George notices that the greeting card store downtown is going out of business and he sees this as a business opportunity! He believes that he can buy Texas-themed snow globes for $1 and resell them to his neighbors for $5. George is arbitraging the snow globes, buying low and selling high. He goes through some struggles at first, but finds out how to sell them by the end of the episode.
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.
Tim tries to host a guys night and things don’t seem to be going his way. Beyond the awkwardness of just the two of them, the big pay per view fight lasts only a couple of seconds. While the two did get to watch the fight, which had a knockout, it wasn’t quite worth the hundred dollars they paid. Tim notes that he may be able to turn it off and get his money back. With a lot of experience goods, it’s not necessarily the actual outcome of the action that people care about. Tim and Matt did see a fight, so why is he so focused on getting his money back?
A second quick econ line occurs later when they sit down for dinner. Even though Tim isn’t eating any tacos, he notes that the cook is cheaper since he expects Matt to eat 25 or 26 tacos. This form of bulk discounting represents second degree price discrimination. With this pricing mechanism, the hope is to induce customers to purchase more than they would have (law of demand) even though making an additional taco doesn’t have the added cost of another cook.
Sheldon finds that his sandwich tastes a bit different than normal. After a quick trip to the grocery store, he realizes that his local bread company has been bought out by a larger corporation that is looking to make break quickly and cheaply. He doesn’t like this switch and petitions super market customers about getting the local bread company to listen to their customers.
Without realizing it, Sheldon suggests that communism may be a better system because then one central authority can decide the recipe for bread. He assumes bread lines in Russia are a result of great tasting bread, and not the country’s inability to allocate resources. The show is set in the 1980s, which is the midst of a Cold War. Sheldon’s dad gets a spot on the news and Sheldon almost shares how the social security system is similar, but his dad doesn’t give him the chance.
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.
The local flower delivery guy makes racist remarks to Franco because he’s African American. The rest of the characters discuss other comments they have received regarding their nationalities. Labor market discrimination in this scene occurs as Arthur’s donut shop is a customer of the flour supplier. Customer discrimination could persist, but if the customers aren’t discriminatory, they have the ability to take their business elsewhere, which Arthur and Franco try to do. The Becker Model of discrimination argues that only customer discrimination can last in the long run because competition should drive out co-worker or firm discrimination.
In a 1963 Labor Day interview with Walter Cronkite, President Kennedy discusses his position on handling the labor market of the United States with around 4 million unemployed (about 5.5% at the time). Kennedy notes that the growing labor force in the United States requires that if the US wants to “stand still,” they still need to move very fast. Kennedy’s main policy focus at the time was retraining workers who had been displaced by technology and making sure that significant amount of workers have the necessary education to handle the growing workforce.
Kennedy also speaks to the lost jobs in “hardcore unemployed” industries like coal and steel and how it’s important to make sure those workers are retrained because those workers are no longer needed. He then laments that there’s a different issue with older workers replaced by technology and younger workers who don’t have the education to handle that technology. Kennedy ends this portion of the interview with a very powerful quote about the fear of automation:
Too many people coming into the labor market, too many machines are throwing people out.
You can view the entire interview, courtesy of the Kennedy Presidential Library, on YouTube.
In Lucy and the Great Bank Robbery, Lucy and Viv rent their room people trying to visit the New York World’s Fair. Unbeknown to Lucy, she rents the room to two bank robbers who have decided to rob Mooney’s bank at night. After the heist, the bank robbers discuss whether they should stay in town and actually visit the World’s Fair or if they should leave. One of the robbers dutifully notes that money is only good for two things: stealing and spending. While your economics instructor would probably advise against the first part, we typically focus on the role of money as being only used for spending or saving. The two then go on to discuss how they’ll store their money since they can’t put the stolen money back into the bank. Saving money at home (in mattresses or in the ground) are common ways that money leaks from the money supply.
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!