Category: Meddling with Markets

30 for 30: Broke — Unexpected Expenses

 

One reason why so many athletes become broke after retirement is overspending, but a secondary issue is the unexpected costs associated with earning millions of dollars each year. This segment of the ESPN 30 for 30 special looks at the taxes and unexpected costs associated with earning millions of dollars per year. For many athletes, this may be the first real job they have held, which means they are unaware that they are now part of the highest tax bracket, so approximately 40% of their millions is withheld. A secondary issue is that athletes play in multiple states and countries, which means that they owe state and federal taxes in more than one jurisdiction. Because of the complicated tax situations, many athletes need a financial advisor in addition to their agents, who also take a percentage of the total income.

Abdullah Al-Bahrani and Darshak Patel have a great paper in the Southern Economic Journal that looks at using ESPN 30 for 30 to teach economics.

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The Beatles — The Taxman

I reached out on Twitter to solicit advice for great music videos associated with different lessons, and my former teaching assistant responded with this great song from the Beatles. One of the great lines from the song goes like this:

If you drive a car, I’ll tax the street,
If you try to sit, I’ll tax your seat.
If you get too cold I’ll tax the heat,
If you take a walk, I’ll tax your feet.

This is a great opener for a lesson on taxes and tax policy.

Thanks to Marissa Reuther for the song suggestion

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South Park — Medicinal Fried Chicken (NFSW)

 

Cartman and the gang head to KFC after soccer practice only to find out it’s been converted into a new medicinal marijuana shop. Cartman convinces his mom to drive him to a nearby town for KFC, but that show has closed as well. Cartman learns that Colorado has recently passed a bill that bans fast food in low-income areas, but it turns out KFCs were only built in low-income cities, so there are effectively no more KFCs in the state. The state government has essentially set a price ceiling for KFC in low-income areas at zero dollars. One of the predictable side effects of these price controls is a black market for the item. Items with price ceilings also tend to have inefficiently low quality. The banning of fast food causes Cartman to enter the black market to feed his KFC addiction. In later scenes, Cartman is upset because he catches a dealer cutting the KFC gravy with Boston Market gravy. When the dealer suggests he can take the gravy back, Cartman notes that no one wants fried chicken without gravy, implying the two items are complements.

Thanks to Thomas Jandora for the clip reference

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Friends — Rent Control

 

This is a classic example of a price ceiling, where the government comes in and sets a maximum price on what can be changed to consumers. One of the most prolific examples of price ceilings is rent control. In this episode of Friends, Chandler brags about how because the apartment was rent controlled, it was a ‘freaking steal!’

Thanks to James Tierney for the clip and description.

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John Stossel — The Fight Against Food Trucks

John Stossel, through ReasonTV, looks at the regulations behind the food truck industry. From a competitive market standpoint, food trucks have the ability to respond to high demand areas by relocating at any given moment. For brick-and-mortar businesses, however, food trucks enter the market as a low-cost competitor and steal customers from permanent restaurants. Many cities in the United States have setup regulation limiting the location of food trucks or the hours they may operate. This rent seeking behavior, however, limits the amount of options available to consumers in the name of “fairness.”

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The Daily Show — Wage Against the Machine

This video does a nice job of describing many of the economic arguments for and against raising the minimum wage in a comical way. The clip is a few years old, but it still does a nice job of discussing many of the common arguments. Note: the clip does include a supply and demand graph, but it labels supply and demand incorrectly! This is a good opportunity to discuss economic misconceptions, as well as the labor supply and labor demand curves.

Thanks to Rebecca Chambers for the clip and description!

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Marketplace — The Problem with NAFTA

A brief background of NAFTA and the problems of exiting NAFTA. A good discussion within the video covers the parties that gain and the parties that loses from NAFTA. A good note in the video is that the jobs that are lost are different from the jobs that were gained.

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ieaTV — Art Laffer Explains the Laffer Curve

It’s not often that you can learn about the Laffer Curve from Art Laffer himself. While relatively controversial, Art Laffer popularized, but did not create, the notion that tax revenues could increase by lowering taxes. In this clip, he does a good job distinguishing between the two sections of the curve and focusing on the pedagogical side of the curve.

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Law and Order — Selling a Kidney?

This is a series of clips from the show Law and Order where the detectives uncover a doctor operating a black market kidney ring. The detectives debate throughout the episode of whether kidneys sales should be prohibited and if there is an efficient way to allocate kidneys in the market.

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College Humor — Apartment Hunting is the Worst (NSFW)

This comedy series shows a series of examples of associated with price ceilings for apartments in New York City. It shows not only the predictably inefficiently low quality of these apartments, but also the wasted resources that are involved when there is a shortage of apartments.

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