We’re feeling it baaaad here in New Orleans. Roughly 8% of our workforce is in the service sector and our film/television industry has ground to a halt. I work in video production. My friends/colleagues and I are basically just sitting around now hoping productions can get back up again in a safe but still somewhat timely manner. It’s going to be rough for a while.
> The restaurant sector generates $3 trillion in annual sales worldwide, and provides employment to a vast number of individuals
Can someone with an economics background tell me whether this is a sound argument? It looks like it could be reasonable to me, but it also looks a lot like the examples of deadweight losses in Bastiat's "That Which is Seen, and That Which is Not Seen".
I would guess that we should count the $3T transferred as a cost on one side of the book and as a benefit on the other side, and from an accounting standpoint not care much either way. I'd also guess we should somehow try to compare the relative value of the service on each side of the transaction to gauge somw "surplus" value. People get food they value at $3.1T, and they pay $3T, and the workers would have done the job for $2.9T, so society wins by $200B in aggregate. Or something. But maybe that's nonsense?
I don't know if that's reasonable, but I am fairly convinced that we shouldn't dig $3T worth of ditches just to fill them in. That is deadweight loss.
At the very least I think we can assume that restaurants are not a deadweight loss because they're profitable, though. People often choose to pay that premium over cooking for themselves, and we should trust that those choices reflect personal relative value well.
There's certainly some broken window logic being applied, but not 100%. There's no doubt that some economic decisions (investments, employment choices,etc.) made before the virus would not have been made given what we know now. If we had an impossibly flexible economy where everyone could be immediately rehired as deliverers and expert physicians and restaurants and assets could be reatomized into hospitals and toilet paper then maybe the impact could be very small. It's possible that in such a world the investment decisions made not knowing the virus was coming wouldn't differ much from the decisions that would have been made with perfect prescience. But in reality there will be some cost caused by the difference in economic choices made not knowing this was coming. The sum over everyone's future income streams will be smaller than they would have been because of worse resource allocation. I agree it won't be the full $3T but don't have the expertise to estimate it.
I don't even know how to comment on this. The restaurant industry isn't just about food. It's about life. It may make just 3.5% of world's GDP but for many people it's most of what they do outside of home. I feel it more acutely than ever now when all restaurants are closed due to the quarantine, in our place.
I think the most important thing is that they're both a net wealth transfer to local food service workers (who by and large are relatively low income) and fuel demand down the road.
Most people will be able to cook for themselves just fine, but by doing so they'll be saving money, which would otherwise have been spent locally. This means that that money won't go on to restaurant workers to be spent, and the remainder won't show up as profit for the restaurant. (Instead it'll go into savings, which will likely have a negligible effect at best since money is ~free to borrow these days)
Locally this will lead to a depressed demand for everything and globally lead to a decrease in paper GDP and profit for the companies (read: stonks go down).
So honestly, I would argue that paying people to dig ditches (vs do literally nothing else, though at that point you might as well just give them cash) is in and of itself beneficial, though of course less so than doing something that generates a benefit outside of that from the activity itself.
You have to be careful to separate supply and demand.
In the US the Fed regulates total nominal demand (= spending) in the economy. When the Fed is doing their job well, it doesn't matter for nominal spending whether any one industry, like restaurants, is disturbed or not. Or whether some industries are booming.
The Fed will just adjust how much money they are 'printing'.
But what matters are supply side factors.
All those people patronising restaurants or working there presumably did so because they preferred it to the alternative ways to spend their money or time.
After a disturbance, they will have to make do with their second (or third or fourth..) best opportunities instead.
If the disturbance was a long term shift in consumer taste, we should hasten the transition of workers out of that industry.
But the current crisis is presumably temporary. So we pay for lots of friction of adaption back and forth, just to get back to where we used to be. (The adaption is still a good idea. It's probably better for waiters to become eg Uber Eats drivers than to twiddle their thumbs.)
Or it's just a correction; especially in the US, the eating out culture is ridiculous, and the staff are massively underpaid and taken advantage of (zero-hour contracts, low wages, dependence on tips which in practice means they're expected to do a lot of additional emotional labor, flirting, etc).
This money is not lost from the economy; people still have to eat after all.
Not sure how well this correlates to revenue lost though. I'm sure there is massive impact, I wouldn't be surprised if there is also a corresponding uptick in takeout orders.
My wife an I opened a nail and wax salon 6 months ago. Really don't know what to do, so far they haven't asked us to shutdown. Business had been steadily growing and we are about break-even. No idea how this will play-out, what if anything the building owner can do to help out, or how the federal help might work for a small business like ours.
The rent and payroll are our biggest expenses naturally, we can of course cut hours and even close entirely; no idea what our staff will do with no income.
If this lasts more than 3-4 weeks (which is likely), yeah it's hard to say how any business is going to survive.
Only good thing is I have a full time job for a major health company and our mobile app usage this week has sky rocketed... so my day job is quite secure at least.
One thing that people are recommending is to offer prepaid packages that customers can use once things normalize. You provide a slight discount, the people with steady jobs transfer some liquidity to you, and you just have to give a bunch of free service in the coming months.
It's like a micro version of what the Fed is doing with banks.
As a consumer, you should only buy gift certs and prepaids to the extent you could lose the money and be ok with it.
If this gets a lot worse, you’ve pre-bought a bunch of meals out, you lost some/all of your income, you might not want the expensive meals over the cash, and you even less want those to be an IOU from a bankrupt place.
IF you are i the US employees may be eligible for unemployment immediately even if employed with full/cut/zero hours. Not super helpful to you as the owner unless you can also apply but could make a shutdown easier on staff.
Many localities, states, and the federal government have programs to freeze rents, mortgages, and provide assistance in the form of interest-free or low-interest loans to help you make ends meet if necessary!
If your area has been declared to be in a state of emergency, you might qualify for a small business loan set up just for the purpose of helping businesses such as yours survive this:
People are trapped at home, itching to get out. You run aggressive promotions right now to drive up your customer base since everyone is sitting at home bored with nothing to do.
Not to trivialize the numbers, but people still have to eat, so these dollars are largely being re-allocated elsewhere, primarily to takeout, food delivery, and grocery stores. Other sectors that are service-based represent real net loss in GDP.
Yep. Food cost is usually about 1/3 of the bill; 1/3 to rent and overhead, 1/3 to staff. If a few percent can be squeezed from any of those areas, there's the restaurant's profit.
On the other hand, restaurants are operating on economies of scale (and they get wholesale prices for their raw materials -- their groceries are much cheaper per-portion than yours). Don't get me wrong, cooking at home can be cheaper than eating out -- but only if you're cooking large batches of food or are buying ingredients that can be used for more than one meal.
You'd be surprised how cheap individual portions of food are for restaurants.
Restaurants will shutter, and hourly workers dependent on tips will majorly suffer. Even the economic stimulus mentioned today won’t go to all the immigrant labor that runs many (most?) kitchens.
For sure but don't forget that many people cannot work right now and are not getting paid so many people and spending far fewer dollars in whole so their spending may be far far less as a result, for example, buying some bags of rice, beans etc.
I've been trying to encourage people to support local eateries by getting takeout.
I have a compromised immune system. I don't do a lot of eating at restaurants. I do get a lot of takeout and have for a lot of years now.
If you call ahead or order online and pick up, it minimizes your exposure to other people. Little Caesar's has a pizza portal where you can order online, pay online, enter a code at the store and retrieve your own pizza from a customer-facing warming oven without ever directly interacting with a person.
If you aren't sucking wind financially as a consequence of layoffs and shut downs, getting takeout can help protect our economy from a total meltdown while fostering new habits for a healthier future culture.
I'm still getting takeout and some staff at eateries are beginning to greet me enthusiastically by my first name like I'm their best friend, apparently thrilled to pieces to have a regular customer while business is hurting.
Anyone knowledge about the probabilities of getting infected from takeout / delivered food? Either via handling at the restaurant itself or en route. All indications are that the virus can survive quite a while on smooth surfaces like plastic bags.
The only thing I know, is the people making the food probably don’t get paid sick leave. With the huge demand in place for delivery food, the pressure is on from their bosses to keep coming in no matter how sick.
“The risk of getting infected from food delivery is pretty low but not zero,” says Daniel Kuritzkes, chief of the division of infectious diseases at Brigham and Women’s Hospital in Boston.
One thing you could do if you’re really worried is toss the food in the oven for a little while (works best with Thai or Chinese food, think currys or rice/noodle dishes) and chuck all of the packaging
Wash your hands before you touch anything else and then when you grab the food out of the oven you should be in the clear
I have a lot of procedures in place for dealing with it if someone at the store coughed, sneezed, etc.
Things get eaten promptly.
We typically order as close to exactly as much as we will eat. We rarely keep leftovers.
Trash always goes out promptly after the meal is finished. I don't even own a trash can.
Everyone washes hands promptly.
If there was an incident and we feel things are contaminated, we don't keep empty bags, leftover condiments, etc either. If everything is clean, we are willing to keep such things.
There are some articles on HN talking about how long it can live on surfaces. You could use the search function to dig some up.
So my understanding is the best items are ones that have limited human interaction after cooking. Curries, soups, wings are better than sandwich tacos salads
Is personal charity to business owners really an effective way to help prevent a recession? What if you're supporting one of the weaker businesses that could barely survive anyway? Those are usefully killed off in a recession, improving overall efficiency. The more that close down, the better business will be for the survivors.
It's not charity. I'm dependent on takeout. I'm supporting businesses I've supported a long time.
I'm not going to eateries I wouldn't normally go to. I would be very negatively impacted if the eateries I frequent shut down.
I have a very deadly medical condition. I've had to somehow make my life work in the face of very hostile conditions, in a world that didn't want to accommodate my need for germ control.
I'm supposed to be on boatloads of drugs. I used to be on boatloads of drugs. I gradually got off all of them.
Prevention of exposure to germs to begin with played a role in that.
Like many people, I am worried about both germ control for everyone and economic survival. Unlike most other people, I've wrestled with such questions for me and my family for about two decades and developed some best practices.
Calling ahead or ordering online and getting takeout is one of those best practices.
It has worked for me for a long time under extremely difficult circumstances.
Why is "overall efficiency" in any way important? As compared to people having stable livelihoods, diverse and wonderful local businesses instead of "efficient" and monotonous chains.
The obsession with efficiency at the cost of other, far more worthy virtues is what has brought us to this point, where "efficient" global supply chains cannot now produce urgently needed goods at a time of crisis.
Is this really that surprising given that states and countries are now explicitly prohibiting dine-in options and mandating restaurants to be takeout only? I'd love to see this data overlaid against the changes in takeout orders.
Absolutely. My town shut down restaurant eat in this week, but when I went my favorite Thai place for pickup the owner said they had one of their busiest Saturdays ever. Despite fear, rational or not, people still need to eat.
Most of those changes were AFTER this data represents. The situation escalated very quickly.
I have a niche SaaS that helps brick and mortar retail stores in North America. There was a drastic shift on Thursday. And it escalated daily.
To give a sense of the speed and scale of the shift. All of 2020, at least 1/2 of stores were up at least 10% daily (great growth for retail).
On Thursday, a majority of stores were down for the first time all year. By Sunday, 3/4 of stores were down at least 10%. On Monday, 1/4 of stores were down 50% for the day.
I am not looking forward to reviewing the numbers tonight.
I feel for the industry, but I'm having a hard time seeing myself buying gift cards at a moment when I'm wondering if I will have a job or food for my family.
Readit News
The restaurant sector generates $3 trillion in annual sales worldwide, and provides employment to a vast number of individuals.[a]
Absent government intervention, the cascading economic impact from just this one sector will be enormous.
[a] https://medium.com/@CravyHQ/the-restaurant-industry-a-global...
Can someone with an economics background tell me whether this is a sound argument? It looks like it could be reasonable to me, but it also looks a lot like the examples of deadweight losses in Bastiat's "That Which is Seen, and That Which is Not Seen".
I would guess that we should count the $3T transferred as a cost on one side of the book and as a benefit on the other side, and from an accounting standpoint not care much either way. I'd also guess we should somehow try to compare the relative value of the service on each side of the transaction to gauge somw "surplus" value. People get food they value at $3.1T, and they pay $3T, and the workers would have done the job for $2.9T, so society wins by $200B in aggregate. Or something. But maybe that's nonsense?
I don't know if that's reasonable, but I am fairly convinced that we shouldn't dig $3T worth of ditches just to fill them in. That is deadweight loss.
At the very least I think we can assume that restaurants are not a deadweight loss because they're profitable, though. People often choose to pay that premium over cooking for themselves, and we should trust that those choices reflect personal relative value well.
Most people will be able to cook for themselves just fine, but by doing so they'll be saving money, which would otherwise have been spent locally. This means that that money won't go on to restaurant workers to be spent, and the remainder won't show up as profit for the restaurant. (Instead it'll go into savings, which will likely have a negligible effect at best since money is ~free to borrow these days)
Locally this will lead to a depressed demand for everything and globally lead to a decrease in paper GDP and profit for the companies (read: stonks go down).
So honestly, I would argue that paying people to dig ditches (vs do literally nothing else, though at that point you might as well just give them cash) is in and of itself beneficial, though of course less so than doing something that generates a benefit outside of that from the activity itself.
In the US the Fed regulates total nominal demand (= spending) in the economy. When the Fed is doing their job well, it doesn't matter for nominal spending whether any one industry, like restaurants, is disturbed or not. Or whether some industries are booming.
The Fed will just adjust how much money they are 'printing'.
But what matters are supply side factors.
All those people patronising restaurants or working there presumably did so because they preferred it to the alternative ways to spend their money or time.
After a disturbance, they will have to make do with their second (or third or fourth..) best opportunities instead.
If the disturbance was a long term shift in consumer taste, we should hasten the transition of workers out of that industry.
But the current crisis is presumably temporary. So we pay for lots of friction of adaption back and forth, just to get back to where we used to be. (The adaption is still a good idea. It's probably better for waiters to become eg Uber Eats drivers than to twiddle their thumbs.)
This money is not lost from the economy; people still have to eat after all.
You do know about this thing called service sector that accounts for more than half of the economy ?
I understood that in the US, waiters make fairly good money because of tipping, no? Which isn't the case of other workers though.
Deleted Comment
The rent and payroll are our biggest expenses naturally, we can of course cut hours and even close entirely; no idea what our staff will do with no income.
If this lasts more than 3-4 weeks (which is likely), yeah it's hard to say how any business is going to survive.
Only good thing is I have a full time job for a major health company and our mobile app usage this week has sky rocketed... so my day job is quite secure at least.
It's like a micro version of what the Fed is doing with banks.
If this gets a lot worse, you’ve pre-bought a bunch of meals out, you lost some/all of your income, you might not want the expensive meals over the cash, and you even less want those to be an IOU from a bankrupt place.
As a shop owner, it’s indeed quite cheap loans.
https://disasterloan.sba.gov/ela/
People are trapped at home, itching to get out. You run aggressive promotions right now to drive up your customer base since everyone is sitting at home bored with nothing to do.
Encourage people out of their homes at a time when it seems that the exact opposite is needed to start controlling the spread of the virus?
You'd be surprised how cheap individual portions of food are for restaurants.
I have a compromised immune system. I don't do a lot of eating at restaurants. I do get a lot of takeout and have for a lot of years now.
If you call ahead or order online and pick up, it minimizes your exposure to other people. Little Caesar's has a pizza portal where you can order online, pay online, enter a code at the store and retrieve your own pizza from a customer-facing warming oven without ever directly interacting with a person.
If you aren't sucking wind financially as a consequence of layoffs and shut downs, getting takeout can help protect our economy from a total meltdown while fostering new habits for a healthier future culture.
I'm still getting takeout and some staff at eateries are beginning to greet me enthusiastically by my first name like I'm their best friend, apparently thrilled to pieces to have a regular customer while business is hurting.
source: https://www.wsj.com/articles/what-are-the-risks-of-food-and-...
Wash your hands before you touch anything else and then when you grab the food out of the oven you should be in the clear
Things get eaten promptly.
We typically order as close to exactly as much as we will eat. We rarely keep leftovers.
Trash always goes out promptly after the meal is finished. I don't even own a trash can.
Everyone washes hands promptly.
If there was an incident and we feel things are contaminated, we don't keep empty bags, leftover condiments, etc either. If everything is clean, we are willing to keep such things.
There are some articles on HN talking about how long it can live on surfaces. You could use the search function to dig some up.
Edit: here's one:
https://news.ycombinator.com/item?id=22611099
I'm not going to eateries I wouldn't normally go to. I would be very negatively impacted if the eateries I frequent shut down.
I have a very deadly medical condition. I've had to somehow make my life work in the face of very hostile conditions, in a world that didn't want to accommodate my need for germ control.
I'm supposed to be on boatloads of drugs. I used to be on boatloads of drugs. I gradually got off all of them.
Prevention of exposure to germs to begin with played a role in that.
Like many people, I am worried about both germ control for everyone and economic survival. Unlike most other people, I've wrestled with such questions for me and my family for about two decades and developed some best practices.
Calling ahead or ordering online and getting takeout is one of those best practices.
It has worked for me for a long time under extremely difficult circumstances.
The obsession with efficiency at the cost of other, far more worthy virtues is what has brought us to this point, where "efficient" global supply chains cannot now produce urgently needed goods at a time of crisis.
So, you can get pad thai takeout from a restaurant. But you may not be able to get a box of noodles from a grocery store.
I have a niche SaaS that helps brick and mortar retail stores in North America. There was a drastic shift on Thursday. And it escalated daily.
To give a sense of the speed and scale of the shift. All of 2020, at least 1/2 of stores were up at least 10% daily (great growth for retail).
On Thursday, a majority of stores were down for the first time all year. By Sunday, 3/4 of stores were down at least 10%. On Monday, 1/4 of stores were down 50% for the day.
I am not looking forward to reviewing the numbers tonight.
Here in NC we just joined the list of states that have banned dine-in service entirely. Curbside or delivery only, after 5PM today.
Basically, a site that helps you buy gift cards and support your favorite local restaurant through the COVID pandemic.
Would love community feedback!
That is the problem with "corona panic", it causes other people to panic and behave irrationally