The Mark of the Entrepreneur

Which of Schumpeter's five roles of the entrepreneur is/are illustrated here?

Decisions and Analysis

Opportunity cost, cost/benefit and marginal analysis, it's all here.

Something You Can Use the First Day

For those of you who have been gone all summer, I haven't been particularly prolific - too busy. But there are some very usable resources in the archive so you might want to spend some time back-tracking. Regardless, welcome back.

For those of you who are just starting school or haven't started yet, here's something to use on day one.

Elevator Externalities

Here's an interesting little mind exercise courtesy of a couple professors at Northwestern.  I think the set-up could be a great discussion starter, don't you?

HT to Marginal Revolution for the pointer.

Just So We Don't Forget...MR>MC

(You can't just “make it up on volume.”)

If you're looking for something to help your students remember that firms have to be profitable to survive in the long-run, try this. (Big HT to EconomistsDoItWithModels. And you will want to read her accompanying post.)

"Marginal" Thoughts

Today's issue of The Wall Street Journal has a keeper (subscriber content at this writing, but put the headline in your browser and you might find an ungated version). it contains a very good article that can be used when discussing marginal productivity of labor and marginal revenue product. It really is worth the effort to try and find it. The slideshow is "okay" but doesn't have the potential of the article.

The is about how the venerable fast-food chain is adding things to its menu to appeal to changing customer tastes. The problem is some of the investments are hefty and the additional revenue generate may not pay for the investment. In the article, one franchiser talks about how a certain piece of equipment wasn't paying for itself. Another franchiser discusses how an attempt to stay open 24 hours at a certain location didn't cover the labor costs.

At the same time, the article discusses how new ideas can drive productivity - a key aspect for profitability in the fast food business. The most obvious example is the addition of a second drive-thru lane at some restaurants.

As I said, you might want to spend some time trying to find this article. It has real potential to help when discussing those "exciting" cost curves in your micro classes. As always, I look forward to your comments.

You Can Find A Number of Concepts Here

Choices, opportunity cost, marginal cost/benefit, marginal productivity...

Pricing Mysteries (with video)

Today's edition of The Wall Street Journal has an article (free content at this writing) that just begs to be used in economics class. It's about airline ticket prices. And it includes a very good video.

Airline ticket pricing has long been a mystery. Two people sitting in the same row in the same relative position (both in aisle seats or window seats) can pay significantly different prices. As we know, some of that is how soon before the flight did you buy the ticket, how long are you staying at the destination, etc.

But what about the basic cost and pricing structure of the flight. Why does it sometimes cost more to fly short distances than longer ones. Or why do two trips, of the same distance seem to have different price structures? Shouldn't marginal cost and marginal revenue fit in somewhere? This article tackles some of that. And if you're about to launch into pricing this could be helpful.

As we know, cost can be a determining factor. But it's not the whole story. Friedrich von Weiser provided some insights. His idea of alternative cost (later opportunity cost) gave more power to the consumer based on how they value the good or service, as opposed to the cost basis.

So the popularity of the destination will be a factor, as will the income of the consumer. But even those factors don't provide the whole answer. The number and type of competitors also play in. I recommend this article. Give it a read and see what you can do with it. I'd also welcome additional thoughts on its use to share with the readers.

Complementary Goods and Marginal Utility

This recent Dilbert cartoon speaks to a lot of concepts.

But EconGirl at Economists Do It With Models does a much better job of talking about it than I ever could. I recommend you give a it few minutes.

Productivity

This video (HT to Carpe Diem) is about a new, robotic warehousing system. I could see all kinds of lessons arising from this video.



Show the video and ask students to identify which tasks disappear when a system like this is introduced? Using a productivity or growth equation (Y = aF[L,K,N] or some variation), what is happening when a system like this is introduced? What tasks is the system taking over? What skill-level would workers doing that job have to have to do those tasks? How would those jobs be classified (skilled, semi-skilled, unskilled)? How might this system offer an improvement over workers performing those tasks? How would marginal cost/benefit be a part of the decision to introduce such a system?

What would be the implications to a program of unemployment support for displaced workers if systems like this were wide-spread? Would this be an example of cyclical or structural unemployment? How does this relate to Schumpeter's idea of creative destruction?

Decreasing Marginal Utility

For those of you looking for something to illustrate decreasing marginal utility, I draw your attention to this comic strip.  While not the best example, I think it works and it's reasonable funny.

Please share your thoughts.

Just in Time for the Super Bowl: Economic Lessons from the NFL

In today's issue of The Wall Street Journal, the page 1 story for the Personal Journal section is about what it takes to win the Super Bowl. If you're into football (and even if you're not), it's a fascinating piece and it offers several interesting opportunities for applying economic thinking.

Concepts that leapt to mind as I was reading included productivity (time spent per foot of offense), marginal thinking (value of additional hour of prep time), psychic income (return on effort because they love the game), marginal thinking (benefit of an additional hour studying film), and even a little labor economics (hints at the expiration of the current contract with the players' union).

While I haven't dissected it to the point of developing any lessons, it might make a good follow-on discussion on Monday when some of the class is discussing the game. We’re having our annual "family Super Bowl party" with the cuisine determined by which teams made the game. And some of us like The Who, so we'll make it half-time. Enjoy the weekend, and share your thoughts.

Econ in Music

This one is a bit of stretch, but not much.  I was driving my son to school the other day and I heard "Time Won't Let Me" by The Outsiders.  Two concepts jumped into my mind - scarcity and margin.  If you can remember it, see if you agree.

Economics of Cafeteria Food

Thanks to frequent reader, Dr. Mark, here is a cartoon that many students are probably facing regularly.
Issues of price, marginal analysis, etc. are all there for the illustrating.

Birthday – John Bates Clark

One of the highest honors for an American economist under 40 is to win the John Bates Clark medal. But you may not know who John Bates Clark is. Since today is the anniversary of his birth, here's some background. Born in 1847, he was one of the leading figures of the marginalist revolution. He was one of few Americans to working on the idea at the time, and was a strong proponent of capitalism. You can read more about Clark here and here.

And here’s an interesting quote from Clark. Perhaps it’s something you can use – perhaps when introducing gross national product or just discussing the link between production and consumption.

If a man were living in isolation his income would be literally his product. Make him the monarch and owner of an island, and the fruits that he raises and the clothing that he makes constitute, in themselves, his income. This ceases to be true when trading begins.

I hope you’ll share your thoughts.

Choice, Value and Marginal Analysis

I think the cartoon below presents opportunities to discuss choice, value and marginal analysis.

What do you think?

Economic Thinking and "Non-Economic" Choices

Many of us teach our students that economic thinking helps us make "non-economic" choices. What we usually mean by that is that the analytical tools we gain from understanding economics can help us make choices beyond the financial sphere.

Today's edition of The Wall Street Journal has an excellent example of applying economic reasoning to what many would consider a non-economic or even a moral choice.

This opinion piece focuses on a choice we make as "a civilization". I won't quibble about whether "civilization" or "society" is more appropriate. But the upshot is how we react to threats to our security. It is a complex issue and this article does not go as deep as it could. But it does provide a framework for discussion, using what I would call an "economic way" of thinking - posing costs and benefits for judgment.

I highly recommend it. And I look forward to your thoughts.

Economic Thinking, Economic Behavior and Free-riders

There's a superb article in today's edition of The Wall Street Journal (HT to Dr. Mark for the "heads-up"). While I'm not sure I agree that economists are generally less generous when it comes to charitable contributions, I'll admit to some of the other behaviors highlighted. How about you? Do you recognize any part of yourself in the examples?

The Role of the Young in the Health Care Plan

The Chicago Tribune has an excellent story on the vital role the young play in the proposed reforms of the health care system. (HT to Izzit.org).

It's basically the same role they play in the Social Security system. That may seem cynical, but from what I can see, it's true. Current funds are used to support current spending. The article raises a question in my mind. If young people use marginal analysis with a short time horizon, how might that affect their decision to participate?

Izzit has a lesson plan to accompany the article here.

Marginal Analysis in a Holiday Classic

During the weekend, I watched one my holiday traditions, Irving Berlin's White Christmas. About 37 minutes into the film, Bing Crosby and Danny Kaye find themselves on a train from Florida to New York. Danny gave away the tickets and now is trying to get Bing to go to Vermont to meet up with "the Haynes Sisters." What popped in to my mind was "marginal cost/benefit analysis." If you get a chance, watch it and see if you agree.