Clever Economic Hacks

Preventing crime, answering nature’s call, AND preparing for the in-laws: Marginality

None of us wants to be robbed, but who wants to spend money on expensive security systems, “bad goods” which mitigate “bad” in our life, rather than make you truly better off compared to living in a law-abiding society? What if we could save our hard-earned cash while enhancing our safety?

Think on the margin. After all, thieves, saints, and the rest of us do this all the time. Marginal analysis thinks on the “edge” rather than on the “average.” So if Mr. Thief is prowling around your neighborhood and he sees your nice, dark home, what might make him think twice about prying the door open?

A sign, scrawled on your front door: “Honey, make sure to feed Diablo when you get home.” On the margin, your thief will likely pass by, and burgle someone who doesn’t understand marginality. Of course, a home security sign is another crime deterrent: the burglar is unlikely to do research to see if you’ve really paid for that service.

Or if you’re on a date with your beloved, and after 30 minutes of intimate chat, those three glasses of iced tea are telling you you need to visit a restroom. You announce your intention. She responds, “What? Aren’t you enjoying our conversation? What do you love more—me or the bathroom?”  (In other versions of this, it’s, “Who do you love more, me or the Packers?!”)

“You, of course,” you answer, “but on this particular margin, emptying my bladder is more important to me.”

If she doesn’t like that, that’s a good sign of economic incompatibility.

And if you hear that the in-laws are coming over for the weekend in 20 minutes, do you spend that time making one room meticulously clean? Of course not. Spending your scarce time superficially spiffing up each room will make your house 50% more presentable. 

Finally, if you and your bestie are enjoying a great restaurant meal, and you’re eyeing something scrumptious on their plate, how do you suggest that they share a bit?

Wait. Don’t ask for a bite right away, because the marginal value of what they are enjoying declines as they get more full. When they’ve enjoyed a good deal of that steak, then float the idea of a wee bit of sharing.

Being an Econocontrarian: minimum wages, recycling, free goods: Understanding Scarcity

While being a contrarian doesn't make you more popular, it gets you noticed. Economics gives you a clear view of scarcity. The Rolling Stones’ Mick Jagger, who attended the London School of Economics, had a hit song that reflected scarcity: “You can’t get what you want/ but sometimes you get what you need.”

True, economists dismiss the idea of “needs” (keep in mind, Mick didn’t do terribly well in economics class, though he did like Hayek), but they understand that each good has tradeoffs. We live in a world where our desires are limitless and everything we desire involves sacrifices, and is therefore costly.

So if you want a $20 fast food minimum wage, expect more expensive burgers, fewer jobs for entry level employees, more automated payment systems, offset by a few happier employees. That’s a tradeoff.

Or, if you want to recycle your plastic, expect to spend a lot more time and money sorting trash and subsidizing recycling, which would have helped you buy those expensive fast food burgers. 

And if you want free goods—say free college tuition or school lunches— that means that the people selling the goods financed by other people’s money are more inclined to spend recklessly and expand the program beyond the deserving poor, which helps explain why college tuition has galloped past the price of other goods. 

Bursting bubbles: child labor, pollution, planned obsolescence, buying local: Economic Logic

Enlightening your friends who never took (or never understood) economics also won’t make you friends, but it makes for more interesting conversation. What ended child labor? Not legislation, for goodness sake. The Industrial Revolution did. After all, the pre-industrial agricultural era had plenty of dangerous child labor on farms, and the transition to the modern world makes us rich enough to tell junior to get out of the textile mill and read his McGuffey readers at school.

Isn’t pollution a problem?

Sure: but as property rights become clearer and individuals become richer, the planet continues to become cleaner.

But aren’t cheaply-made goods evidence of planned obsolescence? No, not in a free market. If I could make a smart phone or an electric bike with a battery that lasted 50 years, I would get rich, and all sorts of battery manufacturers would become bankrupt. They won’t like that, of course, but unless they have guns (and/or get in cahoots with the authorities in a government-enforced collusion) the market will reward me and punish them. I’m convinced that we buy a good amount of schlocky goods on Temu because we anticipate replacing them with more fashionable ones. It turns out that I planned that “obsolescence” when I purchased my cheaply-made $12 Chinese sneakers.

Well, at least can’t we head to the farmer’s market and enjoy locally-produced veggies?

Sure. But they aren’t actually locally sourced, and they probably exacerbate global warming. Were each of the necessary inputs of those luscious outputs produced locally? That would mean the farmer’s jeans, irrigation hoses, hoes, and the energy for his rototiller were all produced in situ. Worse, the relative inefficiencies of local farms compared to “factory farming” means their CO2 emissions per tomato or zucchini are higher than produce flown in (like grapes from Chile) or trucked to the grocery store. 

But those local tomatoes do taste better. 

Eating, drinking, and being merrier: Calculating Happiness

Perhaps all of this bubble bursting has made you a bit morose. Can economics give us insights into being happier? 

Sure. It’s a marginal thing, of course: the first bite of that steak or first sip of your Pinot tastes better than the 27th bite and 17th sip. Economists do suggest that more income does add to happiness. Of course, that’s only marginally, since after about $80,000 per year, each additional dollar has quite marginal additions to your joy. 

Getting married does increase your happiness, and though any alcohol consumption causes some health damage, its associated sociability (unless you drink alone….) likely adds to your lifespan. 

And of course, happiness, being subjective, has tenuous connections to many goods. Another nuke likely makes a pacifist sadder, and a peace agreement might make Raytheon’s CEO a bit grumpy. A war or a series of hurricanes might increase GDP, particularly if you take a second job to pay the bills, but in the end, you are poorer despite the misleading GDP numbers, as those goods reflect misery.

In the end, I’ve come to believe that the key to happiness is gratitude. When my kids did mission trips in Juarez, Mexico, they were shocked by very poor people who were both happy and generous. I’m not sure whether those poor villagers benefitted from my children’s service, but I trust my children learned some lessons about wealth and happiness, in addition to the lessons about economics they learned at Brookfield Academy.