The east coast and parts of the southern U.S. were to varying degrees paralyzed by blizzards last week. The snow as expected rendered the roads treacherous, and in anticipation of slick streets, shoppers flocked to the grocery stores in advance.
The rush into grocery stores, and its aftermath, offers worthwhile lessons in economics.
First up, it’s best to address an economic fallacy that storms, other natural disasters, and wars seemingly always unearth. The Safeway that I patronize in Washington, D.C. was inundated with shoppers ahead of the snowfall. This was the norm throughout the east and southeast, and no doubt some economists will say the economy was boosted by all the frenzied consumption. Don’t believe them.
While it’s certainly true that consumers voraciously stocked up on groceries early last week, it must be remembered that all the spending at Safeway, Giant and Food Lion was the “seen.” The “unseen” was what consumers could have done with their money if they hadn’t been forced to load up on food, water, and other supplies. Some may have directed the funds toward a trip, but even better, others might have spent the money on a new resume better suited to entice employers, and some potential employers could have used extra monies to buy ads meant to boost saless or software that would render their businesses more efficient and profitable, and for being more profitable, more able to attract the investment necessary to hire new workers.
Economists worship at the altar of consumption, but lost on them is the simple reality that all job creation, and all economic advancement, is a function of savings. Blizzards, though they might boost near-term consumption and the “velocity” of money that only matters to the fraudulent economics profession, almost by definition reduce productivity. War works against economic growth in a much more bloody way.
Yet if readers were to conduct a broad poll of the Ph.Ds that populate the economics profession, most would answer “yes” to the question “Did WWII End the Great Depression?” Of course this offers further proof of how worthless are the alleged insights offered by most who claim to be economists. War involves people killing one another and the destruction of wealth, while economic growth is a function of people working with one another on the war to creating wealth. War is by its very name anti-economic growth precisely because it’s about destruction of the human, financial and physical capital that drives economic growth, yet those who claim to be “economists” laughably, and rather horrifyingly, suggest that war represents stimulus.
War is the opposite of economic stimulus, and so are blizzards that shut cities down. To be clear, there are no dollars hidden in those often attractive snowflakes that sometimes rain down on us during the winter.
Still, there are positive economic lessons to be gained from the snowfall. They too can be found inside Safeway, along with other grocery stories that served the needs of their desperate clientele this past week. Once again, anticipation of snowfall had people eager to stock up on food, water and other supplies as a hedge against an inability to reach stores and restaurants once blizzards reached their height.
Importantly, Safeway and other stores similarly anticipated a surge of customers due to the snow. Because they did, their customers didn’t go without once the storms hit. It wasn’t love that filled the shelves of grocery stores, rather it was a desire on the part of Safeway and others to generate profits. Profits are a dirty word to some in the punditry, but absent the reward of profits, many of us would have gone hungry amid the snowfall.
Profits also drive the very income and wealth inequality that so vexes economists, politicians and pundits. But as the Safeway example reveals, profits are a function of serving the needs of customers, and as innovators like Apple, Amazon and Google remind us, profits are sometimes a function of providing to consumers market goods they previously didn’t know they wanted.