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    The Ten Best Money Movies

    Apr 1 • Entertainment, Financial Markets, Thinking Economically • 211 Views

    From a Forbes.com, 2006 reader survey, the 10 best money movies:

    1. Wall Street (1987; 35% of votes)
    2. Trading Places (1983; 10% of votes)
    3. The Sting (1973; 6% of votes)
    4. Ocean’s Eleven (1960; 5% of votes)
    5. Boiler Room (2000; 5% of votes)
    6. It’s a Mad Mad Mad World (1963; 4% of votes)
    7. Casino (1995; 4% of votes)
    8. Glengarry Glen Ross (1992; 4% of votes)
    9. The Treasure of the Sierra Madre (1948; 4% of votes)
    10. American Psycho (2000; 3% of votes)

     

     

     

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  • Movies and Business

    Mar 31 • Behavioral Economics, Businesses, Entertainment • 266 Views

    Having discovered a paper that explained why American films tend to present a negative view of business, I was especially interested in seeing which films were discussed.

    “Evil” Firms and Capitalists: The Godfather (1972), The China Syndrome (1979), Norma Rae (1979), Wall Street (1987; remember Gordon Gekko?), Robocop (1987),  Pretty Woman (1990), A Civil Action (1998), The Constant Gardener (2005), Michael Clayton (2007), American Gangster (2007)

    Pro-business: Schindler’s List (1993) Jerry Maguire (1996, Tom Cruise) You’ve Got Mail (1998, Tom Hanks and Meg Ryan) Pursuit of Happiness (2006, Will Smith)

    Where would you place Eddie Murphy’s Trading Places? Others you might add?

    My Source: “Wall Street and Vine: Hollywood’s View of Business”

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    Appreciating the Market

    Mar 30 • Demand, Supply, and Markets, Economic Thinkers, Government • 302 Views

    In a recent WSJ interview, Nobel laureate Gary Becker tells us that, “Markets are tough to appreciate.” The reason, he says, is people feel government can better care for them than a profit seeking individual. Calling markets counterintuitive, Becker sees why people question the benefits of a system that seems to harm the unfortunate. For him though, the key is economic growth which only a market can create.  

    Becker also comments on the cost of health care. Implying that incentives rather than government provide the solution for cutting health care costs, he compares health care spending in Switzerland and the United States. Yes, the Swiss spend close to 11% of GDP on health care and we spend approximately 17%. However, for him, insight comes from asking who does the spending. In Switzerland, 31% of the total is from individuals;  for us, only 12% of total health care spending is an “out-of-pocket” expense. 

    Hearing Gary Becker’s ideas reminds me of a quote from William Bradford about Plymouth Plantation in 1623: “So they began to think how they…could…obtain a better crop than they had done…At length…the Governor…so assigned to every family a parcel of land…This had very good success, for it made all hand very industrious…”

    The Economic Lesson

    Whether your bias is more government or less, still we always can conclude that the incentives created by a decision will determine its outcome.

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    Hot Wing Markets

    Mar 29 • Businesses, Demand, Supply, and Markets • 224 Views

    Opening on April 1 in NYC, the Exchange Bar & Grill has food and drink prices that respond instantaneously to demand.  As described in a Reuters article, if everyone wants hot wings, then, in $.25 increments, the price increases; if no one wants them, the price drops. Prices, though will not fluctuate more than $2 higher or lower than a base number.  That means that you would not pay more than $9.00 or less than $5.00 for 6 hot wings because their starting price is $7.00. The restaurant has a ticker tape that will display price fluctuations.

    The Economic Life

    I have been wondering how we might graph the changing price for hot wings. Is quantity supplied constant or upward sloping? Is the demand curve shifting? Or do we just have a horizontal perfectly elastic supply curve that moves when management shifts it?

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    No Longer a Sin?

    Mar 28 • Economic Thinkers, Government • 260 Views

    Pondering health care reform, I began to wonder whether sin taxes would become Pigovian taxes.

    A sin tax focuses on the impact of a behavior on an individual. Levied on something that society believes is “bad” for a person, a sin tax typically targets habits like smoking or alcohol consumption. Its goals involve generating revenue and minimizing the behavior. 

    By contrast, a Pigovian tax focuses on the impact of a behavior on society. Air pollution, for example, can harm the people who live near a noxious factory. If untaxed, the factory continues producing while society suffers. However, if the factory has to pay when it pollutes, production becomes more expensive.  As a result, the supply of the item decreases and society is compensated.

    Have societies with universal health care coverage transformed sin taxes (which relate to the individual) into Pigovian taxes (which impact society)?

    The Economic Lesson

    First defined by Arthur Pigou (British economist, 1877-1959), a Pigovian tax increases the cost of an activity involving two parties that has a negative impact on a third, unrelated group.  Also called a negative externality, the harm experienced by the third party reflects a failure of the market to price the activity accurately because the market did not account for its cost (harm). When a tax or a fee is imposed, the cost of production increases. Consequently, the item’s supply curve shifts leftward. 

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