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    Economic Facts About Dogs

    Apr 15 • Businesses, Demand, Supply, and Markets, Households, Innovation • 225 Views

    Have you ever thought about the connection between your dog and the economy? During an interview on NPR’s “Fresh Air”, Michael Schaffer, author of One Nation Under Dog, spoke about dogs’ lives. A lot of his stories relate to the onset of two career families:

    • In 2 worker households, dogs were increasingly left alone during the day and began to experience separation anxiety. The solution was an antidepressant.
    • According to Schaffer, pet antidepressants are beef flavored. Otherwise, they are chemically identical to human antidepressants.
    • Pet related goods and services are a part of a $43 billion industry.
    • Two career families typically need dog walkers. There are dog walking certification organizations. 
    • Manhattan has pet taxi drivers.
    • Pet grooming has become a major industry. Shaffer hypothesizes that the growth began when pets started sleeping with us instead of in the doghouse in the back yard. 
    • Dogs’ names have changed.  Decades ago, a dog might have been named Fido. Now the dog is Frank.
    • The pet hotel business is growing. (Shaffer visited the Wag Hotel in San Francisco.)
    • According to a recent Economist article, increasing numbers of pets have been abandoned because of the impact of the recession. 

    The Economic Life

    According to the Department of Labor, 90% of our spending typically is for “food, housing, apparel and services, transportation, healthcare, entertainment, and personal insurance and pensions.” I was not able to find a pets category.




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    Is It Over?

    Apr 14 • Macroeconomic Measurement • 286 Views

    Imagine a “u” attached to a slightly (or considerably) higher upside down “u” and you are looking at 2 business cycles. A business cycle includes a peak, a contraction, a trough, and an expansion. Most people think that this recession started during December, 2007 (the top of the first “u”) and ended during July, 2009 (the bottom of the first “u”). However, the definitive word will come from the National Bureau of Economic Research (NBER) and they are not quite sure yet.

    The NBER tells us when recessions start and when they end. While primarily, they base their decision on the GDP, other data is considered: 

    1. Real GDP: the dollar value of  goods and services produced in the U.S.; measured quarterly by the Bureau of Economic Analysis (BEA).
    2. Real Personal Income: the amount we earn excluding transfer payments (such as social security, welfare, and other government paychecks that do not pay for a good or service); measured monthly.
    3. Employment: the percent of the labor force that is unemployed and looking for a job; measured monthly.
    4. Industrial Production: manufacturing production; measured monthly.
    5. Sales volume: from manufacturers and retailers; measured monthly.

    The Economic Lesson

    A recession is the period between a peak and a trough. Thinking back to our “u”, it is the left side, the trip downward. In economic terms, as we travel down the left side of the “u”, the GDP is either growing more slowly or actually diminishing. While most of us say that a recession is defined as two consecutive quarters of declining GDP, the NBER says that the quarters do not have to be next to each other.



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    More on the Movies

    Apr 13 • Businesses, Entertainment, Thinking Economically • 245 Views

    Following up on yesterday’s post, I discovered how important product placement can be. Sometimes movie makers decide the products beforehand, before they even complete the script and select the stars. Fees for a “starring” product can total millions.

    Up in the Air? Including Hilton HHonors Diamond V.I.P. meant free rooms. But meanwhile, Hilton oversaw accuracy for their uniforms, service, details. For its participation, American Airlines helped to market the film.

    The 28th Amendment?  Movie makers were contemplating where to insert a fast food scene before the scene was written. (Film has not been completed.)

    Wearing economic glasses as you watch your next movie or TV show, you might get some extra insight if you watch for product placement.

    The Economic Lesson

    If profit equals total revenue minus total cost, then product placement certainly helps the bottom line. Also though, we should not forget the opportunity cost of these profit generating decisions. Is artistic quality influenced?


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    A Star is Born

    Apr 12 • Behavioral Economics, Businesses • 246 Views

    Heinz Ketchup had a cameo but Apple was a star.  I saw The Girl With The Dragon Tattoo yesterday and started to think about product placement. In this excellent film, while Heinz ketchup played a fleeting role during a scrambled eggs breakfast, Apple laptops were a recurring presence throughout the film

    How did Apple get this advertising? According to a 2006 Washington Post article, Apple does not pay for it. Still, though, they work very hard to get it and probably provided the computers.

    Carrie Bradshaw used an Apple in Sex and the City, as did the “good guys” in 24, and Alec Baldwin in It’s Complicated. To see the films in which Apple appeared, you might want to look at brandcameo.

    The Economic Lesson

    As oligopolies, large firms with few competitors have many consumers with which to communicate. Films are one vehicle for contacting a large audience. Other characteristics of oligopolies include sticky prices, mass production, product differentiation (though not always as with steel), and the need to advertise.

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    Yacht Lessons

    Apr 11 • Government, Thinking Economically • 239 Views

    When we think about taxes, we should look at yachts. In 1990, because of a new luxury tax, anyone who purchased a yacht paid 10% more. The result? People stopped buying domestically made yachts. Yacht makers went out of business and the government never collected the revenue it sought. After the tax was repealed in 1993, sales increased.

    Fast forward to 2010. On April 6th, the Florida house capped the tax on yachts at $18,000. Consequently, people buying boats sold for $300,000 or more got a tax cut. The result? Supporters claim sales will increase because boat buyers will no longer go elsewhere to avoid the tax.  In response, opponents say this tax cut will not help most Floridians, especially the unemployed and those with declining home values.

    The debate about a tax on luxury items returns us to taxing dilemmas. Government’s search for more revenue is complex.  The most politically attractive solutions might not always become fiscally fruitful.

    The Economic Lesson

    In addition to progressive income taxes and luxury taxes, Congress can look at other tax approaches. They can consider higher sales or estate taxes, a value added tax on manufacturing firms, and a flat tax for everyone. Whichever they select, the incentives they create will shape the response and the revenue they generate. 

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