People have a wide array of preferences for working conditions, which creates a heterogeneous workforce. Some workers may need to be paid extra to compensate for unpleasant conditions (known as a compensating differential) while others may be willing to be paid less to work a job that they enjoy. Workers are often assumed to be utility maximizers, not income maximizers, in the decision of which jobs to work and how many hours to work. Adam highlights that notion at the end of this brief scene with a USDA veterinarian who specializes in the disease.
John Oliver looks at the wealth gap in the United States following the announcement by President Obama that income inequality was “the defining challenge of our time.” Critics immediately accused the President of class warfare. Oliver discusses popular reasons for growing inequality but also highlights some of the current policies that contribute to its growth. An interesting extension of his coverage on the estate tax is a framing argument that by simply telling people the threshold required to pay those taxes can cause people to switch their support for the tax.
Tony Dokoupil takes an interesting approach to ask Americans if they understand what their “share of the pie” looks like. While trying to ask directly, many mall goers avoid the topic, but when asked to distribute pie to plates representing various bins, Americans learn how wealth is distributed currently. This is similar to work done by Michael Norton and Dan Ariely who fond that Americans have a hard to defining the distribution of wealth in the United States.
In this animated short from the Walt Disney Company, Uncle Scrooge discusses the history or money and the importance of money in the overall economy. There are A LOT of great teaching opportunities in this clip and would make a great summary of a money supply lesson or a required video to be watched before the lesson.
Opening to 7:15
History of Money
Huey, Dewie, and Louie visit Scrooge McDuck and request that he help them save the money they had earned. Scrooge goes through the history of money and discusses the role of salt as the original salary that Roman soldiers received. He then goes on to describe money from other societies and why money was important following original barter economies. The characters even discuss the role of money as a medium of exchange!
7:15 to 9:59
After learning of the importance of money in the economy, the brothers question why central banks don’t just print more money if everyone wants it. Uncle Scrooge discusses the role of fiat money and why it’s important for the money to be backed by something or someone who can promise to pay the notes that are printed.
10:00 to 13:20
Financial Planning and Taxes
Uncle Scrooge teaches the brothers about the importance of budgeting. People need to make sure that they allocate a portion of their income toward rent, food, and other necessities. He also teaches them about the role of taxes and how important it is for governments to have a budget and make sure that they collect taxes to pay debt.
13:20 to End
Velocity of Money & Investment
The boys are curious why Scrooge keeps so much money in his vault if he tells them that it’s important to put money “to work.” He teaches them that the money in his vault is just his petty cash and then goes on to discuss the importance of money circulating through the economy. The ending portion discusses the role of corporations issuing stocks and shareholders collecting dividends. At the end, he signs the boys up to manage their funds, but charges them a fee. The boys aren’t happy, but he laments that “nothing is ever free.”
A husband and wife comically discuss their plans for preventing another child, whether to use an IUD or have a vasectomy. The conversation then leads into whether it’s time to go back to work after maternity leave. While she loves her children, she wants to be away from them a bit, but they can’t decide on the best option. One option is to hire a “child minder,” but that would cost nearly the same as her teaching salary, but Sharon is in favor of the option. She’s willing to work full time to pay for someone to watch her children, essentially have zero effective income. Why would she be willing to do something like this? She would derive utility from spending time away from her own children.
Athletes become broke after retirement because of overspending, unexpected expenses, poor financial advice, but also feeling guilty about not helping others around them. One of the early tips of financial advice was to pay oneself before paying others. It’s easy to look at the purchase of houses or unexpected as something that can be prevented, but helping family and friends is something that isn’t as easy to give up.
The growth of professional sports over the past few decades has also meant that athlete salaries have grown as well. The issue? Professional athletes fresh out of high school and college (most under the age of 22) are become overnight millionaires, and most lack the financial literacy to handle that adjustment. Surprising to most, a large percentage of professional athletes declare bankruptcy within a few years because of their inability to manage their finances. Nearly 16% of NFL players file for bankruptcy within 12 years of retirement and ESPN’s Broke looked at the prevalence of financial stress for professional athletes.
Elmo wants to earn some money, but he isn’t exactly sure how. Luis offers him a chance to earn some money by helping him repair the ice cream machine.
Relative values of wealth are often difficult for students to analyze, primarily given our focus on income. Income is the flow of money while wealth is an accumulation of assets. Different generations perceive the concept of “wealthy” differently, but this video includes nonpecuniary aspects like spending time with family or being able to vacations as markers of wealthy. It would be interesting to survey students what they feel is a level of wealth that they would identify as being “wealthy.” I suspect it could also be a good opportunity to talk about the differences between means and medians.
What would you do if you won the lottery? This clip fits nicely with two different sections of an economics course. The first is how people respond to income increases in terms of purchasing normal goods or luxury goods. For labor economics, this discussion is a good segue to discussion how increases in income decrease the time people devote to work assuming leisure is a normal good.