• Competing through monopolistic competition, restaurants use menu language to signal status.

    Linguiça, Linguine & Linguistics

    Sep 17 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic Humor, Economic Thinkers, Entertainment, Households, Lifestyle • 17 Views

    Given the following examples from two menus, you can easily tell which one is from a pricey restaurant and which one is from a diner:

    Menu #1

    • Montauk Wild Striped Bass Roasted and Lightly Smoked
    • Catskill Smoked Salmon Egg Sandwich
    • [glossary_exclude]Market[/glossary_exclude] Berries – Bowl or Cup
    • Farming Turtles Greens
    • Congee of Baby Shrimp
    • Eberle Farms Roasted Chicken

    Menu #2

    • A dozen crispy, golden brown shrimp. Served with seasoned fries and cocktail.
    • Crispy Chicken Fingers: Crispy and golden brown on the outside, tender and juicy inside. Served with Honey Mustard dressing and seasoned fries.
    • All-natural chicken served with cheddar mac & cheese and a side of fresh tomato & mozzarella salad.
    • 100% fresh, perfectly seasoned choice sirloin, fire-grilled and miso-glazed. Served sizzling over a bed of fresh spinach, roasted yellow squash, grilled balsamic-glazed onions and roasted cremini mushrooms. Paired with fresh tomato & mozzarella salad.

    Where are we going? To how menus use linguistics to demonstrate restaurant competition.

    Menu Analysis

    Using data from 6500 menus with 650,000 dishes, Stanford linguist Dan Jurafsky and his colleagues identified the word clues that convey some restaurant economics.

    Expensive restaurants tend to focus on the chef and the origin of their food. On the menu, they refer to specific farms, ranches, and farmers markets. Saying less, their adjectives come from different languages. And they also offer us fewer menu items from which to choose.

    By contrast, cheaper restaurants say a lot and focus on us. Their menus use empty adjectives like delicious, tasty, and terrific because a more specific description might not be mouth-watering. They say that we can get our eggs “any way we like ‘em” or decide among shrimp, chicken or beef for our entree. Called “status anxiety,” they want to be sure we know their steak is fresh, their chicken is natural, their shrimp is crispy and their whipped cream is real.

    Suffixes even can have price significance. It is likely that crisp bacon will have a higher price than crispy bacon. You will pay more for roast chicken than roasted chicken.

    Our Bottom Line and Monopolistic Competition

    Restaurants compete in monopolistically competitive markets. On the competitive side, there are many firms and relatively easy entry and exit. However, these firms have something unique that gives them some monopoly power over their customers. The market in which pricier establishments compete has its menu “norms” while cheaper restaurants have theirs. For both, though, the menu facilitates competition.

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  • bottles of milk doorstep

    Where Have All the Milkmen Gone?

    Sep 16 • Businesses, Demand, Supply, and Markets, Economic Growth, Economic History, Innovation, Labor, Macroeconomic Measurement, Tech, Thinking Economically • 33 Views

    If you are a milkman, being able to drive standing up can save you one hour each day.

    As the milkman pictured below explains, “In the old trucks, you’d drive standing up. No seats. I actually liked that better, because when you make 200 deliveries a day, climbing out of a seat and seat belt every time adds an hour to your day. But safety laws change and you adapt.”

    Structural change reflected by the disappearing milk truck.

    From: WSJ.com

    Where are we going? To the jobs that were eliminated by structural changes in the economy.

    According to the USDA, in 1963, 30% of the milk in U.S. was delivered to our doorstep. By the 1990s, we were down to 1%.

    Obsolete Professions

    Similarly, pinsetters, icemen and street lamp lighters have all but disappeared. In bowling alleys, from the beginning of the 20th century to the 1940s, a pingirl or a pinboy would have been stationed near the gutters waiting to pick up and reset the pins after they were knocked down. Until the 1940s, many of us needed an iceman to deliver the 25 to 100 pound chunks of ice that chilled our refrigerators. And, as in NYC until electrification, we had lamplighters who lit 200 to 300 gas streetlights an hour.

    The Bottom Line and Structural Unemployment

    Indeed, with the arrival of electricity, the auto, and the transistor, we had progress as a plus and structural unemployment as a minus until jobless workers were retrained with skills that were more suited to the new economy. And now economists debate whether unemployment during the Great Recession (December 2007-June 2009) was structural or caused by a downturn in the business cycle.

    Our bottom line: Sort of like the [glossary_exclude]shift[/glossary_exclude] of seismic plates, structural change creates a new economic landscape where old industries disappear and new ones replace them because of technological change.

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  • As an oligopoly, Apple has the power to charge higher prices and differentiate its products in order to let consumers signal status through conspicuous consumption.

    Will Conspicuous Consumption Add to iPhone 6 Sales?

    Sep 15 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic Thinkers, Entertainment, Innovation, Tech • 41 Views

    Has Apple just given us a Thorstein Veblen moment?

    We remember Thorstein Veblen because he described conspicuous consumption in his book, The Theory of the Leisure Class (1899).

    Thorstein Veblen and Apple

    According to Veblen (1857-1929), affluent consumers try to convey their power and wealth through excessive leisure and shopping. Servants and employees help the affluent do less while their money lets them signal their status by buying more. As expressed by Veblen, “The members of each stratum accept as their ideal of decency the scheme of life in vogue in the next higher stratum, and bend their energies to live up to that ideal.” I suspect Veblen is describing the aspirational shopper.

    Thorstein Veblen originated the idea f conspicuous consumption

    Today, with studies indicating that Type A CEOs, entrepreneurs and the top 1% work 24/7, we can ask whether Veblen’s conclusion about leisure is entirely accurate. Thinking, though, of Hermès Birkin Bags priced from $10,000 to more than $120,000, private planes, Teslas, and the iPhone 6 Plus, conspicuous consumption has hardly disappeared.

    The iPhone 6 Plus?

    Reviewing Apple’s newest launch, one tech site tells us that Apple’s loyalist constituency is composed of “the relatively monied” who believe “that Apple does, indeed, add things to their life…including a…chest-puffing sense of self-worth.” You can see (below), that Apple is the leading provider to the affluent.

    With its more affluent customer, Apple use the allure of conspiicuous consumption in its marketing.

    From: MacDailyNews.com

    Sounds like Veblen’s conspicuous consumption.

    The Bottom Line and Oligopoly Power

    As an oligopoly, Apple has used its pricing power and product differentiation to target the more affluent consumer. Selecting higher prices and emotion stirring launches, Apple might be very aware of conspicuous consumption.

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  • It would be beneficial for households and national economic growth if the U.S. saving rate were raised.

    The Nudge Toward a Goldilocks Savings Rate

    Sep 14 • Behavioral Economics, Demand, Supply, and Markets, Economic History, Financial Markets, Government, Households, Innovation, Macroeconomic Measurement, Regulation • 67 Views

    Today in Econlife’s Sunday Charts: U.S. citizens like lotteries. The U.S. saving rate is plummeting. Combine the two and maybe we can use a lottery to get people to save?

    The basic idea is to give savers lottery tickets. The number of tickets depends on the size of the deposit. If your ticket is drawn, you can win a big cash prize and if you lose, you still have your savings and some interest too. True, current banking regulation prohibits lotteries but several credit unions are experimenting with the concept.

    And, it appears to work.

    The U.S. Saving Rate

    One study indicates a lottery increases savings. People deposit more, play other lotteries less and consume less. George Mason economist Alex Tabarrok calls it a “crafty nudge.”

    With the y-axis indicating the percentage of disposable income that households save (they spend the rest), you can see that the U.S. household projected saving rate for 2014 is low when compared to other countries.

    Compared to OECD countries, U.S. savings rate is low.

    From: OECD

    Also, our saving rate is low when compared to the past.

    Defined as the difference between what we spend and what we set aside for the future, the U.S. personal saving rate (below) has declined.

    The U.S. personal saving rates are declining.

     

    On a personal level and nationally, saving matters. Personally, we need our savings for retirement, for large purchases, and for emergencies, On a national level, businesses borrow savings to invest in the land, labor and capital that fuel economic growth.

    The Bottom Line and Savings Incentives

    A Goldilocks level of saving–not too much, not too little, but just right–would be productive for the U.S. economy and individual households. Perhaps by placing a deposit lottery in our arsenal of incentives, we can move to the Goldilocks level that one economist suggests is between 5% and 8%.

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  • This week's everyday economics included vodka to tax dodgers

    Weekly Roundup: From Vodka to Tax Dodgers

    Sep 13 • Developing Economies, Economic Debates, Economic History, Economic Thinkers, Government, Innovation, International Trade and Finance, Labor, Macroeconomic Measurement, Regulation, Thinking Economically • 45 Views

    Everyday Economics — Sunday Chart of the WeekSUNDAY 09.07.14

    The home states of the slimmest Americans…

     

    Although creative destruction has transformed the music industry's technology, still songs are the same length.MONDAY 9.08.14

    How song length has remained 3-4 minutes…

     

    Everyday Economics and The Russian government has taken advantage of Russian alcohol addiction because inelastic demand lets it optimize revenue even when taxes increase price.TUESDAY 9.09.14

    Looking at the Russian government’s Vodka addiction…

     

    Everyday Economics and The difference fiscal policies in the eurozone have meant varying VAT gaps with lotteries in some countries to narrow it.WEDNESDAY 9.10.14

    Catching tax dodgers with a lottery…

     

    Everyday Economics and The price floor that preserves the higher prices from the independent bookstore and its cultural virtues sacrifices market efficiency.THURSDAY 9.11.14

    An independent bookstore dilemma…

     

    By negatively affecting labor markets, the Affordable Care Act will diminish productivity according to economist Casey Mulligan.FRIDAY 9.12.14

    The reason for the “29er” rule…

     

    Economic Ideas Roundup:

    • Creative destruction
    • Fiscal policy
    • VAT
    • Incentives
    • Price floor
    • Labor markets

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