Economists say there is no such thing as a free lunch. Unless you live in Clayton, Missouri (a high-income suburb of St. Louis). A new Panera location there is trying out a new business model. It offers the same menu as its other locations across the country (with prices shown on the menu), but consumers pay whatever they feel like paying. This is what we call first-degree price discrimination, or personal pricing. Ideally, the company has individuals pay as much as they are willing to pay but there is no way of enforcing that here. Peer pressure will likely do that, but there is no guarantee.

As the article mentions, there are two very different groups of customers that would potentially visit the location: 

The clientele at the Clayton location is a mix of well-to-do attorneys and bankers from Clayton, as well as lower-income customers who work nearby or are visiting the sprawling St. Louis County offices and courthouse nearby. Miller, the cashier, said most customers paid full price for their meals Monday, but some took a discount of a few dollars, or paid half-price.

In order for price discrimination to work, there have to be different types of customers, and that’s definitely the case here. The main question is whether the increased volume of sales by lower-income customers will more than make up for the decrease in profit margins on those sales. Another question is how many of the well-to-do customers will actually pay more than the listed menu price. The data on this experiment would be incredible; I might have to make a phone call here. 

There is one more wrinkle to this story though. This Panera location is separate from the national chain. Listed as a non-profit, it does not have to pay taxes. Instead of paying for the food, customers provide “donations.” Customers save on sales taxes, the company does not have to pay taxes on its profits nor sales taxes on the supplies it purchases.

So why do it? Maybe it’s a public relations gimmick for the main company. Maybe the profits earned by this company can be used to fund the charitable contributions that Panera would normally do, so their profits from the for-profit branches of the chain can be used in other ways. Maybe they want to see if it would work in their for-profit chains. Either way, it’s an interesting experiment.

*Yes, I know it’s not a free lunch. Somebody’s paying for the lunch — whether it’s the high-income customers subsidizing the low-income customers, or the taxpayers subsidizing them by not collecting tax revenues. What can I say? I had trouble thinking of a catchy title to this post.

UPDATE: I’ve sent them an e-mail asking them if there is any way of acquiring their data. Based on past experience, I’m not optimistic, but sometimes people surprise you.

Yesterday, the Senate Energy Committee held hearings about the offshore oil rig that exploded and has to date released somewhere upwards of 4 million gallons of oil. Senators grilled executives from BP (who operated the well), Halliburton (who performed maintenance to the well), and Transocean (who dug the well). Most of the media reports on it mention the blame game that occurred, with each company blaming the other. But what struck me was what Senator Maria Cantwell (D-Wash) said in her questioning of Lamar McKay, president of BP America.

McKay: We have said exactly what we mean: We’re going to pay all legitimate claims.
Cantwell: So harm to the fishing industry, both short term and long term, you’re going to pay?
McKay: We’re going to pay all legitimate claims.
Cantwell: If it’s an impact on business lost from tourism, you’re going to pay.
McKay: We’re going to pay all legitimate claims.
Cantwell: To the state and local governments for lost tax revenue, you’re going to pay.
McKay: Question mark.

What happened was an accident. The investigation will determine whether it was due to negligence or not, but if we are to believe that the evil greedy oil companies are in fact as evil and greedy as some politicians and pundits say they are, then clearly there was no intent to release millions of barrels of oil that could have been sold instead for a handsome profit.

Cantwell’s initial questioning is on the mark. Presuming that it should not be the government’s job to pay unemployment insurance claims for people who lost their jobs because of the oil spill (which I agree with), Cantwell wants to make sure that BP is going to compensate those who were affected by the oil spill. McKay’s refrain of “We’re going to pay all legitimate claims” gets boring quickly, but he really has no choice. He can’t say they’ll pay every single possible claim or BP will see more fraudulent claims than Medicare. There has to be a legitimate legal process by which people make a claim for damages and provide evidence of their injury. It’s the last part of her questioning that strikes me as odd and I don’t know what to make of it. Here it is again:

Cantwell: To the state and local governments for lost tax revenue, you’re going to pay.
McKay: Question mark.

(I have to say that I love McKay’s answer here. Instead of saying “I don’t know” or “We’ll have to see about that,” he says “Question mark.” The only thing I would have liked more is if, in response to a question about whether BP will pay all legitimate claims, he would have said, “True dat.”)

Now, there are two different things that Cantwell could mean by “tax revenue” and, without knowing her intent, I don’t know whether she’s simply ignorant or a tyrant.

Scenario 1: Cantwell is talking about the lost tax revenue on tourism and fishing.

If this is what she meant, the answer is simple: Cantwell is simply uninformed about the tax implications of legal cases and settlements. Since 1996, a legal settlement or court award is considered ordinary taxable income unless it is a personal injury claim, which this is not. Damages for interference with business operations are taxable income. Any payments by BP to businesses affected by the oil spill would be treated as taxable income and state and local governments would get their money that way. (If this were not the case, two companies could both avoid taxes by simply taking turns suing each other and settling out of court.) Senator Cantwell need not worry about the government getting its money…although she might want to look up the law before grilling people to avoid looking so ignorant.

Scenario 2: Cantwell is talking about the lost tax revenue on oil production income.

This one is much more ominous. Oil companies have made a tidy profit in the last few years. Politicians like Hillary Clinton wanted to “take” those profits (20 seconds in) and use them for causes they deem worthy. Representative Maxine Waters would take those profits and “socialize” them. (Her statement is at 1:15 in and I don’t know what’s scarier: that she wants the oil industry to be run by a government that can’t balance a budget, or that it takes her 10 seconds to find the words for government takeover; I think it’s also a bit of a Freudian slip when she says “socialize” instead of the appropriate word, “nationalize.”) One could interpret Cantwell’s statement as in implication that the government is entitled to those profits whether BP actually makes them or not, as I initially did when I heard her words.

If this is what Cantwell meant, it’s a harbinger of bad things to come. Almost as bad as Obama saying that things just work better when we “spread the wealth around.” Unfortunately, in the creeping expansion of government that has happened in the last two years, this kind of thing is all too familiar. The government feels entitled to your money. With the current federal budget deficit and many states in deficit, they need your money. Only if you’re “rich” of course; the poor shouldn’t have to pay any taxes at all and should just get free government. Except if they smoke. That’s bad, and since we’re going to pay for everyone’s health care, we have to punish those evil smokers, even the poor ones. Or if they choose not to buy a federal HHS Director-approved health insurance policy and instead choose to buy a catastrophic plan and save the rest of their money to pay for their own regular medical care. Then we have to tax them because, even though that strategy might save them money and not adversely affect anyone, they aren’t doing what the geniuses in Washington feel is best.

This week, the Minnesota legislature voted to raise income taxes. (Again, don’t worry — it’s only those rich people. I’m starting to wonder what we would do if we didn’t have them around.) City governments are raising property taxes, fines and fees. Pennsylvania issues a commercial threatening people who have not paid taxes that they will be hunted down and found. Some local governments are actually charging you if you have an automobile accident and the police have to come to the scene.

There is a pattern here.

Gone are the days of limited government and individual responsibility. You are not allowed to determine how much salt you can put in food. (If you’re a fan of gluttony, watch Man vs. Food now while you can; in a few years, most of the featured meals will be illegal and the show will be gone.) The President says that “at some point, you’ve made enough money” even if you’ve made it legally. And now, depending on how Cantwell’s statement is interpreted, the government may be entitled to the fruits of your labor whether you actually produce or not. From each according to his ability, indeed.

What’s yours is not yours. The government simply allows you to have some of it.

At least for now.

(Alternate Title: Will Someone With an Actual Solution PLEASE STAND UP?)

I’ve been trying to let more political things slide so it doesn’t make me crazy, but today’s roundtable on ABC’s This Week was so chock full of insanity that I had to post.

First, Al Sharpton is asked what the state of Arizona is supposed to do about their illegal immigration problem. Rev. Sharpton does not answer that question at all, putting it back on the federal government saying “the federal government is supposed to make immigration policy.” (Shame on Jake Tapper for not following up and asking him to actually answer the question about what states should do when the federal government does not do their job.)

Sharpton is no fan of the bill and is organizing a protest on Wednesday. He says it is not about protecting illegal immigrants; it is about protecting legal Hispanics who might be racially profiled. There is validity to his point if you believe that police will not follow the law. (Technically, the law doesn’t do that; but the executive order that Governor Jan Brewer signed the day she signed the law specifically prohibits racial profiling.)

[Aside: We can differ about the extent to which this would be done. Those who have a problem with this bill, mostly liberals, seem to believe that police just love racially profiling and will do it whenever they have the chance; then they say it's unfair that they get a bad rap about their stance on law and order. And it's wrong to presume that someone with brown skin is an illegal alien, but apparently it's totally justifiable to just presume cops are racist. The presumption of innocence works both ways.]

Sharpton’s evidence that the law goes too far in impinging on citizens’ rights? “The recognition of that is the state of Arizona’s legislature just refined what they said over the weekend. They conceded that we’re right and they had to refine it.” Sharpton’s argument is this: the law is bad, and we know it is bad because they had to fix it.

Never mind the fact that the bad parts of the bill WERE FIXED BY THE LEGISLATURE. Sharpton’s mad about parts of the bill that were fixed just days later, and he’s holding a protest over a bill that has been refined and improved. At this point, my brain is starting to hurt just a little bit making sense of this.

George Will tries to make an argument that, when you go to a courthouse, you have to show ID, so why is it unreasonable to ask people for ID, especially when federal immigration law requires all legal immigrants to carry their immigration papers on them at all times, and has done so for over a half century? Sharpton has a very good response to him: EVERYONE at the courthouse has to show ID, not just people that might look like illegal immigrants. I actually agree with Sharpton on this. One solution is to simply ask everyone for ID any time they come in contact with police officers, or any time they use government services. It would seem that the standard Sharpton wants is that everyone has to be asked for ID then, right?

Wrong. When asked about the Democrats’ new bill that would require everyone to show a national ID card for employment purposes, Sharpton doesn’t like that either, saying, “I would have some very serious questions with some aspects of the Democratic bill but I’m going to see what ultimately ends up being the Democratic bill and I’m sure a lot of us in the civil rights community will question parts of it.”

Let me get this straight. Sharpton doesn’t like when people are selectively required to show ID, but now apparently doesn’t like when people are all required to show ID. Not sure what Sharpton actually wants to do about immigration? Neither is George Will, who then asks him, “What enforcement of immigration laws do you support?” Sharpton never answers this question. Neither Jake Tapper nor George Will can get Al Sharpton to say what either states or the federal government can do to enforce immigration laws.

Rev. Sharpton has no solutions, but he throws a darn good rally. And did you catch the double standard he applied there?

In talking about the Republican bill, he ignores the fact that the legislature has amended the bill to improve and refine it; improvements don’t matter, it’s a bad bill and we’ll pass judgment based on the initial bill. In fact, we’ll throw a protest to show our displeasure with the initial bill, even though there have been changes.

But in talking about the Democratic bill, he doesn’t want to pass judgment on the bill until it is improved and refined. Wouldn’t want to jump to any conclusions.

If that wasn’t bad enough, I have two words for you: Bill Maher. I watch his show on HBO every week. I don’t want to be accused by people of only listening to what people who believe what I believe have to say. It’s often frustrating, but it’s definitely educational. He usually has one Republican (if that) and two Democrats, along with himself. When John Bolton mad a statement about protecting our country from terrorism, about 4 people in his audience applauded. Bolten responded, “You let in Republicans?” If you’ve ever watched the show, it’s clear that Maher is a liberal, as is his audience, and his show clearly slants left. He used to be a libertarian but now it would be a stretch to call him that, because he wants more government intervention in almost everything (except for drugs, of course; we all know Bill likes him some weed). He says outlandish things and then uses the excuse that he is a comedian to not be held accountable for them, much like Al Franken does. It was the first time I can remember ABC putting a comedian on a political roundtable and it was to their detriment.

He starts off by playing the “Republicans and conservatives are racists” angle here: “But government intrusion, you know, government power, is something that really bothers conservatives unless it’s directed toward people who aren’t white. It does seem like there’s some of that going on there.”

Tapper counters Maher’s statement with statements by Republican officials condemning the Arizona law. George Will says, “Mr. Maher just said, if I heard him right, that conservatives basically are racists and they like government intrusion only against people who aren’t white.”

Maher clearly said the second part of that. While he didn’t specifically say that conservatives are racists, a) it is undoubtedly implied in his statement, and b) Will did qualify it with the word “basically.”

Katrina van den Heuvel apparently hasn’t been listening to anything that was said, as she says, “I didn’t hear that.” It seems some Democrats want to have it both ways: they want to say that Republicans are racist, so that minorities will vote Democrat, but when confronted they want to say that they didn’t just play the race card. It’s disingenuous and shameful.

To clarify what he said, Maher says this: “Let me defend myself. I would never say, and I have never said, because it’s not true, that Republicans, all Republicans, are racist. That would be silly and wrong. But nowadays, if you are racist, you’re probably a Republican.” Sounds an awful lot like: “Not all Muslims are terrorists, but all terrorists seem to be Muslims.” When people say that, they are called racist. Hopefully that same standard will be applied to Bill Maher. But I doubt it will because, after all, he’s just a comedian.

When Jake Tapper asks him at the end of the discussion, “Bill, what should be done to protect the border?” his response is, “I pass.” He and one or two others laugh. But this is not funny. You’re on a political talk show about serious issues and you pass judgment about those that make policy, even implying that they are racist, but when asked to come up with one policy suggestion, you have absolutely nothing to contribute. I’ve been looking for a reason to cancel my HBO subscription for a while. I think I’ve just found it.

This is the problem with “political dialogue,” if it can even be called that, in America these days. Both Sharpton and Maher want to condemn people who make policy decisions to confront real problems they face because these people made decisions that Sharpton and Maher think are wrong. But when asked what decisions they would make in the face of those problems, neither one of them even tries to answer the question. It’s shameful.

Matthew Dowd, another panelist on today’s program said, summarized it well: “To me, this conversation is another example of why people that tune in and people that think they’re going to get an answer from Washington, from Democrats or Republicans, on almost any issue, whether it’s protecting the environment, whether it’s stopping things on Wall Street, whether it’s immigration reform, whether it’s enforcement of any law. That is why they’re fed up.”

Until someone has an actual solution to something they claim is a problem, I’m not going to listen to what they have to say any more, and you probably shouldn’t either. As they say in economics, if you don’t like the model I’m using, it’s your duty to tell me how to fix my model or show me that another model will yield better results. You may not like how I do something, but unless you can show me what you would do instead and how it would solve the problem better, you’re not a political thinker. You’re just a critic.