Thursday, November 04, 2010

Economics of The Simpsons

I recently posted on the Economics of Seinfeld. So here's some highlights from a paper, Homer Economicus, on one my other favorite TV comedies:

Bureaucrats and bureaucracy
As Gwartney, Stroup, Sobel and Macpherson (2003, 135) state, "Economic analysis suggests a strong tendency for bureaucrats and public-sector employees to favor expanding their budgets beyond what would be considered economically efficient." The Simpsons episode titled "Trash of the Titans," provides a great example of this tendency. After getting into an argument with the garbage men and refusing to apologize, Homer decides to run for Sanitation Commissioner. Running on the slogan "Can't someone else do it?" Homer wins and institutes a sanitation program that does just about everything for the residents of Springfield, from collecting diapers inside the house to cleaning their ties. This excessive spending leads to the following exchange between Homer and Mayor Quimby.

Quimby: Simpson, you idiot! You spent your entire year's budget in a month! Your department's broke!
Homer: Uh...oh no! Wait! I think I've got the perfect solution.
Quimby: You'd better! 'Cause those garbage men won't work for free!
Homer: D' oh!
Later, Homer and Marge are going over the sanitation department's expenses to figure out how he could have spent so much in such a short period of time.
Homer: Oh... [the previous commissioner] was right! I'm crashing and burning! Crashing and burning!
Marge: How could you spend 4.6 million dollars in a month?
Homer: They let me sign checks with a stamp, Marge! A stamp!

Although a bit over the top in that few (if any) bureaucrats are as stupid as Homer is portrayed to be, this episode of The Simpsons does provide a humorous beginning to a discussion of the incentives facing bureaucrats and bureaucracies.

The role of advertising in a market economy
Non-economists (and even some economists) tend to view most, if not all advertising as wasteful, misleading, manipulative, or a combination of all three. The previously mentioned episode of The Simpsons called "Trash of the Titans" provides a scene that ascribes to this viewpoint and can be used to begin discussion of the role that advertising plays in the market process.

The scene begins with a stereotypical cigar-smoking businessman in a dark room discussing with his staff the importance of finding a new holiday to exploit.

Businessman: Okay, people. We need to cook up a new holiday for the summer. Something with gifts, cards, assorted gougeables.
Woman: How about something religious? We had great penetration last spring with "Christmas II"!
Man: Ooh, I kno\v, Spendover -like Passover but less talk, more presents!
The company then creates "Love Day" and we cut to the Simpsons celebrating the holiday by exchanging presents. Homer receives a talking toy bear dressed in a suit of armor.
Bear: I'm Sir Loves-A-Lot! The bear who loves to love
Homer: They didn't have Lord Huggington?
Marge: It's the same basic bear, Homey.
Homer: [dejected] I guess.

I use this exchange to introduce a discussion of advertising in a market economy. Is it manipulative? Does it make us pay more for products that are functionally the same as other, cheaper products? What, exactly, are we paying for when we pay for a brand name?

The Springfield Nuclear Power Plant where Homer works provides an excellent opportunity to liven up discussions of monopoly. For example, When discussing why entry barriers are sometimes high, the Springfield Nuclear Power Plant provides a nice illustration of a case where monopolies exist because of economies of scale.

The power plant also provides a good opportunity for discussion of the factors that make some monopolies stronger than other monopolies. After all, it takes two conditions to make a market a monopoly (Gwartney et. al., 255) .The first, as we just discussed, is high barriers to entry such as economies of scale. The second condition is a well-defined product for which there are no close substitutes. Even products provided by a single seller have substitutes, however, even if that substitute is nothing. The degree of monopoly power, and hence the ability to take advantage of one's monopoly status, therefore depends heavily on the nwnber and appropriateness of substitutes.

In the episode titled "Who Shot Mr. Burns, Part 1," C. Montgomery Burns, the owner of Springfield Nuclear Power Plant, apparently felt that one of the kno\vn substitutes to electrical lighting was eroding too much of his monopoly power and resolved to take out the competition.

Smithers: Well, Sir, you've certairlly vanquished all your enemies: the elementary school, the local tavern, the old age must be very proud.
Burns: [stuffing money into his wallet] No, not while my greatest nemesis still provides our customers with free light, heat and energy. I call this enemy...the sun. Since the beginning of time man has yeared to destroy the sun. I will do the next best thing... block it out!
Smithers: Good God!
Bums: Imagine it, Smithers: electrical1ights and heaters running all day long!
Smithers: But Sir! Every plant and tree will die, owls will deafen us with incessant hooting...the town's sundial \vill be useless. I don't want any part of this project; it's unconscionably fiendish.

In addition to being reminiscent of Bastiat's "A Petition" (1964), this episode provides an excellent opportunity to discuss what will happen to the short-run price and output ofMr. Burns' power plant, if his "fiendish" plan were to have worked.

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