of the public now favour a second referendum (with 48 per cent opposed), compared to 33 per cent last December. 

The Liberal Democrats have made halting Brexit their raison d'être. But as public opinion turns, there is no sign they are benefiting. Since the election, Vince Cable's party has yet to exceed single figures in the polls, scoring a lowly 6 per cent in the Opinium survey (down from 7.4 per cent at the election). 

What accounts for this disparity? After their near-extinction in 2015, the Lib Dems remain either toxic or irrelevant to many voters. Labour, by contrast, despite its pro-Brexit stance, has hoovered up Remainers (55 per cent back Jeremy Corbyn's party). 

In some cases, this reflects voters' other priorities. Remainers are prepared to support Labour on account of the party's stances on austerity, housing and education. Corbyn, meanwhile, is a eurosceptic whose internationalism and pro-migration reputation endear him to EU supporters. Other Remainers rewarded Labour MPs who voted against Article 50, rebelling against the leadership's stance. 

But the trend also partly reflects ignorance. By saying little on the subject of Brexit, Corbyn and Labour allowed Remainers to assume the best. Though there is little evidence that voters will abandon Corbyn over his EU stance, the potential exists.

For this reason, the proposal of a new party will continue to recur. By challenging Labour over Brexit, without the toxicity of Lib Dems, it would sharpen the choice before voters. Though it would not win an election, a new party could force Corbyn to soften his stance on Brexit or to offer a second referendum (mirroring Ukip's effect on the Conservatives).

The greatest problem for the project is that it lacks support where it counts: among MPs. For reasons of tribalism and strategy, there is no emergent "Gang of Four" ready to helm a new party. In the absence of a new convulsion, the UK may turn against Brexit without the anti-Brexiteers benefiting. 

George Eaton is political editor of the New Statesman.