Asymmetric information is a condition in which one party to a transaction has information that isn’t known to the other side of the party. This can disrupt the market for used goods because the buyer may not know the full extent of what they’re purchasing. In this Volkswagen ad, the father and son duo are unaware of the older lady’s past experiences with the cars. This is a great segue to Akerlof’s Market for Lemons, which is based on the the used car market.
Paladin is hired to settle an issue between a vineyard owner and a neighboring oilman. The smoke and runoff from the oil well are damaging the grapes of the award-winning vintner. This is a classic case of externalities and the Coase Theorem would suggest the two could meet and solve the problem on their own (if there were low transaction costs), but the Coase Theorem wasn’t written about until two years AFTER this episode aired.
From an economic perspective, giving the wrong gift makes society poorer. If you spend money on chocolates and give it to someone who happens to think it is worth less (due to an allergy!), you’ve lost value. Whenever you receive an outfit that is the wrong size or style, a candy you won’t eat, or something that is worth less to you than what the gift giver spent on it, an economic inefficiency has occurred. Thus, from an economic perspective, the most efficient gift is always cash. The person will maximize their own utility by spending (or saving) the money according to their preferences.
Submission and description from Erin Yetter!
Things seem off in The Good Place, but it turns out that the as the world becomes more complicated, seemingly identical actions (like giving flowers) can have unintended consequences that most people don’t realize. Our private actions can have social costs that we’re unaware of and would probably try to avoid if we were fully informed of their costs.
While I was listening to Hi! Bob on Audible, one of the scenes involved Sarah Silverman and Bob Newhart discussing stand up comedy. The clip in the chapter comes from Silverman’s set entitled, “We Are Miracles” and discusses the impact of priming on young women. Telling people they can be anything they want can possible introduce issues they maybe never thought were issues before. How we talk to young women often plays a role in future human capital acquisition and may lead to a form of subtle human capital discrimination.
Jason and Jerry make a surprise appearance on Curb Your Enthusiasm to reprise their roles of George and Jerry to discuss the struggles of meeting strangers. There are people all around us that we’ll never meet, partly because they don’t want to meet us. They assume we’re bad people even though we know we may not be.
Thanks to Daniel Stone for the clip!
Garrett is on gift wrapping duty at the store and he hides his inability to wrap gifts under the guise that it’s inefficient. While economists may see gift giving, in general, as inefficient, gift giving inefficiencies are scattered throughout television and movies (Blackish, Brooklyn 99, John Mulaney’s Stand Up, Life in Pieces, and Old School). In this scene, Garrett focuses on the wasted time that it takes, beyond just getting the gift, that goes into wrapping a gift only for the wrapping to be destroyed later.
PBS Newshour investigates the economics around the first Thanksgiving, including the differences between Europe’s cash economy and the indigenous barter system as well as common resources and property rights.
There is a feud waging between C and D blocks. It is C Blocks time for some revenge, so the leader “Badison” devises a plan to defecate on C Blocks clean uniforms. Meanwhile, the guards of the prison are involved in a fantasy prisoner league (think fantasy football, but with points for things prisoners might do or get in trouble for). The guards see what is happening and have to decide to whether or not to intervene.
Asymmetric Information – the two guards outside of the laundry room have access to information the other guards in the league do not. Further, their decision to intervene or not will directly impact points in the game. Could use this to talk about how asymmetric information can affect the outcome of negotiations, trade, games, etc.
Cost-Benefit analysis – the guard explicitly uses this term, which I love, when deciding if they are going to intervene. C Block will undoubtedly retaliate so is the possible ensuing violence worth the potential benefit of points in the game. The guards have the compare the options before making a decision.
Data is trying to formulate a battle plan for Commander Riker, but he’s assuming that Commander Riker is rational and knows that Data has analyzed his move. Data takes it a step further and hypothesizes that Commander Riker knows that Data knows that the commander has a battle plan. Full information is a tough assumption about rationality, but bounded rationality lets us assume that people have limitations but still respond to incentives in a predictable way. While perhaps a human failure, most of society does not operate on the same level as Data.
Thanks to Peter Nencka for the clip suggestion!