Why Marx gets all the love from the academic left while the ghost of Henry George hangs out in Nomadland is a question I've been asking for decades now.
To paraphrase Stalin, "how many divisions has the Georgists?" Marxists are willing to kill and conquer their opponents whereas Georgists write strongly worded letters.
But Karl and Henry say much the same thing in somewhat different ways: for Karl the issue is the "consumer surplus" of employers, and for Henry the issue is the "consumer surplus" of landowners (or the "negative consumer surplus" of workers and tenants).
The really important question that the marxists in particular are keen to disregards is the *size* of those issues, both absolute and relative: whether the surplus is large or small, and whether the landowner surplus is larger than that of the employer. In the current UK situation it seems to me that the landowner surplus is much bigger than that of the employer in much of the country.
As several studies show after Thatcher and Blair the UK has become again a "rentier paradise" with capital investment chasing much higher "passive income" than profits from industrial business,
This is an interesting argument. In the scenario you’ve described, wouldn’t you still expect to see supracompetitive profits on the books of NY grocery retailers? Rent and permitting expenses should push up the retailers’ average cost of goods sold, but not their marginal costs. Relatively high average costs combined with relatively low marginal costs should give you either (1) an airline-industry scenario, where prices are competitive(-ish) and firms are constantly struggling to stay in business because marginal prices are too low to cover their average costs, or (2) a collusion scenario (could be either express or tacit collusion) where firms avoid aggressive price competition, and charge supracompetitive prices, facing little threat from new entrants because the high average costs serve as barriers to entry. Now the landlords / permit-holders would capture some of the supracompetitive profits, but it seems highly unlikely that they could calculate their charges so efficiently to capture 100% - you’d expect to see a split between the landlords / permit-holders and the retailers. (I’m not sure this changes your analysis about Mamdani’s proposal, by the way, just trying to think through the details.)
I think they do calibrate their rents to capture pretty much all the supernormal profits on average and over the cycle, so the operators are left hanging on, making enough of a surplus during anomalously good times to make it worth their while hanging on during downturns
Yes it's a little unclear if these low profit margins refer to price-mc or price-ac. But even in "mainstream econ" that Dan snipes at higher fixed cost mean less entry, which means fewer firms and less competition but each firm producing more per firm, so higher on their mc curve.
Also, while Ricardo was right about land being in a sense "naturally" in inelastic supply, this is not necessarily true of "retail space" (or housing for that matter) except by policy choice, so i think mainstream econ here goes a little deeper than Dan is letting on
I’ve always wondered about the history of rent controls in New York. I mean, in Berlin you can understand that rent controls are politically popular, because of the inherent suspicion of banks and “Kapitalismus”, though of course that didn’t prevent Private Equity buying huge blocks of apartments 20 plus years ago. But New York is full of wealthy people, so rather ironic that it’s also found a way to have rent controlled property.
Nowhere clearer than in the U.K. housing market where landowners generally escape blame for high prices in favour of pointing the finger at “blockers”.
As is often the case, you've encapsulated a 'gimme a break' conclusion of mine- if you can look around at the modern world and not conclude that a huge driver of consumer prices is 'the people who own stuff have decided to make more money' then you are in the midst of a particular Chicago-school fever from which there may be no saving you.
One nuance that I think supports this argument is that in the US outside New York, grocers often pay very low rents because they function as anchor tenants in strip malls. The shopping center owners give the grocers de minimis rents because they drive traffic to the properties, and make it up by charging more ancillary businesses (dry cleaners, liquor stores, banks, etc) higher rents to access that traffic.
In most of New York, this doesn't work, because grocers are just neighborhood retail tenants like any other, so they have to pay the prevailing neighborhood retail rent. They might get a bit of a discount because they can occupy space that other retailers can't (above- or below-grade, deeper spaces with less frontage, etc), but it's not nearly at the level of the anchor tenant discount that they get from shopping center owners. The result is a higher rent burden and higher prices, as you say--and also a reason that bringing more Wal-Marts won't solve the problem (there just isn't enough land to build shopping centers that would create an anchor tenant dynamic for them).
«if the city owns the land, and internalises the zoning gain from giving permission to use the building for a supermarket, then it’s intrinsically working from a lower cost base. [...] Obviously, one might say that it would be better to deregulate retail zoning and directly attack rents that way»
Our blogger is victim of the usual centrist/"abundance"/thatcherite claim that zoning creates rent but for land Von Thünen's Law (which applies to residential and commercial property too) rents are simply a private tax on wages, and zoning mostly redistributes the rent among landowners
Without the Zohranmarkets the rent from wages gets captured entirely by property owners, with the Zohranmarkets a part of the rent is transferred to residents (whether working or not, whether taxpayers or not) from local taxpayers via lower retail prices because the city instead of renting the land it owns at whatever the market will bear uses it to lower Zohramarket rents.
Rentierism happens when elasticity of supply is low and elasticity of demand is high and in the residential case when the supply of good jobs in an area grows faster than the supply of housing within commuting distance.
The best way to fix that is not to try and increase the supply of housing within commuting distance because that simply increases congestion; it is to partly move the supply of jobs to some area where housing is relatively more plentiful, distributing job growth around the country instead of spending enormous amounts ren rezoning to increase density there.
Great piece for so many reasons. One thing to add: Zohran doesn't expect to make a profit. The point is to subsidize food essentials for people who live in food desserts, on the model of PX's.
Nice! Reminds me of a related criticism of fixed-pot competitive grants favoured by recent UK governments to bung resources to councils: on expectation, the resources expended by the bidders in the competition will equal the size of the pot, less epsilon. Allowing for the cost of holding the competition, the net value is likely negative. Drawing lots would be more efficient.
«training in Marxist economics tends to give you a) a weird, unrealistic and largely useless theory of economics plus b) a clear understanding of how economics relates to political power. While a training in mainstream neoclassical economics only gives you the first of these.»
My impression is that neoclassical economists have a very clear and deep "understanding of how economics relates to political power" and that is why they are neoclassical Economists instead of marxist economics and avoid that topic zealously for the sake of their careers :-).
NYC: formerly known for beckoning the poor huddled masses to Lady Liberty and Ellis Island, now known for its notorious Billionaires Row of empty pencil-thin skyscrapers; not a single Walmart (although some Aldi's) but you can get groceries finally at the local Erehwon store (home of the $85 baseball cap)...inside a Members Only club that costs a fortune to join.
Meanwhile, up in famously anti-tax "Live Free or Die" New Hampshire the state has a monopoly on liquor sales through its chain of liquor stores, with half of the sales coming from out of state residents. Nothing like a state liquor store right off the highway to encourage safe driving! What's the point in having a vice you can't profit from?
The half truth about "the only things certain in life are death and taxes" needs to be made more complete with some additional certainties, like "politics, and property," which are indeed closely related, and you'd be surprised to see what marriages of convenience they lead to.
So get your socialist hands off my state-owned liquor stores. And come to nuh hamp shuh for the resulting lower tax burden...we hate taxes, just in case you forgot. And NYC: yeah, send me your "poor huddled masses" so they can do the landscaping, but keep them outside our famous velvet ropes that keep all the nobodies out.
If you want to understand NYC, remember that famous line by (Groucho) Marx: "I refuse to join any club that would have me for a member"? That was a joke.
Actually, people are practically begging to be let "in." And others are equally determined to keep them "out."
Most of this might very well be true but 1) you strawman unfairly the alternative of "deregulate retail zoning" by bringing in Walmart and 20 years into it, even though Mamdani himself is actually trying to do that (good) and 2) doesnt change the fact that putting in these stores with a "we will always undercut private bodegas by 30%" is about the dumbest way to do it since it will most likely drive private groceries out and possibly lead to a price increase since it changes market dynamics to a price-leadership situation, with the private stores having foreknowledge of how the Mamdani stores will react (very bad)
To whom? If capitalists didn't invest and own property for whom would the bell toll? Donne told us - it tolls for thee. Keep up the discourse and prompt the thinkers, but don't tolerate underachievers.
Looking at simply just the profit margins of retailers is not a helpful way to solve for grocery inflation. Sure retailer margins don't wary wildly, but products prices do wary significantly (For example you have Equate Aloe Vera hand wash at Walmart for $1, and Cucina Lime Zest at $37).
Now if going by purely free market dynamics, it's in everyone's best interest to sell the $37 hand wash, except for the buyer, and everyone in the supply chain will try their best to do this, to the extent of hiding and delisting cheaper alternatives.
A state run grocery store (apart from lowering rent costs) can and should optimise the SKU assortment in a way that cheaper (yet effective) products are easily and readily available.
Margins on groceries are important to track, but so is premiumisation. Walmart could have 3% margin on both Equate and Cucina, but it will want to sell more of the Cucina to the consumer, and it will try to do as much of it as possible. Modern day grocery shelves are heavily optimised to extract money from the consumers one way or another. And i would argue that ecommerce has compounded this problem.
I would argue, that state run grocery shops, much like state run public transport should be run even if they don't turn profitable. The benefits of accessible affordable essentials far outweigh the costs.
Why Marx gets all the love from the academic left while the ghost of Henry George hangs out in Nomadland is a question I've been asking for decades now.
To paraphrase Stalin, "how many divisions has the Georgists?" Marxists are willing to kill and conquer their opponents whereas Georgists write strongly worded letters.
It’s because Georgist thought is way more threatening than Marxist.
But Karl and Henry say much the same thing in somewhat different ways: for Karl the issue is the "consumer surplus" of employers, and for Henry the issue is the "consumer surplus" of landowners (or the "negative consumer surplus" of workers and tenants).
The really important question that the marxists in particular are keen to disregards is the *size* of those issues, both absolute and relative: whether the surplus is large or small, and whether the landowner surplus is larger than that of the employer. In the current UK situation it seems to me that the landowner surplus is much bigger than that of the employer in much of the country.
As several studies show after Thatcher and Blair the UK has become again a "rentier paradise" with capital investment chasing much higher "passive income" than profits from industrial business,
This is an interesting argument. In the scenario you’ve described, wouldn’t you still expect to see supracompetitive profits on the books of NY grocery retailers? Rent and permitting expenses should push up the retailers’ average cost of goods sold, but not their marginal costs. Relatively high average costs combined with relatively low marginal costs should give you either (1) an airline-industry scenario, where prices are competitive(-ish) and firms are constantly struggling to stay in business because marginal prices are too low to cover their average costs, or (2) a collusion scenario (could be either express or tacit collusion) where firms avoid aggressive price competition, and charge supracompetitive prices, facing little threat from new entrants because the high average costs serve as barriers to entry. Now the landlords / permit-holders would capture some of the supracompetitive profits, but it seems highly unlikely that they could calculate their charges so efficiently to capture 100% - you’d expect to see a split between the landlords / permit-holders and the retailers. (I’m not sure this changes your analysis about Mamdani’s proposal, by the way, just trying to think through the details.)
I think they do calibrate their rents to capture pretty much all the supernormal profits on average and over the cycle, so the operators are left hanging on, making enough of a surplus during anomalously good times to make it worth their while hanging on during downturns
Yes it's a little unclear if these low profit margins refer to price-mc or price-ac. But even in "mainstream econ" that Dan snipes at higher fixed cost mean less entry, which means fewer firms and less competition but each firm producing more per firm, so higher on their mc curve.
Also, while Ricardo was right about land being in a sense "naturally" in inelastic supply, this is not necessarily true of "retail space" (or housing for that matter) except by policy choice, so i think mainstream econ here goes a little deeper than Dan is letting on
I’ve always wondered about the history of rent controls in New York. I mean, in Berlin you can understand that rent controls are politically popular, because of the inherent suspicion of banks and “Kapitalismus”, though of course that didn’t prevent Private Equity buying huge blocks of apartments 20 plus years ago. But New York is full of wealthy people, so rather ironic that it’s also found a way to have rent controlled property.
A huge number of voters in NYC directly benefit from rent controls.
Nowhere clearer than in the U.K. housing market where landowners generally escape blame for high prices in favour of pointing the finger at “blockers”.
As is often the case, you've encapsulated a 'gimme a break' conclusion of mine- if you can look around at the modern world and not conclude that a huge driver of consumer prices is 'the people who own stuff have decided to make more money' then you are in the midst of a particular Chicago-school fever from which there may be no saving you.
One nuance that I think supports this argument is that in the US outside New York, grocers often pay very low rents because they function as anchor tenants in strip malls. The shopping center owners give the grocers de minimis rents because they drive traffic to the properties, and make it up by charging more ancillary businesses (dry cleaners, liquor stores, banks, etc) higher rents to access that traffic.
In most of New York, this doesn't work, because grocers are just neighborhood retail tenants like any other, so they have to pay the prevailing neighborhood retail rent. They might get a bit of a discount because they can occupy space that other retailers can't (above- or below-grade, deeper spaces with less frontage, etc), but it's not nearly at the level of the anchor tenant discount that they get from shopping center owners. The result is a higher rent burden and higher prices, as you say--and also a reason that bringing more Wal-Marts won't solve the problem (there just isn't enough land to build shopping centers that would create an anchor tenant dynamic for them).
«if the city owns the land, and internalises the zoning gain from giving permission to use the building for a supermarket, then it’s intrinsically working from a lower cost base. [...] Obviously, one might say that it would be better to deregulate retail zoning and directly attack rents that way»
Our blogger is victim of the usual centrist/"abundance"/thatcherite claim that zoning creates rent but for land Von Thünen's Law (which applies to residential and commercial property too) rents are simply a private tax on wages, and zoning mostly redistributes the rent among landowners
Without the Zohranmarkets the rent from wages gets captured entirely by property owners, with the Zohranmarkets a part of the rent is transferred to residents (whether working or not, whether taxpayers or not) from local taxpayers via lower retail prices because the city instead of renting the land it owns at whatever the market will bear uses it to lower Zohramarket rents.
Rentierism happens when elasticity of supply is low and elasticity of demand is high and in the residential case when the supply of good jobs in an area grows faster than the supply of housing within commuting distance.
The best way to fix that is not to try and increase the supply of housing within commuting distance because that simply increases congestion; it is to partly move the supply of jobs to some area where housing is relatively more plentiful, distributing job growth around the country instead of spending enormous amounts ren rezoning to increase density there.
Great piece for so many reasons. One thing to add: Zohran doesn't expect to make a profit. The point is to subsidize food essentials for people who live in food desserts, on the model of PX's.
Nice! Reminds me of a related criticism of fixed-pot competitive grants favoured by recent UK governments to bung resources to councils: on expectation, the resources expended by the bidders in the competition will equal the size of the pot, less epsilon. Allowing for the cost of holding the competition, the net value is likely negative. Drawing lots would be more efficient.
«training in Marxist economics tends to give you a) a weird, unrealistic and largely useless theory of economics plus b) a clear understanding of how economics relates to political power. While a training in mainstream neoclassical economics only gives you the first of these.»
My impression is that neoclassical economists have a very clear and deep "understanding of how economics relates to political power" and that is why they are neoclassical Economists instead of marxist economics and avoid that topic zealously for the sake of their careers :-).
Funny how politics makes such strange bedfellows.
NYC: formerly known for beckoning the poor huddled masses to Lady Liberty and Ellis Island, now known for its notorious Billionaires Row of empty pencil-thin skyscrapers; not a single Walmart (although some Aldi's) but you can get groceries finally at the local Erehwon store (home of the $85 baseball cap)...inside a Members Only club that costs a fortune to join.
https://jessieonajourney.com/is-there-a-walmart-in-nyc/
https://www.forbes.com/sites/dougmelville/2025/09/03/erewhon-is-coming-to-nyc-but-access-comes-with-a-36000-membership/
Meanwhile, up in famously anti-tax "Live Free or Die" New Hampshire the state has a monopoly on liquor sales through its chain of liquor stores, with half of the sales coming from out of state residents. Nothing like a state liquor store right off the highway to encourage safe driving! What's the point in having a vice you can't profit from?
https://www.businessnhmagazine.com/article/nhrsquos-milestone-anniversaries-90th-anniversary-nh-liquor-commission
https://newhampshirebulletin.com/2026/03/04/an-income-tax-was-proposed-in-new-hampshire-and-youll-never-guess-what-happened-next/
The half truth about "the only things certain in life are death and taxes" needs to be made more complete with some additional certainties, like "politics, and property," which are indeed closely related, and you'd be surprised to see what marriages of convenience they lead to.
So get your socialist hands off my state-owned liquor stores. And come to nuh hamp shuh for the resulting lower tax burden...we hate taxes, just in case you forgot. And NYC: yeah, send me your "poor huddled masses" so they can do the landscaping, but keep them outside our famous velvet ropes that keep all the nobodies out.
If you want to understand NYC, remember that famous line by (Groucho) Marx: "I refuse to join any club that would have me for a member"? That was a joke.
Actually, people are practically begging to be let "in." And others are equally determined to keep them "out."
Most of this might very well be true but 1) you strawman unfairly the alternative of "deregulate retail zoning" by bringing in Walmart and 20 years into it, even though Mamdani himself is actually trying to do that (good) and 2) doesnt change the fact that putting in these stores with a "we will always undercut private bodegas by 30%" is about the dumbest way to do it since it will most likely drive private groceries out and possibly lead to a price increase since it changes market dynamics to a price-leadership situation, with the private stores having foreknowledge of how the Mamdani stores will react (very bad)
To whom? If capitalists didn't invest and own property for whom would the bell toll? Donne told us - it tolls for thee. Keep up the discourse and prompt the thinkers, but don't tolerate underachievers.
Woooootttt we love a deregulating zoning + land value tax combo
Looking at simply just the profit margins of retailers is not a helpful way to solve for grocery inflation. Sure retailer margins don't wary wildly, but products prices do wary significantly (For example you have Equate Aloe Vera hand wash at Walmart for $1, and Cucina Lime Zest at $37).
Now if going by purely free market dynamics, it's in everyone's best interest to sell the $37 hand wash, except for the buyer, and everyone in the supply chain will try their best to do this, to the extent of hiding and delisting cheaper alternatives.
A state run grocery store (apart from lowering rent costs) can and should optimise the SKU assortment in a way that cheaper (yet effective) products are easily and readily available.
Margins on groceries are important to track, but so is premiumisation. Walmart could have 3% margin on both Equate and Cucina, but it will want to sell more of the Cucina to the consumer, and it will try to do as much of it as possible. Modern day grocery shelves are heavily optimised to extract money from the consumers one way or another. And i would argue that ecommerce has compounded this problem.
I would argue, that state run grocery shops, much like state run public transport should be run even if they don't turn profitable. The benefits of accessible affordable essentials far outweigh the costs.