Queue is now a game. But not always.
In Poland, during the 1970s, you might have taken an hour or two off from work, rotating with a brother or sister, to stand in line. Everyone could have been waiting for a pair of shoes but if a shampoo were available, you bought it. There were even queue rules like mothers with small children got to go first. So people temporarily borrowed small children.
The creators of the game Queue want to remind us that while the game is “great fun, … Queue reconstructs a reality which, for the people who lived it, was no fun at all.” So players have a shopping list that is virtually impossible to locate. To win they need to outsmart meat shortages, surly salespeople, long lines and dishonest officials. They experience corruption, a black market, and frustration. And unintentionally, there really were shortages because Queue’s developers had not produced enough games.
I downloaded a free English version of the game that includes a fascinating description of the Polish Communist-era command economy. It even includes several pages of Polish political jokes about Communism:
- A symptom of memory loss: when you find yourself standing with empty shopping bags in front of a store and cannot tell whether you were going in or coming out.
- What is it: a many-legged creature that is at least 20 meters long and eats meat yet has to make do with potatoes? The queue in front of the meat store.
Or here is their quote from a Polish citizen who describes his trip to London:
- “…when I first went to London–on an official visit–I photographed sausages, ham, and meat displayed in store windows. Later, I would show these photos to friends, explaining that you really can go into a store and buy these things just like that. These were shocking revelations.”
Our bottom line? Through Queue, we can see the perverse incentives that a command economy creates. The game reminds us that when a small group of people tell all of us how to answer the 3 basic economic questions (below), we respond to counterproductive incentives. The result is multiple inefficiencies and wasteful transaction costs like queues.
3 economic questions that all economies answer:
- What goods and services should be produced?
- How should goods and services be produced?
- Who should receive the income?
Sources and Resources: I first read about Queue in this WSJ article. However, the English translation of the game says it all. Finally, to identify contemporary command economies, the Index of Economic Freedom is always a handy resource.
A Communist Queue
Our story begins with 3 Greek entrepreneurs who want to create an e-commerce business selling olive products. It ends as Oliveshop.com begins to flourish with orders from the U.S., Australia, Japan, Mongolia and beyond.
The middle of the story, though, is the problem.
Occupying 10 months, these entrepreneurs filled out an avalanche of forms, satisfied tomes of regulations, stood for hours on lines, and endured multiple inspections. The pension office needed proof that that their pension contributions were up-to-date. The Health Department required lung x-rays and stool samples. Greek banks would only process payments if they switched the language of the website from their clients’ languages to Greek. And, there was much more.
Our bottom line: Procedures ranging from forms to lines to inspections are called transaction costs. The higher the transaction cost, the less likely the activity.
The Economic Lesson
During 2011, the Greek GDP contracted by 6.9% while its debt climbed to 165% of GDP. Meanwhile, its unemployment rate is close to 20%. Greek statistics provide tangible evidence of how excessively high transaction costs can retard economic activity.
In a Teaching Company Course, “America and the New Global Economy,” economist Timothy Taylor tells us the nations with considerable regulation tend to have more corruption. Correspondingly, Transparency.org’s Corruption Perception Index 2011 gives Greece a low grade for 2011.
In the World Bank’s Doing Business Index 2012, for the “starting a business” category, Greece ranks 135 out of 183 countries. (The U.S. was #13 and New Zealand, #1.)
This 2012 McKinsey Report looks at Greece’s problems and its potential.
An Economic Question: How does one new business affect the 4 GDP components (business, consumer, government purchases and exports minus imports)?
Which friction minimizing invention received a patent in 1999?
Described by Amazon in their application for patent 5,960,411, the purchaser just hits a button that activates the movement of payment information from “the client system” to the”server system.”
Because 1-Click glides the customer through the purchasing process, it fits Swarthmore Professor Barry Schwartz’s definition of friction-free finance. In a NY Times opinion column, Dr. Schwartz explains that transactional friction can be good and bad. With Amazon, 1-Click can help us save time and energy that we can use productively elsewhere.
Sometimes though, as with the subprime mortgage debacle, too much ease can let us forget the reality of the transaction. When mortgage packages and online “paperwork” eliminated time, effort and friction, the number of transactions multiplied. And the rest is history.
Professor Schwartz concludes by asking us if we would all be better off if we increased financial friction.
The Economic Lesson
A synonym for financial friction is transaction cost. When you call a pharmacy and spend 5 minutes moving through a menu before you can place your order, you have incurred a transaction cost. If an unemployed person has to fill out many forms when applying for a job, he or she has experienced a transaction cost. And, in the former Soviet Union, the everyday transaction cost of standing in line for hours to purchase food and clothing might have led to Communism’s demise.
Much more than friction, 1-Click criticism, expressed in Wired.com, has been about a patent for a payment process.
An Economic Question: What transaction cost have you recently encountered?
Done with grocery shopping, you scan the registers and select the shortest line. Standing there for 2 minutes, your time flies. Another minute? Okay. But then, according to research, when the time hits 4 minutes, you believe you have been there for 6 and 5 minutes feel like 10.
In one unscientific study, a reporter compared wait times at 5 NYC supermarkets. He concluded that a central line that directed people to one of 30 registers moved people along quickly. By contrast, with a slow checker or a problem buyer delaying customers, the slowest system was the traditional line at each register. (Studies have confirmed his conclusions.)
Random line facts:
- To choose a quicker line, a researcher says to divide the number standing in line by the number of customers that join the line each minute. (But, how much time will that use up??)
- Waiting in line, men typically become impatient at 2 minutes and women at 3.
- Some suggest avoiding lines with people who tend not to rush like the elderly.
- Lines surely sped the demise of the former Soviet Union. Employed by the state, sellers cared little about customer service. Consequently, hours of standing in line eliminated massive amounts of productive activity.
Discussing the merits of the reverse pyramid and back to front, econlife looked at airplane boarding lines here.
The Economic Lesson
A line represents a transaction cost. Defined economically, cost means sacrifice. Standing in line, we are sacrificing what we otherwise might have been doing and thereby adding to the cost of the purchase. During the business day, the transaction cost of a line can be high. During a summer vacation, the cost of standing in line for ice cream can be minimal.
An Economic Question: Using the economic definition of cost, explain why certain people might not mind standing in line while others avoid the experience.
During August evenings in Nantucket, the lines are long at the Juice Bar. Outside each of two doors is a line stretching along the sidewalk. Once you enter the doors into the shop, you can select among (sort of) 6 lines to get to the counter and order your ice cream.
Analyzing the experience, journalist Anand Giridharas says that forming orderly lines had been equated with “middle class behavior”. In India, traditional lines looked like trees with branches as mini lines sprouted next to the trunk and others cut in. Then, though, with the emergence of a middle class, the acceptance of branches and those who cut in was replaced with orderly single file lines. Similarly, when McDonald’s arrived in Hong Kong, they “introduced queue monitors” to replace the traditional chaos around registers.
Perhaps we can view lines as reflections of democracy and the market. Democracy dictates that we are all equal with the same opportunity cost for our time. The market, instead, implies that those who can pay deserve to go first. I guess whenever we fly, we are choosing between a democratic experience (coach) and the market (first class).
The Economic Lesson
A line represents a transaction cost. Defined economically, cost means sacrifice. Standing in line, we are sacrificing what we otherwise might have been doing. During the business day, the transaction cost of a line can be high. During a summer vacation, the cost of standing in line at Nantucket’s Juice Bar is minimal.
With lines reflecting the dysfunction of the former Soviet Union, the huge transaction costs helped to speed its demise.