Sunday, July 08, 2007

A Book on the Box

I just finished reading The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger by Marc Levinson. It's a history of the shipping container with a focus on all of the changes that it caused or enabled.

Aside from being a great read, the book also provides a number of examples of basic economic theory in action.

There is a discussion of shipping conferences - cartels of ship lines that set prices, allocated market shares and ensured everyone made a profit. A entire chapter is dedicated to economies of scale - how the smaller ships and ports lost out to a few really large ports based on inland transportation access.

Another section looks at the effects on manufacturing. With much lower shipping costs and times, plants no longer needed to be located close to ports resulting in an exodus from the port cities. Once manufacturers figured out how to make the most efficient use of containerization, we got Just In Time and huge inventory reductions. We also got the rise in the disciplines of supply management and corporate logistics.

Intended to mark the 50th anniversary of the shipping container, it's also a great book on economics. Then again, it's written by an economist.


Product Differentiation - No Chain Stores Allowed

One of the characteristics that separates monopolistic competition from perfect competition is a differentiated product or service. In real estate development this first takes the form of location and then branches off into other areas. A developer in Scottsdale is trying to develop another niche - all stores must be unique. Even though chain stores will pay higher rents, none are allowed in the redeveloped complex.

It's a walkable lifestyle center at the seam of Scottsdale Fashion Square and Old Town Scottsdale, where luxury department stores give way to Indian jewelry shops.

What really sets the $41 million project apart is that it will connect the two existing shopping districts with something entirely different: Each if its restaurants and stores must be local and independent.

No chains allowed...

Southbridge's appeal, by design, is supposed to be its uniqueness. Unger believes that bit of character is something a younger generation wants, Unger said.

He is aiming for the younger-than-50 crowd, and anyone who likes film, architecture, modeling and nightclubs.

"These people are not here to play golf or look at a cactus," he said. "They're here for a different reason."

It's an interesting approach. I also suspect that it's fairly risky. Chains exist because they have a proven business method making them much more likely to be able to pay the rent than startups.


Arizona Board of Appraisal gets slapped

In economics, capture theory is the theory that a regulated firm (or firms) captures the regulator and makes a monopoly profit. The Arizona Board of Appraisal was acting as a captured regulator when it sent two cease and desist letters to objecting to their Zestimates.

Boards become captured because of rational ignorance. Most of the public makes the rational choice that becoming informed about something isn't worth the cost. Hence, only the people that care (firms in the industry) pay attention to what the regulator is up to. In this case, it appears that the public and hence the legislators started to pay attention., the popular real estate Web site, is in the clear for offering its home-value estimates in Arizona.

Earlier this week, Gov. Janet Napolitano signed into law Senate Bill 1291, with an amendment that allows Zillow to operate in the state.

The Arizona Board of Appraisal a year ago ordered Seattle-based Zillow to stop offering its property estimates because it does not have an Arizona appraiser's license...

Charles Havranek, Board of Appraisal vice chairman, said the board at its June 21 meeting voted 6-1 to rescind its two previous letters ordering Zillow to cease and desist.

Note that the board's lopsided vote to recind the letters occurred prior to the new law taking effect.