The New York Quandary

Groceries are awfully expensive. Subsidies sound gratifyingly easy. Are they?

Act like the end of a record and fade out
All that cha-cha stuff is just played out
Kill the noise and the instruction
Now′s the time for a brief introduction
Feet meet the beat, glad to meet ya
Fancy moves is just how I greet ya
Side to side, jump, step and turn
Set the fire boys and let’s burn
- How To Dance, Bingoboys

Scenic Manhattan

The United States generally can be said to have two particularly dominant cities, one on each coast: Los Angeles and New York City - with various others following in relative strength of influence behind. So the otherwise-relatively-inconsequential role of city mayor has been known to take on some importance in major metropolitan areas, and in particular those two - which partially explains why currently the spotlight has fallen on Mayor Zohran Mamdani of New York City.

Mayor Mamdani is a recently elected Democrat and a member of the wing of the party known as the Democratic Socialists of America; a faction that has for most purposes split off to the left from the rest of the Democrats but remains officially under the same umbrella because of the vagarities of our de facto third party system. (One mighr reasonably argue that the DSA fills a role similar to what the MAGA movement does within the Republican party; the parallel isn’t exact but neither does it seem particularly wrong.) He excels at pulling the party to the left, having purged several moderate members and replaced them with his DSA allies; he likewise excels at drawing the limelight: he regularly draws the ire of President Trump, he has threatened to arrest Israeli Prime Minister Benjamin Netanyahu should he come to New York to speak to the UN (despite lacking the authority to do so, the threat plays well with his supporters), and he is extremely eager to push forward his agenda by taxing the rich as much as possible.

He is an absolute media darling, who proclaim that he has immediately and miraculously balanced the budget - a claim so eyebrow-raising that it bore some looking into (of the “wow! how’d he do that?” sort) - turns out the answer is partially “got a bailout from the Governor” and partially “cooking the books” - not paying pension obligations, and declaring (stop me if you’ve heard this before) a department of government efficiency which would surely cut huge waste and was forecast to produce huge savings.

didn’t we just do this DOGE thing?

There is an actual tax increase in there too, though. It’s what’s being referred to as a pied-à-terre luxury tax on second homes valued over $5 million, yielding an estimated $500 million. (For various reasons that number has been revised down a couple times already, circa $380M at the moment, but surely that number can’t actually fall all that far, right? The real estate market can’t crater that much, right? Eh. New York’s luxury real estate market is surprisingly weird, for a number of historical reasons, and I’ll go into that some other time. There’s some reason to think people will bitch but they’ll pay it.) But suffice it to say, that wouldn’t actually balance the budget. Never mind all that though. Mamdani got credit for it, and he’s riding high.

So never mind this idea about trying to arrest the prime minister of Israel. (I can’t be the only one who thinks that might, uh, spectacularly backfire? My good man, I would tend to suspect that you yourself are not a harder target than say, the supreme leader of Iran, should the Israelis come to regard it that way that, and for that matter if you kidnap a foreign leader with the hopes of handing him over to a foreign court, the FBI response is likely to be sudden and dramatic but probably not warmly welcoming.) I’m sure someone will say “but Trump did it to Venezuelan President Maduro!” - I suppose so, but the Venn diagram of people who approve of both Trump arresting Maduro and of Mamdani arresting Netanyahu is probably a very small group of people. Let’s talk about … a different interesting idea.

It’s probably a good fundamental gripe that groceries cost too much lately. Sure would be nice if prices came down. Mamdani’s thesis: Yes! We will do that for you. The city is going to launch their own grocery stores, offering very affordable food. There’s some pretty enormous discounts - a base of 30% discount on typical retail price on fresh produce, meat, and seafood, alongside 20 additional essential grocery staples like milk, bread, and cheese. Not everything, by any means, but you know, the sorts of healthy things that hopefully you should be eating. This will all be subsidized by the state (e.g. by the taxpayer) and it’s not going to be means-tested; the theory is that savings apply to all shoppers regardless of personal income level.

Now at first glance that might sound pretty decent for shoppers, right? That’s a very significant reduction over what other grocery stores sell this stuff for; the margins a grocery store typically makes is usually just a couple percent on any given product (they’re the classic example of “they make it up in volume” - selling a lot of products and making a little bit on each one) - so this is like having super-amazing coupon specials all the time.

My twelve-year-old looked at me and said “Isn’t this what Standard Oil got busted for?” (good memory!) and I said “More or less, but since they’re the government, there’s no rule against them doing it.”

Now he hasn’t spent any time to speak of in New York, but I explained to him that their shopping experience isn’t as much based on grocery stores and supermarkets like a lot of suburban cities he’s used to; New York City is a lot more like when he spent time in Tokyo: it’s mostly nonstop city with little stores everywhere, at least every block, except instead of them being 7-11s like they are in Tokyo, in New York they’re little family owned stores they generally call bodegas. These mom-and-pop shops are the ones that are going to be suddenly endangered by this policy - and though plenty of people are going to be thrilled that they get their groceries cheaper, I should imagine there are also going to be quite a lot of people who are going to be quite irate that Mayor Mamdani just put Grandma and Grandpa out of business so that his buddies could grab power.

When asked whether the city-run grocery stores would threaten surrounding busineses, Mamdani told reporters that the city’s stores would not pose a threat to bodegas and other grocery stores because they would not sell hot food and cigarettes, items he says drive revenue for existing bodegas and stores.

I doubt New Yorkers are entirely comforted by the thought that their local deli can become a smoke shop.

Yes, ok, this, is in New York, but they can’t ALL be Rasta shops

But don’t worry, I have a plan. I was on the wrong end of this sort of thing before.

Back at Amazon, we were heavily discounting certain books. It’s exactly what you’d think: inevitably, Harry Potter during that particular craze, when no store could keep them in stock, Amazon was getting them in by the truckload, and shipping them out just as fast. And we were selling them at a phenomenal discount, to build the Amazon brand as a good place to buy books cheap (and to demonstrate that not were they affordable, but that we could get them to you quickly).

We were buying so many of them and discounting them so vigorously that something very similar was occurring. You see, smaller bookstores don’t generally buy directly from the publisher, they buy from a network of distributors, who make their money by handling logistics and fulfillment for small numbers of books, and charging a markup - because small bookstores only need a few copies of any given work on the shelf, as a rule. And books are a very “long tail” product - the hot stuff sells quick, the obscure stuff sits and gathers dust - so you might sell a lot of the best-seller list every month and relatively less - eg basically none - of the 1986 Garfield and Heathcliff Volume 2 Greatest Hits Cat Funnies or whatever. But when the new Harry Potter book hit, it would just fly off the shelves. So it turned out that what Amazon was selling this book for to the customer at home was cheaper than the distributor was selling it to the bookstore. And also crucially, Amazon had it in stock in large numbers, when the distributor could only give the bookstore a few copies.

So I got pulled into a meeting with a bunch of cranky fellas. Some little bookstore had placed an order for 2,998 products - which turned out to be one fairly obscure book, and 2,997 copies of the latest Harry Potter novel in hardback. This was an idiosyncracy of the Amazon order form at the time, which permitted you to put in up to three digits in the “how many do you want to purchase” field - and the customer had added Harry Potter to his shopping cart three times and changed the order quantity to 999. Were we really going to ship him a pallet of Harry Potter? We had a lot of other customers who were expecting to hear about the boy wizard, after all, and the purpose of this little meeting was to decide: do we tell this guy no? He’s a competitor (barely), he runs a little bookstore and he expects he can sell a few thousand copies of the new Harry Potter - and he’s probably right - and he is getting it cheaper from us than from the distributor, which is hilarious.

Someone asked the entirely reasonable question: are we making any money selling this book at this price? There was some hemming and hawing and the answer came: “we make a little bit” - turned out it would be actually be more profitable per-unit this way, because we’d be shipping it it in bulk, basically a pallet of books instead of individual boxes. But then we had to weigh that against the expectation that we were trying to otherwise delight three thousand customers, rabid Potter fans who were expecting the latest Boy Who Lived antics courtesy of Amazon’s one-click purchasing and the postal service. We were assured we had the inside track on getting more, many many more, printings of the book as we needed them. Eventually Jeff Bezos himself got pulled into this silly meeting for a few minutes - he was on the same floor, and though he was tremendously overbooked with other things, often triple-booked into various things with the executive team, he often got pulled in for brief consults: in this case, he cut the Gordian Knot. We would in fact sell the thousands of books to the tiny bookstore (and see if we couldn’t make a press release out of supporting the little guy, to stick a thumb in the eye of Barnes and Noble) - thereby making our eight bucks or so of profit across the three thousand of books or whatever absurdly low figure it happened to be given the razor thin margin we ran on that heavily discounted superseller. It really was about that bad, I don’t recall the exact number but it was ridonkulous.

So, long-winded anecdote aside, what’s the connection? Why, I suggest that our friends in New York should look at doing something similar. Just as the the little bookstore effectively got their 2,997 copies of the latest Harry Potter subsidized by Amazon… the little bodegas should look at this as a discount program for them, too! After all, most of these are family-operated micro-stores, and the margins for groceries are notoriously bad. If they could buy a healthy chunk of their inventory at a 30% discount, gosh, that’s a great deal. How about every morning at five AM - right when the city market opens - we go down and fill a shopping cart or two with everything we need to stock the shelves of our little store for the day, at a government-subsidized 30% discount; bring it back and stock the shelves and open by seven; we can sell it for the normal market rate or heck, even at a discount. It’s a little arbitrage play, at the expense of the city - and thus the taxpayers - but maybe it’ll keep the little shopkeepers from being killed off by Mamdani.

Wait, you say. These grocery stores aren’t intended for shopkeepers to come in and buy all the stuff to restock their own stores! Well, the city-owned groceries are deliberately not means-tested - at least as currently declared, they’re not a food stamps / SNAP program, you can shop there regardless of how much or little you make - but if you show up with a tractor-trailer and say I would like to buy the entire produce section and the entire meat department please, load ‘em up - one can imagine that the guy in line behind you is gonna get pretty irate.

That fella is here buying too many groceries again… remind him Luca Brazi sleeps with the (30% off) fishes

Yeah, ok. So let’s say some reasonable limit gets put in place like… one shopping cart per person? This sort of idea was in fact what led to the aforementioned Amazon limit on orders, where the purchasing customer had four “rows” in their electronic shopping cart (one with a single book, the other three with 999 copies of the latest Harry Potter) - and it’s obviously easier to enforce in a physical store. But bodegas are almost stereotypically a family operation - I don’t mean Family in the sense of classic crime movies nor the mumbly Vin Diesel fashion - same difference, right? - I mean the sort of thing where it might be reasonable to think the operation of the little storefront is in fact multigenerational and blood-or-marriage related to a very high degree of reliability. So the scenario doesn’t really change: at five in the morning, when the city market opens, you instead have Grandma, Auntie, and three cousins each bustling about with shopping carts and grocery lists.

Don’t think that’s plausible? Here’s a very real-world example of a “thundering herd” attack on this kind of enforcement barrier. In November 2016, Indian Prime Minister Narendra Modi made a surprise announcement: 500 and 1000 rupee notes were about to be worthless and no longer accepted as cash starting at midnight, and you could deposit a limited number per day at the bank for the next eight weeks after which they were nothing but colorful paper. More than a billion Indians were taken aback by this policy, politely called “demonetization” - and this was a potentially catastrophic move, this was roughly 86% of the country’s money potentially being wiped out, but it was a fairly classic authoritarian play: use the banking system or we vaporize your wealth.

Were the banks really ready for a billion-and-a-half people to open accounts? (Seriously dude, what do you think?) No, of course not - as Al-Jazeera reports, people literally died, but India was not a nation of widespread wealth - the Gini coefficient will readily tell you that there’s a lot of poverty and pockets of extreme wealth, inequality is the order of the day. But at least ostensibly, the thought was: this would reduce corruption because the black market runs on “black money” - cash that the government couldn’t track, so forcing everyone into the banking system would allow it to be measured and managed. While I have some relatively serious misgivings about this particular thesis - not the least of which is the classic answer of “derp, people will use euros or dollars instead of rupees if they can’t trust the Indian government”, I’ll leave them aside for the moment. The immediate problem for everyone who had those rupees was that they now had an eight-week clock before their value burned up.

Some people just want to watch the Joker burn

Most Jokers, even the socialist ones, are not particularly eager to burn up their own nation’s economy once they are in charge of it - nor in general to set their own wealth on fire; the aphorism is generally something along the lines of they only get in trouble once they run out of other people’s money to spend. Certainly, if you are holding a pile of rupees that you probably certainly shouldn’t legally have but you now need to get them into the banking system or they combust, you’re very motivated to deposit them - but the trap that the government has set is of course the auditors eager to ask “so, where’d all this cash suddenly come from?” and bust people for tax evasion and the like.

Well, India is noted for a number of different things, but one that is nigh-universally agreed upon is that there an awful lot of Indians - you know, like more than any other nation on the planet. A veritable trove of human capital, as seems to be the phrase of the moment. This leads to some particularly typical ways to solve problems; RTS gamers might call this a zerg-rush kind of solution - but basically the premise is the quote frequently attributed to either Lenin or Stalin: “Quantity has a quality all its own”. You can solve a lot of problems simply by throwing bodies at them, if you have them and you don’t have the need to be more efficient. How did that apply?

Well, the concept is called money mules - you might have heard the related term from your favorite crime show, talking about smuggling, when people reference drug mules? Same basic premise - some poor schmuck (and yeah, usually literally: some impoverished dude) paid to take risks or do something on behalf of a less ethical employer who is trying to dodge some sort of observation, restriction, or legislation.

This seems all a good bit afield from socialist grocery stories, isn’t it? Or is it? Well, follow my line of thought: if it’s feasible to get a certain quantity of products very cheaply - to buy dollar bills for seventy cents a piece, as the metaphor sometimes goes, then of course you would want to do this, you would want to buy as many as they’d let you buy. Usually, this then becomes “any given person can only buy a limited quantity of such products - you can only buy ten golden tickets a day” or whatever the special item is. (Given how our recent political situation has gone and how much most of these politicians love the limelight, I half expect to see one faction selling Golden Trump Tickets and the other faction selling Golden AOC or Mamdani Tickets, but hell - swap in Willy Wonka for all I care, the point is less about narcissistic politicians and more about limited-opportunity disproportionate financial transactions.)

A day may come when I make a post without memes, when we forsake our friends and break all bonds of fellowship, but it is not this day

And if a given person can only buy ten Golden Tickets a day - then surely the game theoretical optimal answer is that you flood the ticket seller with as many buyers as you possibly can, each trying to buy ten tickets. This is why, for instance, the shopping experience is always terrible on Ticketmaster when it comes time to buy concert tickets and there is a absolute crush of umpty-eight-trillion bozos all trying to buy the maximum number of available tickets and scalp them, leaving you staring at crashed Ticketmaster servers, 14-hour wait lines, and eventual nosebleed seats (or none at all) for your favorite band. Of course, what happened in India was not a Ticketmaster situation precisely - it was more a ticket stuffing situation. You see, there was a certain bank deposit threshold which was “safe” - where you could put in a particular amount of cash and the bank official would smile and nod and say “thank you sar, welcome to our bank, we are pleased to have you as a new member” - this was the Pradhan Mantri Jan Dhan Yojana account intended to be the “intro to banking” account, and up to a certain deposit limit it was automatically flagged for approval. What happened? Of course: wealthy individuals laundered black money by distributing banned 500 and 1,000-rupee notes into proxy accounts in amounts under strict reporting thresholds, hiring others to open new Jan Dhan accounts (usually belonging to poor citizens, employees, or dependents, and depositing amounts just shy of the amount that would trigger the transaction alarm), and various shenanigans with employee advance salaries, commission agents, and crazy money-laundering schemes - I’ll cover some of this below for people who are fascinated by this sort of financial train wreck, but it’d be a lengthy divergence in the middle of this article. In general, though it amounts to: can’t get it done yourself? Well, what if you had a hundred rented jamokes to do it? Think of it like if you’d gone to Home Depot one day and picked up a bunch of the workers that are often waiting in the parking lot - except instead of having them do landscaping work, you had them stand in line at the bank for you. (This metaphor probably doesn’t work in the ICE enforcement at Home Depot era, but I suspect a lot of you may recall the days when you could pull in on Saturday morning, pick up power tools and lumber, and then various laborers would clamor to jump into the back of the truck and ride off with you to do whatever construction project you needed.) Stuffing old retired money into ATMs and withdrawing the new bills? Super easy, barely an inconvenience.

I swear this image was supposed to be in a different article

And similarly: if you can profitably exploit the city grocery system with your brother and your cousin and your uncle… why, just imagine what exploits you could get away with if you brought a greyhound bus full of shoppers and a few (u-haul or logistics) vans outside. On one hand, it would make it seem like Mamdani’s supermarket was a phenomenal success, because clearly sales would be amazing… but then again, everything might sell out - or the lines might be hellaciously long - and the customers who were actually supposed to get the discounted groceries might be a little irate.

Let alone if you bussed in truckloads of people from New Jersey. “Hey! You aren’t even supposed to be in the state, let alone the city!”

Nah. It’ll probably be fine.

Hilariously, in rapid succession, there was a pair of stories from New York, as the mayor’s office realized: “oh wait - people are going to pillage these stores.” The first declared that you would have to show ID (with a valid New York address) to buy groceries from these stores - to prevent outsiders from coming from… wherever… to buy highly discounted products. When the scorn began rolling in, to the tune of “that’s everyone’s objection to migrants” or “you need to show ID to buy groceries, but not to vote” or the like, this policy was immediately reversed … after all, why not, it’s all free money, right, and we can always tax someone else for more of it so that we can deliver more bargains to show how successful Mamdani’s Great Idea is!

Well, let’s wait and see how this develops. I’m sure it’s not over yet. But as ever, my lesson to you is simple: politicians may speak about being directed by best intentions, but once the speeches are over, people behave according to the incentives and not the rhetoric.

For those of you hanging around in hopes of the post-credits recap, here you got. It really was pretty epic the sort of nonsense that demonetization brought out in India. There were areas of the country exempt from this rule - the northeastern states were excluded from it - so people literally flew planeloads of cash there and wheelbarrowed it into banks, the sort of thing that you associate with Zimbabwe or Weimar Republic hyperinflation. Or real estate transactions often represent an exception to the threshold, so a lot of property-purchases-for-cash suddenly took place, with Bollywood movie stars hawking apartments and collecting improbably large commissions. Other classes of business that happen to deal primarily in cash suddenly became highly popular - and in India, most businesses were cash businesses at the time, one of the big reasons for the demonetization push was to try and convert people to more of a digital economy - so the prospect that one might be able to point to a paper ledger and say “ah yes, we sold these products and got this cash, then we paid this cash out and refilled our inventory, and for some reason these couple months were very busy but here are the receipts” … not to be too blunt about it, but it’s sort of a long tradition to make investigations into such things go away with some well placed payments.

There’s a few notable carveouts in the rules: for instance, donations to religious institutions in old notes are exempt from the ban, but a television channel caught on camera a priest at the Govardhan Temple in Mathura in northern India who offered to convert banned currency notes into new ones. Cash gifts received during weddings are exempt from taxation, which has led to some hurried weddings and account-stuffing - congratulations, honey, here’s an enormous dowry, and by the way, we might have to give 90% of it back, or perhaps just you get to wear that jewelry for the wedding ceremony only and then after that it’s going to disappear and it’s never going to be seen again and we’re not going to ask any questions - but we get a nice honeymoon out of it.

Economists who supported demonetization predicted that black money hoarders would destroy their stashes of cash rather than declare them.

I’m sure you’re shocked to learn that people do not, as a rule, destroy their money (nor let it become entirely valueless) if they can figure out another option.