econlife - Why Valentine’s Roses Bloom in Colombia by Elaine Schwartz

What do you get when you combine a sunny mountain with thousands of workers who earn $300 a month?

200 million roses.

A Rose Supply Chain

Our story begins with the U.S. government. Hoping to disrupt Colombia’s cocaine cartel, in 1991, they said no more import taxes on flowers from Colombia, Peru, Ecuador and Bolivia. Legitimate Colombian flower farms responded. At 24 cents, their wholesale price was 11 cents lower than the 35 cents charged by U.S. growers.

You can see why U.S. rose production fell right after the ATPA (Andean Trade Preference Act):

And it kept falling:

Meanwhile, we have a supply side with thousands of pickers in the mountains near Bogotá. Their job is to do a two second snip 25 inches from the stem. Then, bunches of the roses are wrapped in clear plastic and rushed to a nearby airport. As Valentine’s Day approaches, each of 30 cargo planes carries a million roses to Miami daily. There, refrigerated trucks pick them up and take them to warehouses for repackaging.

And that’s it. They are ready to go anywhere in the U.S.

One likely destination? Walmart buys 24 million Colombian roses.

Our Bottom Line: Comparative Advantage

Our rose story connects Adam Smith, David Ricardo, the U.S. and Colombia. In his Wealth of Nations, Adam Smith explains the virtues of mass production and the need for “distant sale” that requires a transport infrastructure and many buyers. Colombia had the transport infrastructure connecting it to the U.S. where many buyers awaited its roses. But, the last crucial piece is comparative advantage. Through globalization, Colombia was able to benefit from the comparative advantage that 19th century economist David Ricardo described.

As Ricardo might have explained, Colombia was able to grow roses at a lower opportunity cost than the United States. Combined with a supply chain that facilitated “distant sale,” Colombia could optimize its comparative advantage as a rose grower.

My sources and more: Thanks to the Washington Post for its wonderfully detailed article on the rose supply chain. Then, if you want more, do look here at the environmental benefits of not using local growers. And finally, for a fast statistical read, the National Retail Federation has all you could want to know about what we buy on Valentine’s Day.

Please note that a similar version of Our Bottom Line was previously published at econlife.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - The Easiest Way to Keep a New Year’s Resolution by Elaine Schwartz

Whenever I do the dinner dishes, I listen to a “page-turner” mystery. In fact, listening to the 13 novels in the Maisie Dobbs series, I actually looked for extra dishes. Now, it turns out that my dishes/mystery “complementarity” was a research topic. Wharton professor Katy Milkman called the phenomenon temptation bundling.

Where are we going? To our New Year’s resolutions.

Temptation Bundling

With temptation bundling, we combine our “wants” and “shoulds.”

The Experiment

To see if temptation bundling had academic resilience, researchers from Penn and Harvard set up three scenarios at a campus workout facility. All three groups got iPods. But the first group’s iPod was loaded with tempting page-turner novels that could be accessed only at the gym. The second group also got the good books on their iPods. However, they were not required to listen at the gym. Then, acting as a control, the third group got iPods, a $25 Barnes & Noble gift certificate, and a sample workout with a reminder that exercising is good for your health..

The results confirmed most of what we would expect. Group 1’s workouts exceeded the control group by 51 percent and for Group 2, 29 percent. So yes, temptation bundling did increase the frequency of the undesirable activity—the “should”– but after a temporary Thanksgiving break, its impact on all groups diminished precipitously:

 

Utility Streams

Temptation bundling creates added value. It limits the time used for your indulgent wants while encouraging a distasteful activity that will be good for you. You wind up with less of the “wants” and more of the “shoulds.” Done alone, each activity has less utility. Done together their synergy is more valuable.

The Penn/Harvard research team summed up the value boost with two utility streams. Our wants have less cost at first because they are so pleasant. But then the guilt and wasted time kick in. Meanwhile, the “should” starts out really painful. But then as time goes on, its benefits surface.

Graphed (below) the “wants” curve sinks over time but the “should’ curve ascends:

Temptation bundling is really just about cost and benefit. By combining a want and a should, the wants become less of a minus and the shoulds, more of a plus.

We also just waded into the waters of behavioral economics.

Our Bottom Line: Commitment Devices

Temptation bundling is one of many commitment devices. Defined by behavioral economists, commitment devices are just what you would expect. They are incentives that encourage us to stick with an activity.

Here are some commitment devices:

Most of us need commitment devices to keep our New Year’s resolutions. Maybe temptation bundling is the one.

My sources and more: I first learned about Dr. Milkman’s work on temptation bundling in a Freakonomics podcast. (My speedy 4 mile walks and good podcasts are another temptation bundle!) The podcast took me to Dr. Milkman’s co-authored paper and then to a broader look at commitment devices.

Please note that this post is an updated version of a 2015 econlife.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

On Idleness by Andy Jobson

It’s funny how quickly bad habits can set in.  After a few weeks of summer lethargy, I found myself struggling to use my time well in pre-planning this year.  That’s when I recalled Samuel Johnson’s essay “On Idleness,” which I have often shared with seniors.

Johnson presents an amusing assessment of a vice which, though not as widely disparaged as pride, may nonetheless be just as problematic.  He argues that idleness can often be hidden in ways that pride or wrath may not.  My students love the description of the truly idle, who rise from bed merely to find their way to the couch, who exercise just enough to get tired so that they can sleep again, who “exist in a state of unruffled stupidity, forgetting and forgotten… and at whose death the survivors can only say, that they have ceased to breathe.”

The real value of the essay, though, is its analysis of the ways we hide our idleness.  We do this by staying busy on the non-essential things.  Maybe we invest

hours of time in preparing our workplace, sharpening pencils and straightening stacks.  Maybe we fill the day with “petty business,” staying busy but not productive.  Hobbies can be entertaining ways to spend time, but Johnson notes his own tendency to while away the hours on something that truly just prevents him from addressing priorities.  One vice I especially have to fight is the fancy that I am engaged in important business when having conversations with fellow teachers. Of course I can learn a lot from them, and sometimes it is time well spent, but it can also be a way of hiding from the work I really have to do. 

I’m probably in the minority of teachers who waste time this way, but I have found his gentle humor helpful in redirecting me when I am tempted by the trivial.  Have a great (and productive) year!

An educator of 22 years, Andy Jobson has taught government, economics, and U.S. History. Currently teaching English literature at Riverside Military Academy in Gainesville, GA, he’s also been an administrator, a STAR teacher twice, and taught elementary school with Teach for America.

econlife - Everything You Might Not Know About Government Shutdowns by Elaine Schwartz

This really happened…

The September 30 to October 2 shutdown in 1982 started because the Congress and President Reagan “had other plans.” When the fiscal year ended on Thursday September 30, the House and Senate had agreed on a compromise. But because of a White House barbecue for the Congress and a Democratic $1,000 a plate fundraiser, there was no late night session. On Friday, the government shut down.

Shutdown History

The government used to remain open if the President and the Congress disagreed about the federal budget. Yes, sometimes agencies didn’t receive their yearly appropriations. But, assuming they would soon get their money, officials ignored the lapse.

It all changed with President Carter (1977-1981).

The Carter administration refused to ignore funding gaps. Their rationale was an amended version of the Antideficiency Act (1884) that said federal agencies could just spend what they were promised. If you didn’t get your allocation, then you were limited to essential activities. Only mandatory programs and those with longer term funding were not affected.

The result? Eighteen shutdowns.

For some gaps, the impact was minimal while with others we had hundreds of thousands of furloughed employees. The one constant was the huge variety of issues. Abortions, foreign aid, and the deficit were only several of the causes of a congressional impasse.

Do note that the shutdowns were caused by the “Appropriations Funding Gaps” in the following table. Also, the beginning of the government’s fiscal year is different from the calendar year:

Our Bottom Line: Shutdown Cost

The cost of a shutdown is tough to measure. Government revenue declines from closed national parks and tourism sites. Safety could be a problem when the Environmental Protection Agency and the Food and Drug Administration cancel inspections. Add to that mortgages that aren’t approved because the IRS halted income verifications. Think about the airlines, hotels, and wedding planners that lose business. And don’t forget “non-essential” government statisticians. During the 1995-1996 shutdown, the December employment report came out during mid-January.

Returning to the 2018 shutdown, you can see the cost is incalculable.

My sources and more: Vox had the perfect story of all 18 shutdowns if you want the details. Meanwhile, I found the ideal complements at CRFB’s cost discussion and from the Congress. However, if you just read one article, I recommend the NY Times story of the 1982 funding gap.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - Hollywood’s Unusually Large Gender Pay Gap by Elaine Schwartz

When the stars of All the Money in the World were summoned to do some reshoots, their response could not have been more different.

Maybe that contributed to the problem. But not really. There is so much more.

First the story…

 

The Reshoot Pay Gap

At $80 per diem, Michelle Williams was paid less than $1,000 for doing the All the Money in the World reshoots. Mark Wahlberg got the same per diem plus $1.5 million. The math? The woman received less than one-tenth of one percent of what her male co-lead got.

Because of a Christmas release date, filmmakers wanted to act quickly after Kevin Spacey–accused of unwanted sexual advances– left the film. Ms. Williams reputedly rushed to the shoot. Sounding rather gracious, she told USA Today, “I said I’d be wherever they needed me, whenever they needed me. And they could have my salary, they could have my holiday, whatever they wanted. Because I appreciated so much that they were making this massive effort.”

Mark Wahlberg though is reputedly a tough negotiator.

 

Hollywood’s Gender Gap

For some insight about Hollywood’s gender pay gap, let’s return to an updated version of an econlife post from last year. Doesn’t Jennifer Lawrence sound remarkably similar to Michelle Williams?

The Actor/Actress Pay Gap

Lawrence also had been paid less than her male co-stars–although not nearly as much. Ms. Lawrence said that during salary negotiations, “I didn’t want to seem difficult or spoiled.” Later though, she “saw the payroll on the internet and realized every man I was working with definitely didn’t worry about being difficult or spoiled.”

Forbes confirms that Hollywood’s top women earn less than their male counterparts:








The Williams and Lawrence pay gap, though, is part of a much larger story.

 

In Front of the Camera

The first place to find the gap is in front of the camera. Led by Dr. Stacy Smith, a group at the USC Annenberg School periodically checks the percent of female speaking characters. For four media platforms, they concluded that the average ratio was 2 men to each woman. With film at 2.5 to one, it was worse.

These are the numbers from “Inclusion or Invisibility? Comprehensive Annenberg Report on Diversity in Entertainment” (All of the following graphics unless otherwise indicated are from this paper.):

Behind the Camera

One reason for fewer women in front of the camera is the men who are behind-the-scenes. Among the media’s directors, women are far outnumbered:



However, when women make the movies, those “invisible” females appear:

Our Bottom Line: Expectations Bias

As behavioral economists, we could say that we have an expectations bias. When industry leaders imagine a director or a blockbuster film, they think of men.

Dr. Smith suggests we can start to erase that bias by gradually adding women to scripts:

I suspect that when more media industry women populate a behind-the-scenes pipeline, so too will their salaries.

My sources and more: Seeing that Michelle Williams was paid so much less than Mark Wahlberg reminded me that Annenberg’s Stacy Smith would have an updated study. It was time again to take a look. Although there are no surprises, it is interesting to see the newest Forbes list.

Meanwhile, last year I recommended this gender gap podcast from More or Less and this TED talk from Stacy Smith. Finally, to complete the picture, you might enjoy this fivethirtyeight article.

Ideal for the classroom, econlife.com reflects Elaine Schwartz's work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.