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.

Jon Bartley
Show Hide image

Why I slept on the street outside Downing Street

The government is trying to stop taking child refugees. This means condemning them to the sub-zero night. 

It’s hard to sleep on concrete, with rain threatening and the winds of an approaching storm whipping around you. As the cold reaches your bones, rest evades you. Being so exposed, with no shelter or safety from the weather and the world, the idea of slipping into unconsciousness feels impossible.

This is what I learnt as I slept rough outside Downing Street last night.

In the centre of London, I bedded down on the pavement alongside 60 activists and volunteers who work with refugee children. Some had come in their onesies, others with guitars. As we sat resolute yet hopeful on cardboard boxes and under umbrellas, all were happy to share their stories.

I heard from those who have worked in the Calais and Dunkirk camps, and with children on the streets. They told of the stress and desperation of the children both inside and outside the resettlement centres in which they have been placed following the demolition of the Calais camp. The children have no faith left in our government and feel betrayed. They told me the children's stories - children who had come from conflict zones like Sudan and Afghanistan.

With us was one refugee who spent six months in the Calais camp. He told me of his reasons for fleeing Syria, how he was kidnapped and detained by the secret service because he stood up to the Assad regime. He is now using his skills as an actor, to raise awareness of what is going on with refugees here in the UK.

I didn’t get much sleep. But at least in the morning I could go home to a warm bed and a hot shower. Compare this to the youngsters sleeping rough on the edges of Calais and Dunkirk, in woods and under bridges, with only a donated sleeping bag to protect them from sub-zero temperatures. Next to that, my night outside Downing Street was five star.

For those young children and teenagers, spending the night alone, frightened, cold and wet in a country that is not their own, is a daily reality. By sleeping out last night, I got just a small taste of that reality, and it was enough to know it’s not something I would want my children to have to do. It’s not something I would want any children to have to do.

The big scandal here of course is that the bulldozed "Jungle" camp in Calais, awful as it was, sheltered many of these children. The UK government was implicit in the flattening of the huts and shelters where roughly 1,300 unaccompanied child refugees lived. It is thought at least 90,000 lone child refugees arrived in Europe in 2015. Under the Dubs Amendment to the Immigration Act, there was the expectation that the UK would step up and take 3,000 of the extremely vulnerable children. But now the government has scrapped it, with just a tenth of this number set to actually arrive.

Is it any wonder then that children with no hope of safe and legal crossing to the UK have started to return to the site of the demolished camp in Calais? The majority of the minors bussed to centres in France weren’t even considered for transfer to the UK, and this combined with the Dubs closure has left them with little alternative but to attempt to come to the UK by other, more dangerous, means. We have pushed these children into risking their lives climbing onto trucks and, in many cases, into the hands of people traffickers.

We didn’t have to end the Dubs scheme, and it is nothing short of a scandal that less than 50 miles from the coast of our country there are children sleeping rough on the streets because we are not doing the right thing. Had the government committed to giving local authorities the resources they need to welcome refugee children, we could have provided shelter to thousands. We are the fifth richest country in the world, and while I know budgets are under pressure, I also know the government could afford this if it wanted to.

In spending a night outside Downing Street with teams from Help Refugees, Hummingbird Project and Voices for Child Refugee, we aimed to raise awareness of what is facing refugee children in Europe, and to demonstrate that we will not allow them to be forgotten. But we also want to see real action, real change. This morning the campaigners went into 10 Downing Street to give Theresa May a petition calling on the Government to rethink the closure of the Dubs scheme – and to say "we must be so much better than this". The petition is just the start of the ongoing struggle to make the government listen – and we won’t stop until it does.

Jon Bartley is the co-leader of the Green Party.