Economics of Halloween

A fairly open question to end things for the week:

What do you think are the economic effects of Halloween? The more creative (and the less obvious) the better. What markets do you think are most affected by the holiday (positively or negatively)?

To go ahead and take away the most obvious answers, I am sure that candy makers and costume shops have a sharp increase in demand for their products. A more interesting question along those lines though: If the demand for those products is higher during Halloween, why do most grocery stores have sales on candy? Or why don't costume shops increase prices during Halloween (it is my experience that they have sales suring this time as well)?

Why Do We Laugh?

This post relates more to evolutionary biology than economics, but it is a questions that I have always been interested in: Why do humans laugh? What biological or evolutionary purpose does laughing serve? A possibility is offered by V.S. Ramachandran in his book: A Brief Tour of Human Consciousness:

The common denominator of all jokes is a path of expectation that is diverted by an unexpected twist necessitating a complete reinterpretation of all the previous facts -- the punch-line...Reinterpretation alone is insufficient. The new model must be inconsequential. For example, a portly gentleman walking toward his car slips on a banana peel and falls. If he breaks his head and blood spills out, obviously you are not going to laugh. You are going to rush to the telephone and call an ambulance. But if he simply wipes off the goo from his face, looks around him, and then gets up, you start laughing. The reason is, I suggest, because now you know it's inconsequential, no real harm has been done. I would argue that laughter is nature's way of signaling that "it's a false alarm." Why is this useful from an evolutionary standpoint? I suggest that the rhythmic staccato sound of laughter evolved to inform our kin who share our genes; don't waste your precious resources on this situation; it's a false alarm. Laughter is nature's OK signal.

What do you guys think of this explanation? Can you think of other biological reasons or evolutionary reasons why people laugh? Can you think of jokes that are counterexamples to this explanation?

Source: Marginal Revolution

History of the Minimum Wage

An interesting excerpt from a paper by Tim Leonard called Protecting Family and Race: The Progressive Case for Regulating Women's Work:

It's no surprise that progressives at the turn of the twentieth century supported minimum wages and restrictions on working hours and conditions. Isn't this what it means to be a progressive? Indeed, but what is more surprising is why the progressives advocated these laws. A first clue is that many advocated labor legislation "for women and for women only."

Progressives, including Richard Ely, Louis Brandeis, Felix Frankfurter, the Webbs in England etc., were interested not in protecting women but in protecting men and the race. Their goal was to get women back into the home, where they belonged, instead of abandoning their eugenic duties and competing with men for work.

Unlike today's progressives, the originals understood that minimum wages for women would put women out of work - that was the point and the more unemployment of women the better!

When we discussed minimum wage in class, our main conclusion was that the minimum wage would result in increases in unemployment among low skilled workers. The implication of the above excerpt is that the creators of minimum wage knew this and intended it to only apply to women so women would be kept out of the workforce to a certain degree.

Source: Marginal Revolution

Terrorism & Nuclear Weapons

There was an opinion piece in Monday's Wall Street Journal by the Nobel laureate Thomas Schelling called "The Nuclear Taboo," where he discusses a bit of history of nuclear weapons and, more interestingly, what would happen if a terrorist organization obtained nuclear capability:

"[Terrorists] will discover, over weeks of arguing, that the most effective use of the bomb, from a terrorist perspective, will be for influence. Possessing a nuclear device, if they can demonstrate possession--and I believe they can, if they have it, without detonating it--will give something of the status of a nation. Threatening to use it against military targets, and keeping it intact if the threat is successful, may appeal to them more than expending it in a destructive act. Even terrorists may consider destroying large numbers of people and structures less satisfying than keeping a major nation at bay."

What are the implications here? Do you agree with what Schelling says about the likelihood that terrorists will actually use a nuclear weapon if they obtain the capability? What factors could affect this likelihood?

I don't have a link to the article since you need a subscription to view it online, but for my students I have a copy in my room if you would like to read it.

Size of Developing Economies

Another interesting fact from the upcoming book The Undercover Economist:

A small African state like Chad has an economy smaller than that of a Washington suburb like Bethesda and a banking sector smaller than the Federal Credit union set up for World Bank staff.

These facts are good to give us perspective on the problem of developing nations...

Source: Marginal Revolution

Channel One?

Here is a question posed by Maria that might be very easy to answer with a little research, but I don't know the answer off the top of my head:

Why is there never a channel one on TV?

I imagine the reason is technical or has something to do with industry regulations for the television broadcast industry as a whole, but I will leave it up to you guys to find out.

Replacing the Almighty Greenspan

Today Bush announced that Ben Bernanke will take over for Alan Greenspan as Chairman of the Board of Governors for the Federal Reserve, which is a major announcement, considering the fact that Alan Greenspan is the equivalent of an economics "rock star" (which I know is a oxymoron) and the fact that Greenspan has led the Federal Reserve since before some of my students were born (August 11, 1987).

We will talk much more about the role of the Federal Reserve chairman and Ben Bernanke next semester when we get to Macroeconomics, but for now here is a link to various economists talking about how this is a good nomination, and here is link to a summary of Bernanke's major contributions to macroeconomics.