22.12.06

GRIPING ABOUT UNFAIR COMPETITION? At Econ Log, Bryan Caplan notes a Pareto-improvement from illegal immigration.
But it takes more insight to notice the role of immigrants in less exotic industries. In fact, I doubt I'd have to linger in an L.A. doughnut shop for long to overhear an elderly customer denounce the unmitigated evils of immigration while devouring a delicious Cambodian-made cruller.
But the article he links to commits a number of fundamental errors in economics.

Winchell's, the largest West Coast chain, has just 17 of the roughly 400 doughnut shops in the Valley.

"The small independent doughnut shop operators are able to run a lower overhead," said Lincoln Watase, president of Yum Yum Donut Shops, which owns Winchell's. The mom and pop stores don't have to pay managers, administrators and other support staffers like the chains do.

Sigh. What's that equivalence theorem of Adam Smith that the doughnut shop must pay the owner the wages of the baker, the interest of the bondholder, the rent of the landowner, and the profit of the shareholder? Alternatively, perhaps there is a maximal efficient size of a doughnut chain, and Yum Yum has exceeded that.

The immigrant owners seem to understand this concept. Althought the couple that owns one of the doughnut shops appears to believe in a free lunch, they're also aware of the subtleties.

For Kim Thean, owner of K's Donuts at Ventura Boulevard and Fallbrook Avenue, staying in business comes down to simple economics. When a relative works the register, it's free.

"We are family so we don't really care about hours," said Thean, 39, who runs the shop with the help of one employee - his wife, Sokha. "When you have to hire someone and pay them, it's expensive."

But family labor isn't really free. Read on.

The couple's three daughters are too young to work in the store, and Thean isn't sure they ever will.

"I don't know if they'll like it," he said, flashing a quick smile below wire-rimmed glasses. "I'm not going to force them."

Thean doesn't take days off because when he is not around, nobody bakes doughnuts for him. Instead, he closes on New Year's Day, Christmas and Labor Day. A two-week vacation is out of the question.

Selling doughnuts has allowed the Theans to make payments on a home in West Hollywood and own two cars.

One day Thean wants to invest in real estate, but for now he says he cannot expand until he has relatives who can work in his shop.

The kids will develop Californian notions of opportunity costs. The relatives might look into real estate hustling themselves.

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