Father of Our Country as an Economist

In his book Washington: A Life, Ron Chernow quotes a letter that speaks to the hoary economic historians’ debate about the profitability of slavery.  Washington noted that in his time Virginia estates were forever doomed to lapse into debt, “as Negroes [sic] must be clothed and fed and taxes paid…whether anything is made or not.”  Even if slavery were on average profitable, Washington noted that slaves represented a fixed cost of production. 

The Fixed Costs of Retailing Bourbon

The Bourbon Outfitter in Lexington, Kentucky sells souvenirs and paraphernalia related to bourbon distilling and drinking. Its only physical retail outlet is a kiosk in a shopping mall; and its selling season is the Christmas shopping period. Its difficulty is that the mall will only rent kiosk space in three-month intervals—the kiosk is a fixed cost to The Outfitter, which has come up with the following solution: It rents the kiosk from November through January, and opens on November 1, sufficient time before Black Friday to make an impression on shoppers. It stays open until New Year's and then closes down.

The owner tells me that this is a profit-maximizing policy, since the variable cost of remaining open after New Year’s Day far exceeds the trickle of revenue that might flow in.

[HT to BK]