Think Economically


Maximum understanding, minimum average total cost.

Principles of Microeconomics – news video feed and some commentary

So the Fall semester has begun. I show YouTube clips in my class and discuss them. If you’re interested in following along, the playlist is here and will expand as the semester goes:

In the first class, I talked about texting campaign contributions, Rio drug gangs banning crack, and football players going on diets.

First, texting campaign contributions. The goal here, presumably, is to drive down the transaction cost of contributing–or at least the psychic transaction cost borne by the contributor.

A few things worth noting: this is probably aiming at people for whom texting is a regular activity–so read: younger.

Second, the contributions are for $10, which is not very much, so this is probably aiming at some kind of “warm-glow” giving, which when aggregated can really add up; the danger being that if people are substituting texting donations for $25 checks, then the campaigns are in trouble.

Finally, the transaction costs here are actually really high–the video said 40% if I recall. That means that even if these are substituting for $7 checks, the campaigns are in trouble. Unless there are some sort of external benefits of voter engagement or something, but yeah…I’m curious whether this is a flash in the pan or a new way of giving that pans out.

Second on the list, the most powerful drug gang in Rio bans the sale of crack cocaine. This one’s a little harder to parse. Presumably, if they were successfully selling crack, they were doing so at a profit. So why would they ban it?

One possibility is that they’re worried that they will lose their customers to death and destitution. A captive market is a good thing but not if they die or have no money. The intertemporal tradeoff of money now v. money later is at the root of a lot of economic decisions. The crazy thing is this means that somebody ran the numbers (well, or at least thought about it) and decided that getting customers addicted to crack is a bad investment.

Another possibility is that the margins are low and they want to focus on higher-profit goods to sell. Finally, there may be social preferences in here somewhere–drug lords have grandkids, too, after all. And particularly with the Olympics coming in 2016, there may be some nationalistic pride to try to kick the crack habit before the eyes of the world are on Brazil.

One other thing: isn’t crack already banned? It seems noteworthy that the drug gangs decide what is banned and what is “legal”. Norms v. laws, I guess.
Last on the list, football players are slimming down. This one is straight-up game theory. You can model it as a round where you decide what shape you are–giant cube of meat or slimmer (but still absurdly giant) demon with a little more mobility–and then that effects the strategies available to you at the next stage.

So what had happened was: lineman turned into giant cubes of meat–>running was made more difficult–>the relative value of passing increased–>teams adapted to create dink-and-dunk passing schemes or that Mark Bavaro quick out route that worked super well in Madden 2003, plus also fullbacks disappeared–>the benefit to being a cube of meat declined–>the relative value of defensive agility increased–>teams went on diets.

What does this mean for you? Well, I’m curious what NFL division has the lightest average defensive line, and whether that is accounted for in projecting running back performances for fantasy football. Because it seems like running games might become more important again. Oh, evolutionary dynamics, you are so coooool.


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August 2012
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