Friday, February 18, 2011

Cookies and Economics

I just got back from a week in Austin, TX.  If you’ve never been to Austin, well, it ain’t exactly Texas.  I saw a bumper sticker that portrayed perfectly the prevailing attitude of town’s populace: Keep Austin Weird.  So far, it’s working very well.

I attended training and our employer paid to occupy a meeting room.  Part of that package included a mid morning and mid afternoon snack.   For our PM sugar rush, the hotel provided large cookies.  Anything left over was presumably discarded. 

On Wednesday afternoon, one of our instructors grabbed the remaining cookies and paced the room trying to unload the few remaining cookies onto the group.  Her words were, “We bought these, so we better not waste them.”  As she approached me, I told her to please throw them away and spare us the unneeded calories.  Half the folks in here were obese!  Okay, I didn’t say that, but what I did tell her was that it didn’t matter what happened to the unused cookies, the money has been spent.  Eating the cookies or discarding them would yield the same result – economically, we’d be no different.  She couldn’t grasp this, and told me if we didn’t eat them, the cookies would be wasted.

So, had she not found a weak-willed humanoid to consume the cookies, and actually threw them away, would the cookies have been wasted?  I suppose throwing good food away is wasteful, but in my mind, the money used to purchase the cookies – that’s what was wasted.  And that money is gone.  No action (eating or not eating) would change that.   

So, am I right here, or were we being wasteful?  I guess it depends on your definition of wasteful.


  1. I think it depends on whether or not the cookies will substitute for another snack or food later. If not, then yes - wasted. If so, then it prevents a use of future resources, at least somewhat.

    As you point out, given the prevalence of fatties, cookies probably aren't substituting for later food.

  2. You are right that the money cant come back but it would be REAL waste, which is what YOU as an Austrian are supposed to be concerned with.

    Its funny that you were concerned about the money. More money will be here tomorrow, as much as we want. Those resources; milk, flour, sugar might be really scarce in the future....... you should have saved them.

    Throwing them away was like digging a hole and then filling it up........
    so I guess you see that that is NOT a totally wasteful activity ;-)

  3. Oops I didnt pay attention to the author.

    I thought Jeff wrote this.


  4. I'm not Austrian, though. I'm Neoclassical, retraining to be an Austrian. I'm sure I'll get some stuff wrong :)

  5. Greg: I don't see how throwing the cookies away is tantamount to digging a hole and then refilling it.

    I'm assuming she didn't want the cookies. But somehow pawning them on us wouldn't constitute waste. Either way, she isn't getting the money back. So from her viewpoint, she should be indifferent, no?

  6. I'm not Austrian either. I'm more Kentuckian, but hopefully changing to Texan.

    I'm not trained in economics. Had a few classes and am now reading mostly libertarian stuff.

    Jeff: how would you classify Bastiat? Neoclassical?

  7. Harvest wheat, grind into flour, mix with processed sugar and raw milk (Ill skip the whole pasteurization process) and bake for 30 minutes at 350 degrees........ then throw away! (after paying someone for all the previous steps)

  8. Greg: yes, I would agree if we were buying cookies individually, but they were part of the deal. We got the meeting room and 35 cookies. The hotel offered no incentive to only eat 30 cookies and return 5.

  9. Jeff

    I'd be interested in you taking a visit here

    and maybe giving your views. This guy is a very thoughtful blogger and is thinking seriously about all this stuff. He generates some good discussions. He "takes on" Austrian economics in a a few of his posts and I think input form new thinkers like your self would be helpful.

  10. Brad,

    I think Bastiat is classical. The neoclassical school was essentially launched by John Hicks and Alfred Marshall in the 1920s/1930s.


    Will do when possible. Currently working on a response to your comment on David's most recent post.

  11. Greg,

    I see it's an MMT guy. Unfortunately, I will not respond because MMT's axioms cannot be accepted by me. Because logical conclusions follow from axioms, I'd have to first accept or refute the axioms. That's too tall of an order for now.

    I will point out that what he claims is being said by Austrians is also being said by monetarists and neoclassicists. And, if you apply it to growth economics, by New Keynesians too.

  12. The point is Brad, I think, that someone was paid to go through all the processes of making those cookies (and the price of them was included in your charge in one way or another) and to then throw them away IS a waste.

    The larger question to me would now be, was any useful production brought forth by paying all those people along the way even if the end product just got tossed out? I think the answer is yes. They did not simply engage in worthless activity for a salary which took production form somewhere else and therefore was purely an inflationary activity, as would be the characterization of digging holes and filling them.

  13. What are MMTs axioms that you object to?

  14. Greg - I suppose throwing away perfectly good cookies is wasteful no matter how you look at it. I should have brought them home and mailed them to Jeff. He could stand to gain a few lbs. ;)

    I was more concerned with the aspect of sunk cost - which I think my instructor couldn't grasp. I should have used that term with her instead of arguing over the definition of waste.

    But I will tell you that many people, including my mother, grandmother, mother-in-law, etc., can't seem to understand the sunk cost concept, especially when it comes to food. All will try to get me to eat every last morsel of food from my dinner serving, even when I'm stuffed. Their rationale is (sometimes) they don't want to throw it out. So, instead of throwing it out they force me to overeat (doesn't happen often). They’ve spent the money, and throwing it out is okay – if they don’t plan to store it in the fridge for later.

    All this talk of food has left me hungry. I wish I had those cookies now.

  15. Greg,

    It seems the axiom that the government creates money where none previously existed is what bothers me most.

    It also seems to have some confusion between the monetary economy and the real economy.

    I have read some more about it. As before, MMT generally gets the current operating realities of government debt correct. Although, it seems to still say that the government issues currency, which is not the case in the U.S. or Canada at least.

    But, then there's a whole bunch of stuff based on national accounting statements that I can't agree with. I can't convince you of my position, so I'm moving on.