Reality-BasedTM Political Numbers from Nicholas Beaudrot
Electoral Math
Reality-BasedTM Political Numbers from Nicholas Beaudrot
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Trolling through the some infrequent reads, I had one of those magical realism moments where the entire world seems to be pulling you towards the same subject. After getting an email exhorting me to volunteer for a local organic farmer that delivers fresh produce to poor neighborhoods, I ran across Ian Ayres guest blogging for Jack Balkin on retail discrimination and brand identification, then saw Phoebe Maltz, while touching on other subjects, compare the price of produce at upscale hippie organic grocers and in poor neighborhoods. All of this talk of the intersection between working class and the consumer economy leads to this Brooking Institute study (hat tip: former Senator John Edwards) that shows just how expensive for those who live in working class neighborhoods to purchase gasoline, food, banking services, and a number of other basic goods and services. The question is why? Why don't market forces put as much downward pressure on the price of food in lower-income neighborhoods as they do in middle income and upper-middle-income neighborhoods?
The Brookings Institute concludes that several factors are involved; the lack of political capital spent attracting business development to working-class neighborhoods, the lack of business intelligence on the potential market for a full-size grocer in a working class neighborhood, and in the case of financial services, weak laws on predatory and discriminatory lending. Brookings recommends a number of urban policy prescriptions; all of them interesting ideas, but I'm still curious about the root causes. Are there any armchair economists out there with a hypothesis or two as to why the market doesn't work the way it "should" here? Do the working poor get ripped off because their work weeks are so long that convenience foods often seem like a better alternative than cooking a meal? Do the poor have systematically worse access to information on the market price of basic goods in the rest of the city? How much does effective public transportation (or lack thereof) make a difference? Is this simply a case where grocers believe they can make more money by increasing their market share among middle- and upper-middle class shoppers? Does this reduce the amount of competition in low-income neighborhoods?
I know all of these questions make for an unsatisfying post, but this question has gone largely unanswered, even as policymakers search for an answer. My personal hunch is that, as usual, several factors are in play. First and foremost is the scarcity of time and transportation in low-income neighborhoods. The next most important factor is probably the relative lack of competition in various markets (food, gasoline) in these areas. Also playing key roles are a lack of political attention and limited access to basic financial education. But I'd be happy to have my hunches proven wrong.
Anyone out there with some empirical evidence one way or another?
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Update: In this TPMCafe thread, a common theme which I neglected is the difference in crime rate, and therefore, in insurance costs. Otherwise the conventional wisdom seems to be correct, allthough there appears to be some business intelligence that shows that even in "car culture" areas, low-income consumers exhibit less price sensitivity than middle class consumers. I think this means that regulation may not be the answer, but instead that improved education on basic finances might be a good idea.
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updated by Nicholas Beaudrot on 03:16 07 August 2005
