The Social Engineering Olympics

A Wal-Mart store manager in a small military town in Canada got an urgent phone call last month from “Gary Darnell” in the home office in Bentonville, Ark.

Darnell told the manager Wal-Mart had a multi-million-dollar opportunity to win a major government contract, and that he was assigned to visit the handful of Wal-Mart stores picked as likely pilot spots. First, he needed to get a complete picture of the store’s operations.

For about 10 minutes, Darnell described who he was (a newly hired manager of government logistics), the outlines of the contract (“all I know is Wal-Mart can make a ton of cash off it”) and the plans for his visit.

Darnell asked the manager about all of his store’s physical logistics: its janitorial contractor, cafeteria food-services provider, employee pay cycle and staff shift schedules. He learned what time the managers take their breaks and where they usually go for lunch.

Keeping up a steady patter about the new project and life in Bentonville, Darnell got the manager to give up some key details about the type of PC he used. Darnell quickly found out the make and version numbers of the computer’s operating system, Web browser and antivirus software.

Then “Gary Darnell” hung up and stepped out of the soundproof booth he had been in for the last 20 minutes.

There is more here.

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The Chick-fil-A Situation and an Economics Lesson

The economics lesson will come in a moment, but first I want to talk about the situation more generally. But before doing so let me quickly reveal my biases. I am decidedly in favor of same-sex marriage. I have a lot of gay friends. I walked in Seattle’s Gay Pride parade this year. I follow George Takei on Facebook. It’s pretty much the only issue that informs my vote — not the economy, or healthcare reform, or foreign policy. I’ve never heard an argument anywhere near cogent for denying this right to same-sex couples. I also don’t remember having ever eaten at Chick-fil-A — I don’t even know where one is if I wanted to. I will certainly not be eating there in the future.

But as always our discussion of the situation lacks the clarity and precision I prefer. First, let’s state what is obviously true. Chick-fil-A did not donate money to anti-LGBT organizations. “Chick-fil-A” is an abstract human conception. It cannot donate money, just as the table in my dinning room cannot. The idea of Chick-fil-A is useful as a shorthand in many discussions and analysis, and, indeed, has specific meaning and importance in the area of law. But let’s not kid ourselves by conjuring up imagines of everyone at Chick-fil-A gathered around a drumstick shaped conference table one Monday afternoon to determine where this year’s donations would be sent. Undoubtedly, a very small group of people somewhere relatively high up, if not at the very top, made the decision about how to distribute these funds.

I say this only because I fear a certain amount of persecution for those individuals unfortunate enough to be on the front lines of the company’s franchises. I know from first hand experience that many of us know relatively little about the companies for which we work. I would not be surprised if the fry guy, or the checkout guy, or the chicken girl knew nothing of these donations before the recent brouhaha. I say this realizing that the company is outwardly religious in its mission statement. But even if employees were aware of the donations perhaps we should still cut them some slack. I doubt they were attracted to low-level positions at Chick-fil-A because of the company’s questionable values. More probably these employees have relatively few options for employment and are doing the best they can to carve out a living. Sometimes people make tough choices when their livelihood is on the line, and I for one am not going to blame them for that. Sure, some employees share the views put forward by the company’s mission statement, but I’m keeping an open mind as to which employees these might be.

On the other hand, it does seem fairly clear that these donations went to organizations that are openly hostile to same-sex marriage. You can view a complete list of Chick-fil-A recipients here. With a little poking around it seems that promoting traditional family structures is one of the core missions of these organizations. And it is troubling that their budgets are now thousands or, in one case, a million dollars richer.

Opponents have reacted just as they should — protesting, sure, but more importantly not purchasing Chick-fil-A food products. People purchase items when the price of the product is less than the expected value (or utility) they receive. But value is not utilitarian in the strict sense. Embedded in value are all kinds of non-traditional forms of utility like aesthetics, the importance of the brand, and the moral principles of the company compared to the those of the purchaser. (That’s why Apple products can garner a premium despite having nearly identical hardware components). So clearly, using this all-encompassing definition, Chick-fil-A products have lost value in light of recent events. Some have pointed out that Chick-fil-A’s values have not changed for years; but, again, what has changed is the information available in the public forum about these values. Behavior, aptly, responds to new information.

Social movements are an underappreciated aspect of capitalism, but just as surely are part of the modern capitalist system. What is unrecognized by most participants in social movements, however, is that these movements can be very good for the corporations at which they take aim. I don’t mean in some vague sense relating to free publicity and so on, I mean in a real economic sense.

Remember that $5 ATM fee Bank of America proposed charging late in 2011? An online petition against the fee was started by Molly Katchpole, a part-time nanny, and quickly gained over 300,000 signatures, causing BofA to cancel the planned increase. This seems like a victory for consumers, and in some sense it is, but it’s also a victory for BofA because they learned something about the elasticity of their ATM services. The term “elasticity” is used by economists to denote the relationship between quantity and price. If the price increases do consumers cut back a lot, a medium amount, or not at all? A high elasticity means consumers cut back a lot when price goes up. I suppose something like chocolate would be a good example because there are so many substitutes for those who have a sweet tooth. A low elasticity implies the opposite. We might think of cancer drugs as falling into this category. You’re likely to make sacrifices in other areas of your life in order to continue purchasing your cancer medication even if the price, say, doubles. In this second case, there really are no substitutes.

Firms want to charge the highest price possible without losing customers — the price that maximizes profit. But figuring out what that prices is isn’t so easy. Sure, you could do focus groups, but nothing beats 300,000 consumers collectively screaming out, “That’s too much!” “No problem,” says the bank, “we won’t charge that much.” The information embedded in these social movements is extremely valuable. Now there’s a bigger question about why a company is raising prices in the first place — maybe they are losing money or have a poor business model more generally — but elasticity information about particular services can help steer structural reforms in the business and guide executives’ decisions about the best overall method to reduce costs.

The same holds true for Chick-fil-A and the information they were able to garner. The company now has all kinds of demographic data by region (based on franchise location) showing customer loyalty and political beliefs, and can adjust local marketing campaigns accordingly if they so choose. The company also now knows roughly what percentage of total product value is due to their corporate values.Turning to the macro scale, Chick-fil-A now knows how consumers at large will respond to future charitable giving.

Overall technological improvements have caused collective action to work more quickly. Now social movements can easily garner support in days and weeks instead of months and year. But increased technology has also sped up the response time of businesses and likewise increased the sophistication with which firms can analyze the inevitable stream of data that occurs when masses of consumers willingly reveal their preferences and elasticities for particular services.

On net it’s unclear whether the companies or consumers benefit. Perhaps the loss in customers more than offsets the value of the information firms collect. Or perhaps the lost revenue from not being able to implement a $5 ATM fee will lead to more devastating cuts in other areas. Because of technology customers were able to come together and quickly bridge the information gap. Within days, millions of BofA customers knew about the proposed fees and had their outrage validated by strangers across the country. On the other hand, perhaps in the absence of a social movement there would have been a steady leakage of BofA customers away from the bank, with a policy reversal coming only after many more customers had left. The quick response from customers allowed BofA to respond equally quickly, perhaps keeping many customers that would have otherwise left.

But even if particular businesses don’t benefit the industry as a whole surely does since, for example, other major banks can us the BofA experiment to infer information about the elasticity of their own ATM services. In the case of Chick-fil-A, consumers gave a signal to businesses throughout America about the consequences of certain types of corporate giving. BofA and Chick-fil-A were “first movers” in their respective business policies. The widespread response of consumers articulated all kinds of important information to firms throughout America. This information may even counteract the reasons behind the social movements in the first place.

Racial Distribution in America

The WSJ today has an article on race in America by Jason Riley with heavy use of quotations from Abigail Thernstrom. It is provocative throughout. I have not read any of Dr. Thernstrom’s books, but I found the following quote interesting:

 

“I think there’s a running assumption through all of the writing on the left about racial issues that, were it not for racism, you would have random distribution of racial and ethnic groups in education, employment, contracting, elections—whatever you’re looking at. But the notion of random distribution of blacks, Latinos, Jews, Armenians or whomever is absurd. It’s indifferent to the reality of society. That’s just not how people distribute themselves.”

 

I think that’s about right as a first pass criticism of a lot of what you hear in the public sphere. Though I’m not sure what Thernstrom means by “random distribution.” Perhaps “equal distribution” would be more apt. This, of course, applies to the distribution of men and women as well. As for how “people distribute themselves,” I’m not sure of the answer to that question. If we suppose, first, an absence of racism and, second, an equal probability that minorities and women distribute themselves in any particular way across, say, American firms, it may well be that an “equal distribution” is perfectly reasonable, however unlikely probabilistically. Both assumptions, however, are dubious.

 

But to piggyback on Dr. Thernstrom’s point, I think one problem that equal rights advocates have is that there is no obvious normative standard against which to judge progress. Is 50% representation by women on the boards of Fortune 500 companies the correct amount? Too much? Too little? I have no idea. Women make up about 50% of the US population, but it isn’t immediately obvious that this implies they should make up roughly half of the population of whatever institution we’re examining. The same is true for minorities. If we want to honor the differences of minorities and women at the macro level, I’m not sure why we expect, or advocate, that these groups make the same educational and occupational decisions as white men. What is the normative basis for this type of advocacy?

 

Sure, I can understand the elements of power involved—we don’t want white men to be the only ones running businesses or representing us in local, state, and national politics, because “we” are not all white men and there is a normative discourse about the types of values American democracy should stand for and a general feeling of what is equitable when it comes to power distribution. I just think that tacitly implying that proportional minority representation is normative is an oversimplification and actually disenfranchises those that want to make non-normative educational and employment decisions. I’m sure Critical Race Theory has a lot to say on this subject (probably in disagreement with me), but unfortunately I am not familiar enough with the field to speak intelligently.

 

To be fair, equal rights advocates look at a lot more than simply the proportion of minorities and women in any given setting. They look at public discorse, media representation, personal experience, and historical accretion (to name just a few factors) to determine whether things “look out of whack.” Nonetheless, I have a feeling these broad statistics largely drive the examination of the other factors. So if women did enjoyed equal pay and happened to represent half of any particular US occupation, I think the critics would be less boisterous and fewer in number.

 

However, this is where I think things get complicated. Minority representation in US universities and occupations most probably influences the factors I mentioned above, which in turn further influence the choices minorities make. So, in fact, these elements are impossible to disentangle. Dr. Thernstrom seems to overlook the fact (in her quote, at least) that the way minorities choose to distribute themselves is itself influenced by the current distribution. Moreover, what constitutes a “choice” gets very sticky. If we momentarily ignore the effects of the structural composition of society and introduce a framework of rational choice, it wouldn’t be too difficult to determine the efficient distribution of minorities across US society. It would be that decision set that is absent of any coercive forces, such as legal preference or economic incentives given by the government. I see this as the classical liberal stance.

 

However, it is unclear what a neutral legal structure looks like. To have any legal system at all is to preference some at the expense of others. And even if we ignore that problem, we still wouldn’t have things quite right since undoubtedly parents and friends heavily influence how people choose to distribute themselves, by offering advice on the best colleges or the companies with the most generous benefits, for example. Even interactions that are not specifically geared toward such distribution decisions undoubtedly end up affecting them. Surely, growing up in Arizona for one’s entire adolescence, for instance, helps to determine what climate a person likes or dislikes and, thus, how he or she distributes him or herself. Once we add back in any structural elements of society, long histories of slavery and Jim Crow-era regulation, for example, things get even more complicated. It’s clear that what we see as free choice is actually a complex biological system constantly influenced by long-lasting exogenous shocks from the environment around us.

 

The world, then, is socially constructed (not a new insight by any stretch of the imagination, see Sociology since the field began, for example). And it’s constructed such that we can’t simply ignore the way society is structured or define “free choice” in any meaningful sense. (Indeed, philosophers can’t even agree on its meaning). But this leads me back to my original point. There is no such thing as an “authentic” distribution of any category of persons across any institution. Any distribution is valid in the sense that at any point in time the distribution is the result of the accumulation of the world’s social action. And so again, I don’t know know what a normative distribution looks like, since I don’t know what normative means in this context.

 

But that doesn’t get us very far. Throwing up your hands and saying, “it’s all relative” is a distasteful, and to some extent, intellectually lazy position to take. To revisit an earlier point, I think equal rights advocates, as well as Critical Race theorists would, and have, advocated for a world without white hegemony. A world in which “whiteness” doesn’t bestow unique privileges and rights beyond those who weren’t granted “whiteness” at birth. I think that’s right. And Dr. Thernstrom, and others, seem to overlook the contributions of Critical Theory, instead adopting their own set of aggregate statistics to show how much progress has been made.

 

But even when I accept the “white hegemony” argument, which I largely do, I still come up short, because (1) I think a world without such hegemony is very hard to envision (though, again, I’ve read relatively little on the subject, so haven’t been exposed to the full panoply of ideas); and (2) I’m still not sure that this argument ex ante prescribes any particular distribution of minorities across institutions, other than saying that when such a world is achieved we will sufficiently have crossed over into the realm where “free choice” takes over and so whatever distribution arises ex post must be the correct one.

 

In conclusion, perhaps both sides should stop using aggregate statistics to try to prove one way or the other that the current distribution is either just or unjust, and instead focus on defining normative institutional and societal forms using such tools as Critical Legal Theory as a basis (again, probably already been done). That’s more challenging and more amorphous, and certainly harder to measure, but it is probably more intellectually rigorous across many dimensions and will likely offer an ultimate outcome that is more agreeable to everyone involved…except for White men, of course.

 

Note: To those with a Critical Studies background I’m sure this post sounds unbelievable naive. So please, inculcate me with your knowledge.