• In NYC and China, developers are building smaller apartments.

    Living Solo

    Apr 18 • Behavioral Economics, Economic History, Gender Issues, Households, Labor, Macroeconomic Measurement, Uncategorized • 710 Views

    I’ve just started to count the people I know who live alone. School friends, relatives, neighbors. Some are in their twenties and early thirties, unmarried. Others are divorced. Several are widowed.

    31 million of us live alone. Almost one-third of all households in the U.S. are composed of one person. Five million adults, younger than 35, live alone.

    In 1950, living alone was the exception. Not any more. Why?

    Maybe because of affluence, feminism, and technology. An increasingly affluent society has increased our life spans. With one spouse outliving the other, a woman (more typically) or a man is left to live alone. Women working outside the home have less dependence on a spouse. Women can marry later (age 26.5 average) and leave a marriage more easily. Fifty percent of all mariages will probably end in divorce.

    And with pets becoming family members and the proliferation of social media, are we really alone when living solo?

    The bottom line? Ups, downs, and long term economic trends have touched the very essence of how we live. When the economy dipped, more college grads moved in with their parents. More people postponed marriage. More postponed divorce.  On the other hand, with the upward trajectory of the economy between 1940 and 2000, we became more of a live alone society.

    This New Yorker article started me thinking about living alone and is the source of my statistics. In “The Boomerang Generation,” you might look at research from Pew for insight about multigenerational living and here is the census data that confirms the increase in single person households. Finally, for more about the impact of economic growth on our lives, I always love to return to Pursuing Happiness by Stanley Lebergott.

    An interesting single household fact: In 2000, Utah had the fewest single person households and Washington D.C the most.

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    Coke’s “‘Delicious! Refreshing! Exhilarating!’” Marketing Strategy

    Apr 18 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Households, Innovation, Thinking Economically • 2579 Views

    By Mira Korber, guest blogger.

    Imagine Coca-Cola for a moment. Polar Bears, Santa Claus, a time when soda still came in refillable glass bottles…perhaps, for the health-conscious, high fructose corn syrup? And if you live in Singapore, you might even think of a “Hug Me” Coke vending machine.

    As part of Coke’s new marketing campaign, it overnight-installed a unique vending machine at the University of Singapore. It gladly dispenses Coca-Cola — but only after the “customer” hugs the machine in a specific way does the drink pop out.  Therefore, Coke has sympathized with (and definitely capitalized on) Singaporean youth and its growing propensity towards public displays of affection, which have been traditionally repressed in Asia. Fuzzy feelings + soda = positive and pleasurable psychological association between the two…well, that’s Coke’s hope for future sales, anyway.

    Engaging customers through the “Hug Me” machine is a perfect example of  Coke’s static advertising strategy morphing into interactive cultural experience. And this speaks volumes about a new marketing strategy; two fascinating videos the company produced explain a new “liquid linked” advertising plan and how consumers will largely shape how the Coca-Cola brand evolves. Traditional 30-second TV adverts are phasing out. Social collaboration with customers is moving in.

    In the 1930s, the company invented the now iconic image of Santa Claus as rotund, bearded, jolly, and sporting a red and white suit. (Incidentally, he was chugging red-and-white clad soda bottles in every ad.) Now, Coke isn’t presenting its consumers with cheery content, but seeking their help, or hugs, to revamp its image.

    The Bottom Line? Through unconventional marketing, such as the “Hug Me” machine or Coke “Happiness” truck and vending machines, Coca-Cola subliminally sparks positive feelings towards its product. By shifting its focus to popular culture infiltration and stimulation of “happy” feelings, Coke has linked a positive consumer reaction with its beverage.

    Notes: The “Hug Me” Machine in action. How hugs are “gesture-based” marketing. A failed marketing trope. Coke’s sales are indeed up. Coke’s advertising strategy through the years – interesting.

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    Panamá’s Economic Puzzle

    Apr 17 • Businesses, Demand, Supply, and Markets, Developing Economies, Financial Markets, International Trade and Finance, Labor, Regulation • 576 Views

    By Mira Korber, guest blogger.

    Just two days ago I bought a plane ticket to Panamá City International Airport in Tocumen. I will be participating in a classical music festival there, somewhat ironically studying music from centuries past as brand-new skyscrapers are erupting all around. Panamá is booming, and not just with music.

    Panamá is among the fastest growing economies in all of Latin America; the 2011 GDP surged at 10.6%, up from 9.2% in 2010. A new, glittering skyline boasts the 70-story Trump tower. Central America’s first subway system project broke ground in 2011.  And a $5.25 billion construction project promises a third channel to the Panamá Canal.

    As international trade has blossomed, the canal has connected the Americas and linked East with West for the past 100 years. Just since December 1999, when the US relinquished control of the canal to Panamá, it generated $6.6 billion in revenue.

    Now, workers feverishly construct a larger, deeper channel to accommodate massive tankers and cargo ships coming from Asia –primarily China — heading to the United States consumer market. The project (if it doesn’t delay) is slated for completion in 2014, a century after the canal’s inaugural year. Once open for passage, the new channel will support 50% more traffic each day, and may encourage ships to travel east to Panamá from Asia, instead of traversing the Suez Canal in Egypt.

    Amidst massive development projects and increasing foreign investment (+33% in 2011) lurk other concerns. Panamá’s history is blighted by crimes, perhaps most notably by ex-military dictator Manuel Noriega, whose 1983-1989 rule was marked by drug trafficking, money laundering, and murder of political opposition.

    As this stigma looms, 40% of the population in Panamá lives in poverty, with an ever-growing divide between the wealthy and the poor. Even the development comes with concerns about an economic bubble – remember all those new skyscrapers? Most are dark — empty — at nighttime.

    The Bottom Line? Panamá’s rapid growth is remarkable. The Economist likens its economic expansion to Singapore, although it’s not even 1/5 as wealthy (“on a per-person basis”).  However quickly Panamá may develop, the risk of corruption and interference with markets rises just as ominously. Case in point: Singapore ranks 2nd on the Index of Economic Freedom; Panamá ranks 55th.

    PS. You’ll get a from-the-ground perspective on the Panamanian economic explosion when I see it in person this June.

    Read about Panamá directly from El País, a Latin American newspaper (in English). NPR podcast on the subject. Delays in the construction of the new Panamá Canal channel?  NY Times offers insights on growth and Panamá’s military history.

     

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  • Decisions Have An Opportunity Cost That Require Tradeoffs

    Free or Fair Government?

    Apr 16 • Businesses, Economic Debates, Economic History, Economic Thinkers, Regulation, Thinking Economically, Uncategorized • 558 Views

    I live in a town where I have to pay for garbage pick-up and recycling or I can dispose of it myself. The fire department is voluntary. Because there is no local high school, the town pays other school districts to educate our teenagers. In our town, government provides less and our property taxes are relatively low.

    Harvard professor N. Gregory Mankiw might use my town as an example of competition among governments. People who want a local high school would not choose to live here. Using the same reasoning, Massachusetts might attract people who want universal health care while New Hampshire is for those who do not.

    Dr. Mankiw said that municipal differences can elevate the quality of government because they lead to competition.  Concerned that its households and businesses are leaving, then a town, a city or a state will improve its services or lower its taxes.

    By contrast, those of us who believe government is responsible for more services and a more equal society have to reject municipal competition. In order to give more to everyone, governments have to redistribute income. Then though, as Dr. Mankiw explains, When you… “take from Peter to pay Paul, Peter may well decide to leave.” How to prevent Peter’s departure? Make everyone more equal everywhere.

    Do I want a national government that gives me what my town does not provide? The next U.S. presidential election will probably let me express my opinion.

    To read more about the free and fair visions of government, you might enjoy this column by H. Gregory Mankiw.  For each side, “free” is defended in this econlife post while the opposite position is in this obituary for Harvard economist John Kenneth Galbraith. Also, you might want to see what Mitt Romney and President Obama have said about the debate.

     

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    Standing In Line

    Apr 15 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Thinking Economically, Uncategorized • 1013 Views

    Walking along 56th Street in NYC, maybe a half block before 5th Avenue, I always see people on line. (New Yorkers say on line. Almost everyone else says in line.) They are waiting to enter Abercrombie & Fitch.

    Usually we associate an economic cost with a line. Time wasted. Irritation. Inadequate customer service. For Abercrombie, though, it might be a benefit.

    Researchers from the University of Chicago Business School concluded that total queue length conveys the value of a product. The longer the line, the better it must be. In addition, they found that the number of people behind you is crucial. If we are ahead of many others, feeling a sense of accomplishment, we attribute more value to our goal. In one example, the researchers actually found that when there are many people behind us, we also tend to spend more.

    Amazing. A long line snaking for blocks at an Apple store. And most of us think about the value of the product rather than the long wait.

    Our Bottom Line: Queues are all about cost and benefit. If the vendor enables us to perceive a benefit, then a line like the one at Abercrombie can become a competitive strategy.

    If you just want to enjoy hearing about lines, this 99% invisible podcast is a pleasure. For a more serious read, here is the U. of Chicago paper.

    And a final thought… wasn’t it the lines that brought down communism? But that is a different story.

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