Monday, April 29, 2013

Coffee and Ennui

Sitting in the new La Madeleine in Silver Spring and have to say I’m a little bit disappointed and feeling ennui on a rainy day. My local Silver Spring advice is to head down Georgia Ave to Zed’s café, which is friendlier, has better coffee,  more comfortable chairs, and working wi-fi.  A larger thought on restaurants and coffee shops. They are good example of the third factor in production. The first two factors in any output model in economics are labor and capital. That is how many people work there and how many machines (eg cash register, grills, toaster, coffee makers)  there are.  The goal of a chain restaurant like La Madeleine is to create a model where the same capital can be bought, the same number of staff can be hired and you get the same production. As anyone who visited multiple locations of the same chain can tell you some are better than other [side note, I often pass the Starbucks in the Towson library to go to the Towson Starbucks on York road because of the better service]. These differences exists despite the same amount labor and capital. This third factor in production could include human capital (how educated the workers are), local norms (do people typically work hard) and local governance (management). Just like a bad Starbucks,  La Madeleine or any chain restaurant a country like Nicaragua might produce a lot less than Costa Rica even they have similar population sizes and land endowments.

A second thought. My favorite all time coffee shops include Saint’s Rest Grinnell Iowa,  Indie Coffee Madison Wisconsin and Java House Iowa City. I’m not ready to put Zed’s in that category yet, although the free piece of cake on my last visit didn’t hurt. What I think is that changes have a problem of making the truly special at a large scale. As Matt Yglesia points out today although many economic interventions work on a small scale very few can work on a larger scale (perhaps pills are one of the few) since scaling is so much easier. Starbucks has done a decent job of scaling the small coffee shop feel, and as evident by this Washington Post article its hard on a large restaurant too. 

Anyway food for thought.

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