Tuesday, October 16, 2007

Economics and Pop Culture: The Music Man, #1

For those who aren't sure, my new "home" is at the Powell Center for Economic Literacy, which resides at the Collegiate School in Richmond, Virginia. Collegiate is an independent, K-12 school. At the Upper School (high school) level, they are like many other high schools in the country. Academics, sports, extra-curriculars, etc. One of the extra aspects is the presence of the Powell Center. We work to help identify, integrate and support economic education in a wide variety of school activities, with the idea that we will take what works to a broader audience.

Now that the introduction is out of the way, Collegiate's fall musical this year is "The Music Man" by Meredith Willson, and will be performed next week. I was thinking that there should be a multitude of economic concepts, ideas and topics to pull out of this quintessential piece of American theater. I'm going to be blogging on them between now and next week. I hope you'll enjoy this piece of free association between the arts and economics (I am, after all a graduate of the College of Arts and Letters at Michigan State University). Feel free to contribute your thoughts after each installment. Let's see where this goes.

Things start early. In the opening scene, we have a number of traveling salesmen riding on a train. They are discussing (musically, of course) the state of their profession as they head into Iowa. They talk at length about how their job has gotten harder. Increased consumer mobility through the Model-T, packaged food (U-Needa Biscuits), are contributing to the demise of the small town general store and, in turn, the life blood of these drummers. The first economic idea that rises to the surface is that of economic growth. Economist Joseph Schumpeter coined the phrase "creative destruction" to describe how growth changed economies. Old ways of production (and distribution) are destroyed as new methods are created. The new adds improvements, but the old frequently disappear or are discarded. (Anyone still have 8-track or, older yet, real-to-real tapes AND a functioning player?)

Underlying this change is the concept of utility or "usefulness" if you prefer. When we purchase a good or service, we are purchasing its utility. There are three kinds of utility - form, place, and time. Form utility means the product is in a form that is useful to the consumer. Place utility means the product is available when the consumer desires. And time utility indicates it is available when the consumer needs it. Often the same product can have different amounts of the same utility. Think about it: we frequently pay more for a gallon of milk or some other foodstuff at a convenience store than we would pay at a larger grocery store or discount establishment? Why? It's the same product (form utility). But we pay more because the convenience store is ... well... more convenient (time and/or place utility). In this opening scene, the Model-T has a form utility that allows the consumer to take advantage of place utility that previously had too high a cost. The U-Needa Biscuits, in the "air-tight sanitary package made the cracker barrel obsolete" as one of the salesmen tells us. This is primarily form utility, but one could argue that it made it possible to take home a supply that would not go stale - adding place and time utility to the consumer scrounging for a midnight snack.

Finally, salesman Charlie Cowell reminds us that, to be successful "ya gotta know the territory," although Professor Harold Hill will do his best to disprove it. This speaks to the idea in economics that markets work best when there is knowledge available to producer (salesman) and consumer (small store or individual). The character reminds us that an abiding knowledge of the consumer's needs, wants, resources, etc., can help the seller to provide the appropriate products at a fair price. But as Cowell points out, there are those who thrive by taking advantage of "imperfect knowledge." And in doing so, they cause markets to malfunction, at least in the short-run. This is attested to by the fact that salesman following in the wake of Professor Henry Hill are "tarred and feathered and rode out to the city limits on a rail."

Those are my views on the opening. Please share your thoughts.


Mike Fladlien said...

Utility is such an ambiguous concept...i think utility is measured in ordinal points by depth...i read an except from a book, "stumbling on happiness" where the author talks about how the concept of utility has no uniform definition yet it's the basis for microeconomics...i look forward to your next blog...

Scott said...

Been a while since I have visited this blog site. It has really become quite a robust resource. Thought you'd like to know that the Boston Fed's latest issue of its economic education newsletter, The Ledger, covers 'creative destruction' by looking at the economic changes that have occurred in the city of Quincy. Massachusetts.

I do particularly like the way you draw out the economic concepts in every day life.

Keep up the good work.