Wednesday, June 16, 2010

Yes, Virginia, Incentives Matter

Walter Williams hits another one out of the park by explaining how people choose to go to Wal-Mart, but are required to go to the Post Office or DMV. Since people must choose to go to Wal-Mart, they have an incentive to make the experience pleasant that simply doesn't exist at the DMV or Post Office.

Not that the DMV can't be pleasant from time to time, but it's simply a little bit more difficult to align incentives to assure that for them without the blessed profit motive.

Additional note; Pentamom notes correctly that Wal-Mart is not always a pleasant experience. The point here is not that all things good come from Bentonville, of course, but rather that Wal-Mart has the incentive to make things better due to their profit motive--especially when Target comes to town. Or Blumenkinder Heirlooms. :^)

5 comments:

pentamom said...

I think Williams is wrong in assuming that people go to Walmart for a pleasant experience. I'm in there 2-3 times a week (it's half a mile away) and it ain't because it's a pleasant experience -- it's pretty unpleasant at times, and reasonably tolerable, at best, at others. But it's CHEAP and convenient.

His larger point might be valid, but Walmart (at least some of the more poorly run outlets) is the WRONG example to make a point about pleasant experiences.

Palm boy said...

I've yet to have a good experience at the DMV, but I've frequently had good experience's at walmarts.

pentamom said...

Mileage varies. I don't recall ever having an actual bad experience at DMV, though I could certainly stand to have shorter waits when I go there. Otherwise, things have generally been smooth and courteous.

And yes, I've had good experiences at Walmarts, and also pretty lousy ones. Try having the one you use for your normal shopping be out of stock on 10-15% of your normal items on average. And never being staffed enough to avoid long checkout waits, even at only moderately busy times. And, in a way, the reasons for that are similar to the reasons why the DMV isn't known to be a great place to deal with -- captive audience (where I shop, a high percentage of people depend on public transportation to get there and there are no other reasonable grocery options within comparable distance) and restricted labor market (though for different reasons.)

You want to make the point, talk about Target. Or most other well-known privately run companies. Then the point's nicely made. Walmart (in my experience) is just a poor example. And I wouldn't have said this 15 years ago -- back then all my Walmart experiences had been uniformly excellent. I suppose the Walmarts in Northern Virginia where Dr. Williams shops are more like the Walmarts of my earlier experience.

Bike Bubba said...

Yes, Wal-Marts can be pretty miserable--I can think if a few where I just don't even feel quite safe. That said, they know that if they get too bad, you're off to Target or Sears or whatever.

Not so the DMV or Post Office....and I've had some, um, "tremendous" experiences at both.

Douglas Hester said...

It's a pleasure to read anything by Dr. Williams.