The picture below is of a “beer” I drank at a friend’s house this past weekend. It actually tasted pretty good; but why 0.5 percent alcohol, which surely added to the cost of production, but couldn’t, I think, have added to the taste? Including the minuscule amount of alcohol would certainly exclude teetotalers from consumption; and to get any kind of buzz a real beer drinker would need to drink at least several gallons. Read More »
Watching the Olympics in a foreign country (the U.K.) brings out the super-patriot in me. I’m cheering for the U.S. athletes in each event, and I don’t even care about the games!
Is this patriotism unusual? Actually, we Americans are outliers in this regard. In a recent set of World Values Surveys, 71 percent of Americans responded positively when asked if they were very proud of their country. Among 16 other rich countries in the surveys, the average was only 45 percent. And only Australians and Irish were as proud as we seem to be. The jingoism of the networks in the U.S. during the Olympics caters to, and perhaps reinforces, our attitudes.
A recent New York Times article discussed a meeting being held to protest a “tiered wage” that averages $1,000 per week for performers in touring productions of Broadway musicals — compared to a “full wage” of $1,800 for the Broadway productions of the same show.
Why shouldn’t the pay be the same for the same effort? The article gets the answer correct: the pay must equal the marginal revenue product for the production to be profitable; and even compared to performances in cultural capitals like Austin, Tex., the revenue-per-seat-filled on Broadway is much higher. A touring company just cannot, as the article notes, make a profit or perhaps not break even paying the same wages as on Broadway. Perhaps not fair to the performers, but this is good economics. With this difference in pay, however, the quality of the touring companies is unlikely to be as good as the Broadway company.
I visited the Mütter Museum (a great collection of medical and related memorabilia and information in Philadelphia), which had the following sign on one exhibit about shrunken heads: “Westerners traveling to the territory in the late 19th century … were fascinated with the heads and offered the tribe money and guns in exchange. … This led to an increase in warfare … both to get more heads to sell and because of the prevalence of guns. It also led to the creation of counterfeit heads … made from real human heads but not prepared by the tribe, and others [that] were made from monkey, goat, or other animal skin.” Nice to see how, even for a bizarre object, a large increase in demand elicits a supply response of both genuine and fake products.
I welcome other equally weird examples of induced supply responses with both genuine and fake products.
What do you do if your product is obsolete and demand is shifting rapidly leftward? The paper industry has a problem: digitization and environmental concerns. To prevent further declines, the brand of paper our department uses has created a clever slogan (see the picture) — “Because it’s easier to learn on paper.” I wonder what other examples there are of businesses using the market to maintain the demand for a product that is being displaced by technological change (as opposed to obtaining government protection, the usual route in these instances)?
A student says his family owns some property in rural East Texas. The property on a hilltop next to it overlooks my student’s pond. His neighbor says he really enjoys sitting on his porch watching the sunset over the pond. The student’s family doesn’t benefit from the pond’s positive externality — they have no view at all.
His father, who was annoyed by the neighbor’s bragging, decided to stop trimming the bushes around the pond. Soon, the neighbor called up and offered to maintain the property — trim the bushes and keep the pond free of rubbish. A clever ploy by his father to force the neighbor to internalize the externality — although I wonder whether this induced behavior represented a stable equilibrium. (HT: SF)
There are three convenience stores in the student area west of the University of Texas campus. Store A sells the most beer, and barely looks at student IDs; but it also charges the highest price of the three. Store B is a bit stricter on fake IDs, refuses some underage students, and charges a lower price. Store C has the best prices, but its clerks inspect IDs thoroughly. My student reports that nobody makes it through with a fake ID. This near-campus oligopoly defines a new pricing strategy: lenience on IDs that is unsurprisingly related to the stores’ pricing policies. I wonder about differences in the characteristics of the patrons of the different stores.
Chatting with a seatmate on a flight, I learned she was attending a conference, hosted by Shared Hope International, on domestic trafficking in minor children. Naively and optimistically, I asked if this problem has been diminishing. No, quite the contrary. Why? The reason appears to be economic, having to do with technological change and technology transfer. With the internet, it is much easier to engage in transactions — nothing needs to be done face-to-face, thus reducing the risk to traffickers. Also, organized crime is getting involved since the trade is so profitable, as at-risk children can be traded repeatedly (unlike an ounce of crack cocaine). With some modifications, an established drug network can be used as a child-sex network. Disgusting, horrible, and a negative side-effect of technological progress. (HT: JM)