Wednesday, September 5, 2007

Economic Concepts and the Museum of the Confederacy

When I left my previous job with the Federal Reserve Bank of Chicago, one of my colleagues said he suspected one of my motivations for taking up my new job in Virginia was my interest in the American Civil War. While I will admit it was a positive influence, it was far from the determining factor. Nevertheless, I noticed an article in the Richmond Times-Dispatch (link no longer available).

The article talks about the decision to move the current Museum of the Confederacy in Richmond, and divide its holdings among three sites. The two named today were the Appomattox Court House National Park, and the Chancellorsville Battlefield Visitors Center, located in the Fredericksburg and Spotsylvania National Military Park. A third will likely be named later this month.

I was struck by the clear examples of some basic economic concepts in the story. The concepts I was immediately aware of were "place utility", "supply", and "complimentary goods." Allow me to explain my thinking.

Place utility is one of three types of utility that are added to resources in the production process. (The other two are form and time utility.) Place utility simply is putting the good or service in a place where it is more easily consumed. It is utility that gives a product value, whether good or service. Indeed, the same product can have different value depending on the type of utility. This explains why a gallon of milk at a 24-hour convenience store may have a higher price than a gallon of the same brand of milk located at a large supermarket. In the former case, additional utility in the form of place and time (more convenient) make the product add more value. In the case of the Museum relocation, moving the collections to various spots adds more place utility. It makes the "product" easier to consume by increasing the number and locations of the product.

Supply is increased by the fact that the new locations will have combined exhibit space that is more than twice the space the Museum has now. Quantity supplied is increasing, this could reduce the cost (notice I didn't say price) to the Museum of displaying the collection as more should be able to be on display without changing the displays.

Finally, we come to the concept of complimentary goods. These are goods that increase their respective values when consumed together. (Think about peanut butter and jelly here.) The value of both the parks and the Museum holdings are increased by proximity. The Museum collection can be more relevant if in the setting where the various pieces were found. And the park becomes more relevant and interesting through the addition of actual specimens.

I suspect there are other lessons to be garnered here. But these are the first that jumped out at me. I invite your observations and comments.

2 comments:

Paula said...

Hey Tim -

Welcome to Richmond! Lis had mentioned you were moving here, but being new to the area, I had never heard of the Powell Center. Just went to its site after reading about it on the Richmond Fed website - looks like you have some great programs!

You may not remember me. I was in the New Orleans Econ Ed department - we met in DC last fall. My husband and I moved to Richmond in May and I work in another department. You can take the girl out of Econ Ed, but you can't take the Econ Ed out of the girl. ;-)

I realize this was more suitable for email, but I couldn't find an address for you.

I like your comments about the museums. We often don't think of them as having "goods," but this is one of those great examples of economics in every day life, especially in places where we don't think to look.

Congratulations on your new position and move. We are dreading this winter, but something tells me you are looking forward to it!

Paula Munger

Andrew H. said...

Tim,

On my visit to the Museum of the Confederacy a few years ago, I had an interesting economic history argument...

I was on the last two of the White House of the Confederacy (WHC)and a French tourist, the docent, and I got into an argument over the size of the WHC. His contention was that it was too small and a bad choice for the people of Richmond to put up the president of the Confederacy. After all, the White House in Washington is so much bigger. Try as we might, we could not get him to understand that in 1861, it was not easy to just find a huge house for Jefferson Davis and his family on such short notice. We could not get him to understand that the house was not purpose built like its counterpart in Washington. Finally, it degenerated into an argument over the relative wealth of the Union and the Confederacy. When he said, "I think you are wrong. I think the Confederacy was a rich country," I was done with the whole thing. By the way, none of these misunderstanding were due to his grasp of the English language. He spoke perfect English. He just had such strong, preconceived notions about the wealth of America that he could not conceive that the Union or the Confederacy were not rich by world standards (certainly not modern ones). In 1861, the combined GDP (measured by admittedly imperfect methods) of the USA and the CSA was less than that of France. So, it's not just Americans that don't have the best grasp of economic history!