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    Paying the Simpsons

    Oct 7 • Behavioral Economics, Demand, Supply, and Markets, Households, Labor, Thinking Economically • 612 Views

    Rather than accept a 45% salary cut, the voices of Bart, Homer, Marge and Lisa have said this might be their last season. Reportedly paying close to $8 million a season to each of the major voices, 20th Century Fox Television said the show had become too expensive. NPR also tells us that Fox might make more money by ending the show than continuing it. The syndication rights alone could be worth close to $1.5 million for each episode.

    In a counter offer that Fox rejected, the Simpsons’ actors said they would accept a 30% cut and a share of the profits. Meanwhile, producers for the series have agreed to pay cuts. A final decision might be announced today.

    The Economic Lesson

    The Price of Everything, a very good book, explains high salaries. One possibility is the huge audience that technology facilitates. More people mean more money. Here, a University of Chicago economist discusses the rationale and math behind superstar salaries. He even compares Luciano Pavarotti to Mrs. Billington, an 1801 superstar Italian opera diva.

    An Economic Question: Through a demand and supply graph for a superstar, how might you illustrate a high salary?

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    Steve Jobs Quotes

    Oct 6 • Businesses, Economic Thinkers, Government, Innovation, Labor, Macroeconomic Measurement, Thinking Economically • 823 Views

    • “I’m one of those people who think that Thomas Edison and the light bulb changed the world a lot more than Karl Marx ever did.” (From Insanely Great, p. 26)
    • “It’s not the consumers’ job to know what they want.” (NY Times)
    • “We want it to make toast. We’re toying with refrigeration too.” (Wired, about the iPod, during 2004)
    • “Real artists ship.” (Insanely Great, p.165. Referring to the newly developed Macintosh in 1983.)
    • “I didn’t see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me {at 30 years old}. The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life.” (Stanford commencement speech, 2005)
    • “Stay Hungry. Stay Foolish.” (Stanford commencement speech, 2005)

    The Economic Lesson

    More (Steve) Jobs, Jobs, Jobs, Jobs” sums it all up. In a 2010 NY Times Op-Ed, Thomas Friedman said that we can re-invigorate our economy by supporting our innovators. Let’s have a “Start-Up America.” Or as he concluded, “You want more good jobs, spawn more Steve Jobs.

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    Naming Matters

    Oct 5 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic History, Economic Thinkers, Households, Innovation, Labor • 565 Views

    Combine something enjoyable like a strawberry with a color that connects to high tech. Then add the one letter that has a “reliable” sound in most languages and what do you get?


    Actually, the Blackberry might have been called the MegaMail. However, its creators soon discovered that just thinking about an avalanche of emails made consumers cringe. Telling the story behind the name Blackberry, Intel’s Pentium chip, Apple’s Powerbook and beyond, this New Yorker article wonderfully describes the art and science of naming. 

    You also might look here to see why certain names and ideas “stick.”

    The Economic Lesson

    In his Wealth of Nations and Theory of Moral Sentiments, indeed, throughout thousands of pages, economic philosopher Adam Smith (1723-1790) was said to have referred to the “invisible hand” only 3 times. And yet, his description of how the market economy’s participants coordinate their behavior has “stuck” for hundreds of years.

    An Economic Question: In each of the 4 basic market structures–perfect competition, monopolistic competition, oligopoly and monopoly–is the impact of a good name different?

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    A First For Denmark

    Oct 4 • Behavioral Economics, Demand, Supply, and Markets, Economic Debates, Government, Thinking Economically • 565 Views

    Denmark just became the first country in the world to have a fat food tax. That means butter, milk, pizza, any food with more than 2.3% saturated fat content is more expensive. To be precise, for every 2.2 pounds (one kilogram), the tax is $2.90 (16 kroner). Predictably, in response, demand soared for fatty foods just before the tax went into effect.

    This was not a policy reverse. Denmark had already increased taxes on chocolate, other sweets, sugary drinks and alcohol while limiting trans fats.

    And they are not even as overweight as we are. The obesity rate in Denmark is close to 10% while the ratio is closer to 1 in 3 for adults in the U.S.

    Here, more on how Denmark is regulating what its citizens eat.

    The Economic Lesson

    If a society pays all or part of the health care expense for its citizens, should the opportunity cost be individual freedom?

    An Economic Question: Some people say that sales taxes are unfair because they are regressive; those who earn less have more of a burden. Your opinion?

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    Averting Disasters

    Oct 3 • Businesses, Developing Economies, Economic Debates, Economic Thinkers, Government, Macroeconomic Measurement, Thinking Economically • 608 Views

    Disaster spending is setting records this year. At 81, the number of tornadoes, earthquakes, snowstorms, hurricanes and wild fires is equal to the total for all of 2010 and more than each of the previous 3 years.

    Disaster spending almost created a disaster for the Congress.

    At the end of the summer, the Congress could not agree on giving FEMA (Federal Emergency Management Agency) extra funding because the Democrats said, “yes” while Republicans wanted cuts elsewhere to offset the new spending. A FEMA impasse would have stalled a larger spending bill and shut down the government.

    But then, FEMA said it could wait several days. Once the new fiscal year began on October 1, they would get funding already allocated to them. As the Washington Post described it, “Who averted a government shutdown, FEMA or Congress?”

    The bottom line?

    The FEMA impasse was about a lot more than the relatively small amount they needed. It returned us to the Democratic/Republican budget disagreement. The next deadline is November 18 when another shutdown is possible.

    Here, in a digitalsurgeons infographic, you can see lots more about this year’s disasters.

    The Economic Lesson

    Knowing that disasters lead to clean-up spending and reconstruction, people have suggested disasters could fuel economic growth. Calling it “the fallacy of the broken window,” economist Frederic Bastiat (1801-1850) questions the assumption that a broken window can be an economic blessing. He agrees that a glazier would receive, for example, 6 francs to fix it. However, he then says, “…if…you conclude…that it is good to break windows, that it helps to circulate money…I am obliged to cry out: That will never do! Your theory stops at what is seen. It does not take account of what is not seen.”

    Bastiat then points out that the money given to the glazier would otherwise have been spent on new shoes or a book. And, having been able to spend the 6 francs on a new pair of shoes, their owner would have had new shoes and the old, unbroken window.

    An Economic Question: Told by a building contractor that he benefits financially from rebuilding after a natural disaster, could you use the “fallacy of the broken window” to disagree? Explain.

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