I think this article misses something quite important:
The amount of time you save by outsourcing is often much smaller than a nominal analysis of the time spent would suggest. There are a couple of things at play here:
There is an interplay of fixed and variable costs that can make some marginal costs nearly trivial and others quite significant. E.g., I spend about 1.5 hours each weekend shopping for weekly groceries. The amount of time I would save by buying a single day’s less food would probably be around a minute. This is less than the time it takes me to complete an order for takeout. The 15 minutes of direct ingredient preparation time is a small fraction of the overall cost of meal preparation. Cooking a meal can also be parallelized with other activities making the marginal cost even smaller.
There are negative externalities to outsourcing that are really significant. E.g., there is a non-trivial cost involved in meal-planning for a family. Integrating take-outs does not generally make this easier, since it complicates ingredient reuse, prevents buying fresh ingredients at economical scale and increases the risk of spoilage by forcing longer storage periods. Takeouts also frequently increase serving and clean-up costs in a non-negligible way, due to the way they are packaged for transport. There is a cost in the uncertainty of delivery time. There is a time cost of reheating the food that has gone cold. There is a cost associated with storing leftovers.
How does take-out increase serving and cleanup costs? In my experience, take-out drastically reduces cleanup cost vs cooking. You don’t need to clean the baking dish or pan, and those are often hard to clean, whereas plates can just be thrown in the dishwasher, or you can even eat out of the disposable container provided by the restaurant and not have to wash any plates.
Oh, on the contrary: I think this article misses several things that are quite important (or were brushed under a single sentence like “[main principal/agent problems] are communication and risk.” Reason: emphasis on things fewer readers were likely to consider.
So the costs you’re describing are indeed real and brushed off to corner. I think both of these fall under transaction costs, and #2 also under centralization and overhead. For #2, I think you mean something other than what “externality” means to me (a cost specifically born by a non-party to a transaction) --- maybe second-order cost?
I think this article misses something quite important:
The amount of time you save by outsourcing is often much smaller than a nominal analysis of the time spent would suggest. There are a couple of things at play here:
There is an interplay of fixed and variable costs that can make some marginal costs nearly trivial and others quite significant. E.g., I spend about 1.5 hours each weekend shopping for weekly groceries. The amount of time I would save by buying a single day’s less food would probably be around a minute. This is less than the time it takes me to complete an order for takeout. The 15 minutes of direct ingredient preparation time is a small fraction of the overall cost of meal preparation. Cooking a meal can also be parallelized with other activities making the marginal cost even smaller.
There are negative externalities to outsourcing that are really significant. E.g., there is a non-trivial cost involved in meal-planning for a family. Integrating take-outs does not generally make this easier, since it complicates ingredient reuse, prevents buying fresh ingredients at economical scale and increases the risk of spoilage by forcing longer storage periods. Takeouts also frequently increase serving and clean-up costs in a non-negligible way, due to the way they are packaged for transport. There is a cost in the uncertainty of delivery time. There is a time cost of reheating the food that has gone cold. There is a cost associated with storing leftovers.
How does take-out increase serving and cleanup costs? In my experience, take-out drastically reduces cleanup cost vs cooking. You don’t need to clean the baking dish or pan, and those are often hard to clean, whereas plates can just be thrown in the dishwasher, or you can even eat out of the disposable container provided by the restaurant and not have to wash any plates.
Oh, on the contrary: I think this article misses several things that are quite important (or were brushed under a single sentence like “[main principal/agent problems] are communication and risk.” Reason: emphasis on things fewer readers were likely to consider.
So the costs you’re describing are indeed real and brushed off to corner. I think both of these fall under transaction costs, and #2 also under centralization and overhead. For #2, I think you mean something other than what “externality” means to me (a cost specifically born by a non-party to a transaction) --- maybe second-order cost?