In the interest of honesty, I need to begin with some first-step work and acknowledge my powerlessness over my compulsive attraction to Dumpsters. I set boundaries, try to observe them, and yet the siren song is so sweet.
While walking to my vehicle at a local college last week, I passed a bright yellow roll-off box. My inner scavenger started to say once again, “Just take a look; one little look won’t hurt anyone.” Cunning, baffling and powerful, all right! I took one little glance, and there it was — the Mother of All Vises, or at least the Stepmother of All Vises.
Only the handle and a tip of one jaw peeked through the broken concrete blocks and waste cardboard, but that was enough. What “Jaws” was to sharks, this baby was to vises. I was sure that some major part of it must have been broken. No one would throw away a vise like that, otherwise.
But I had to be sure.
In five minutes I dumped my briefcase in my pickup, got a pair of gloves and exhumed this sterling example of the American forge master’s art. The bolts that held the main forging to its swivel base were missing, but everything else was intact.
The jaws appeared to be about 6 inches wide and I could tell by its heft — as I grunted to get it over the side of the Dumpster — that it weighed about as much as my 172-pound anvil.
I found that I was off a little when I weighed it at home later. It weighed just over 160 pounds. With two 5/8-inch carriage bolts, a little time at the grinder, and a couple of nuts brazed into short lengths of pipe, this magnificent beast was as serviceable as when it was new many decades ago. My out-of-pocket cost was less than $4.
What does this have to do with real world economics? There are several possible lessons.
First, it may be economically rational for some people to discard a valuable tool that needs even minor repair. Second, high labor costs cause us in the United States to throw away a lot of otherwise valuable things. That means the satisfaction we get from a given level of output is less than indicated. Finally, even economists make irrational choices.
My first reaction, when I saw the vise poking out of the debris, was amazement. Even with the swivel clamp bolts broken, this vise would have brought well over $100 at any farm sale in Minnesota. The manufacturer is no longer in business, but a new 6-inch jaw vise made by Wilton, the industry standard that weighs less than this one and won’t open as far, lists for $815. Why would anyone throw such a valuable tool away?
But as an economist, I saw several possible answers. First of all, there may have been an “information problem.” When the clamp bolts broke, the college workers probably discovered that no repair parts were available. Perhaps they lacked the experience to fabricate the parts themselves. Their information was incomplete, and they made a rational decision to get a new vise.
Second, the opportunity cost of the shop workers’ time is probably higher than mine.
Happily, everything went like clockwork for me. But an institutional maintenance shop that probably has a list of pressing jobs to do rationally would not risk a purchase order and making a 10-mile round trip to a specialty fastener source on a hunch. Studies show that just processing one purchase order costs many institutions $20 or more.
Regardless of what they are paid, shop workers may have had pending tasks with higher payoffs than fixing a vise.
It probably was rational – “profit maximizing” in economic jargon – for the college to toss the vise. It only was rational for me to salvage it if one considers that I got enjoyment from the work. I don’t need a vise that good. I have gotten along very well with a little 95-pound Polish-made one that I bought in 1975 when I was still farming.
There is, however, a general lesson here. Because the opportunity cost of our time is so high in our wealthy country, we find it rational to discard items that our grandparents or contemporary Peruvians and Nigerians would repair or salvage.
This rational propensity to discard implies a bias in our Gross Domestic Product numbers. Remember that GDP is the value of all new final goods produced in a year with no adjustment for existing physical assets that wear out. But because it costs us so much to repair things, we toss items that would still have considerable value in other countries.
This is a corollary to the “Baumol effect.” Princeton economist William Baumol noted that wages for jobs such as cutting hair, painting houses and fixing tires are much higher in wealthy countries than in poor countries. The service is the same, but wages are higher and thus the services are more expensive.
Thus, a chain-store haircut in St. Paul costs me $13 while the same haircut in rural Peru might cost 50 cents. And these are the values that are used in tabulating the two countries’ GDP. The same trim contributes 26 times as much to U.S. GDP as to Peruvian GDP. So the effective gap between the goods and services available in rich and poor countries is not as wide as the numbers show.
Similarly, a U.S. repair shop finds it rational to discard a vise that any number of skilled Peruvian craftsmen would repair even more easily than I did. Getting a new vise for the college shop will add several hundred dollars to U.S. GDP, but it does not make that shop any better equipped than a developing country would be with the old one.
Finally, I never would have paid more than $100 for this vise. But now that I have it, I would not sell it even if someone offered me $250.
That asymmetry is irrational and goes against the grain of basic assumptions of human behavior that drive all sorts of economic theories. I am an economist and I know my behavior does not make sense, but I would not sell my new vise. If someone made me a good offer for my Polish vise’s 95 pounds of well-forged communist steel, however, I might just take it.
© 2002 Edward Lotterman
Chanarambie Consulting, Inc.