Big Macro Economics...

Talk about a frightening thought!  It may come as a shock to many of you that this writer, in a prior life, once served for a couple of years on a financial institution advisory panel at the Federal Reserve.  Sounds pretty impressive, doesn't it!  Just e-mail me, if you need an autograph - no charge...

Huddling with Alan Greenspan, Rog, Ned, Mike and the boys on the micros and macros of supply and demand is a tizzying experience which invites intoxication. Gathered in a board room decorated to make Versailles appear quaint; properly awed, it's easy for one's sense of self-importance to run fully and freely amok. Are they really listening; or just killing a couple of hours before lunch? Are those narrowing eyes a sign of intent interest or growing drowsiness? Are they earnestly taking note of our local economic views or simply listing "get milk", "drop off dog", "pick up laundry" reminders for the end of the day commute?

As you might imagine, "advising the Fed" on economic policy is a role I find wildly and severely humorous. After all, how does one advise the gods? What should one tell the all-knowing? What do I know which they and 10,000 expert government economists have missed? And, on a more intricate level; what does Mr. Greenspan really mean when he says "Good morning!"? Does he actually mean it or does he believe our hopes for the morning are irrationally exuberant? How good is "good"? How long will it last? What will it do to interest rates? If I believe I understand what he says, does it mean I've missed the point entirely? Is he being opaque or am I being dense? Who's on first, what's on second... Disconcerting isn't it!

How does one make a contribution of value at this level? 

Eventually a revelation!  It occurred to me that the distinguished governors of the Fed probably did not eat lunch at the same places I frequent - the fast food palaces. Was there a critical economic message hidden at the drive-thrus and in the sack lunches of the masses? 

Obviously, an insightful report on the pricing trends of Big Macs, Whoppers, chicken strips, and biggie fries could offer significant clues as to the direction of price stability. The tendency to "supersize" could even prove to be an important leading indicator of economic expansion. As you and I expand; perhaps, so goes the economy.

Pricing was easy; but was there also a fast food

connection to employment and productivity? Were the economic R-squares and standard deviations of the bag lunch universally significant? The quantitative research on these issues became totally consuming. Ninety days and eighteen pounds later, I had the answers.

Employment correlated precisely with "now hiring" signs at fast food franchises! As unemployment decreased, hand-lettered "now hiring" signs were replaced by professionally produced banners, indicating the onset of a permanent trend. As the labor shortage grew more severe, the "now hiring" banners began to appear en Espanol. Further tightening eventually led to "now hiring" signs in Sanskrit and Braille. (I know that's hard to believe but just trust me, okay!) Worker fringe benefits have also been increased; and now include discount coupons, permitting franchise employees to eat somewhere else!

Productivity measurements proved far more subjective. Productivity gains came in three forms. First, the restaurants have instituted the process of "cross-marketing" on all sales. I'm not certain how successful this effort has been, since the correct answer escaped me when I ordered a soft drink and was asked "Do you want that with cheese?" 

Secondly, the restaurants have changed their product mix. For example, one company now includes only the toy in the "happy meal" box with a subsequent increase in profits, but no net loss in nutritional value. While at another restaurant, the meat patty has been eliminated and the bun now encloses the Styrofoam box rather than the traditional vice versa. (Still tastes the same, by the way!) Fries are now routinely prepared a day in advance; coffee a month in advance.

But, the greatest gains in productivity can be

recognized in customer service, particularly at the drive-thru windows. The incidence of the "surprise meal" is way, way up. The surprise meal occurs when

you open the bag at home and find the contents bear absolutely no relationship to the order you placed. (Your best bet for getting what you want these days is to order something else!) A corollary to this service indicator is the "all or nothing ketchup and napkin solution". One of each is no longer an option. You either get none or enough to fully recreate the visuals in the movie "The Texas Chainsaw Massacres".

But the real acid test of productivity comes in the

way you receive change back with your order. In the past, your change - first bills, then coins - was carefully counted back to you, followed by your food order. 

More recently, your change is handed to you in a stack along with a vanilla shake making verification impossible. Rounding off and randomly estimating the change due is gaining ascendancy in some locations; but the most highly productive workers now simply provide you with the amount of change they feel most appropriate. (One possible retaliatory tactic, by the way, is to under pay and tell the cashier to keep the change.)

While labor productivity gains are enormous from

these time saving efforts, a major, potential systemic risk has been created. A very small group of econo-terrorists can now threaten the stability of the entire U.S. economy on any given Friday at lunch time. 
Simply by presenting $6.53 in payment for a $4.26 fast food meal - while asking for the change to include three quarters, four dimes and two nickels;  terrorists can freeze-up fast food lines nationwide, as baffled cashiers stop the American workforce in its tracks, bringing the American economy to it's knees, never to move again. The threat is real and growing1 (Try it next Friday, if you have the rest of the day off.)

Well, what do you think? Pretty insightful, huh! Hope this synopsis of Big Macro Economics is as helpful to you as it was to the Federal Reserve. They always seemed to nod in amazement at my thoughts and analyses.... and look how well the economy has performed since that time.

 Mr. Greenspan even commented once that he was FED up with my thoughts. Wonder what he meant by that?