In the piece “Amazon apprehensive about future growth in Seattle after head tax passes,” Casey Coombs, a staff writer for Puget Sound Business Journal, claims (in the manner of a doctor checking the pulse of his patient) that “Amazon.com Inc.”—the corporation that has provided Seattle, a city that so many believe has lost its soul, a front-row seat to the world-historical transition from a service economy to a post-service one—”has grudgingly accepted Seattle City Council’s unanimous vote… to pass a tax on large businesses.” According to a reading of the corporation’s current constitution, it’s feeling well enough “to resume plans on a 17-story tower at its Denny Triangle headquarters.”
“While we have resumed construction planning for Block 18,” Amazon told an all-ears Casey Coombs, “we remain very apprehensive about the future created by the council’s hostile approach and rhetoric toward larger businesses, which forces us to question our growth here.” Of course, this means only one thing: If Seattle tries another stunt like that head tax, Amazon will finally and forever stop “growth here” and take its money bags to another one (HQ2) that’s friendly to big business and wisely directs its revenues to anything that improves the climate for big business. Or in Amazon’s neoliberalese: “[Seattle] does not have a revenue problem—it has a spending efficiency problem.”
But is this true? Should we tremble in our boots? Can Amazon just up and leave? Not impossible, but also not an easy thing to do.
The neo-Keynesians (never to be confused with post-Keynesians) have an idea called “menu cost.” It was developed by famous economists like George Akerlof and Janet Yellen, the former and first woman Fed Chair. (Trump didn’t re-appoint Yellen because she is not a man and she was appointed by a black man—the second strike was fatal.) The menu cost has two main parts. One provided an explanation for what’s called “sticky wages.” This stickiness presented neo-Keyesnians with a weapon to fight the idea that markets, in complete freedom, were perfect. (The top difference between neo-Keynesians and neo-classicals is that the latter doesn’t believe market failures are intrinsic.) Sticky wages, however, exposed a failure that’s endogenous (inside the market) and not exogenous (caused by something outside like the bad old government or the demands of truculent workers). What menu cost shows is this market failure: prices may not rise simply because the cost of raising prices isn’t worth the trouble. This is why prices tend not to go up gradually but in leaps: 5 percent or 10 percent or 15 percent. So, once again, we see that, even in an ideal market, prices may not communicate to the discerning buyer the exact value of commodities: products, wages, and so on.
Menu cost also means the physical cost of changing the menu. Prices on a menu may get stuck because the prices on the menu are not high enough to justify the expense and all of the trouble of printing new ones and upsetting loyal customers. (True, some restaurants go cheap and raw-write the new prices on top of the old ones.) What am I getting at? Leaving the city is nothing like changing the menu.
