econlife - The Impact of the Starbucks Effect by Elaine Schwartz

Strolling around 110th street in New York’s Harlem, you see new restaurants and small cafes that sell gourmet coffee.

It could be called the Starbucks effect.

The Starbucks Effect

Zillow

A 2015 study from Zillow tells us that home prices increase after Starbucks arrives in a neighborhood. Yes, they say that “properties near Starbucks tend to start out more expensive.” However, they claim that the Starbucks connection stands out.

While homes near a Starbucks sell, on average, for $137,000, those that are distant from it average $102,000. They also found that over 17 years, the Starbucks correlation was reflected by a 96% appreciation. Homes not near went up by 65%.

The clincher though is the Dunkin’ Donuts comparison. You can see that your wealth went up by less when a Dunkin’ Donuts was nearby:

Here’s the data:

Asked which came first, the Zillow people concluded that Starbucks fueled the housing price increases. At Starbucks, they just said, sure…we understand real estate. It’s art and science and we get both.

Some Harvard professors do not entirely agree.

Harvard

In a recent paper, three economists from Harvard used Yelp to compare real time local business activity and gentrification. The Starbucks part of their study focused on the number of cafes. They wanted to see if housing prices rose when there were more Starbucks. Sidestepping causality, they were looking for a leading indicator.

And they found one.

With each new Starbucks, the home prices in a zip code rose by .5%. However, they suggest that Starbuck selects zip codes with an “upswing.” Also, Starbucks is one of many new establishments in the neighborhood. As the authors point out, we simply have communities where more people like expensive coffee. They also want more restaurants, bars, cafes, and grocery stores.

Our Bottom Line: Consumption Expenditures

Whether looking at Starbucks or the other businesses that accompany higher housing prices, we can hypothesize that GDP spending rises. As a dollar measure of what we produce, the totals are mostly what we, businesses, and governments spend. So, a new Starbucks can mean more consumer spending. Meanwhile, the new Starbucks and new housing are in the businesses category because they are defined as investments.

I guess we could conclude that the Starbucks effect is a GDP effect.

My sources and more: In two slightly different ways, Starbucks is linked to rising home prices. Quartz had an excerpt of a Zillow study in 2015. Much more auspiciously sourced, this NBER paper from Harvard Business School is dated August 2018.

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 - Why Driving is Safer in Sweden by Elaine Schwartz

An economist might say that the optimal number of traffic fatalities depends on the cost of preventing them. Sweden disagrees.

Compared to most other countries, Sweden’s road safety is tops:



In the European Union, Sweden and Norway have the low numbers while Bulgaria and Romania (dark blue) have the most road deaths per million:

The Swedish Safety Solution

Through a “Vision Zero” strategy, Sweden is aiming for no traffic fatalities. So far, they’ve been able to almost halve the number of road-related deaths from 541 to 270 between 1996 and 2017. Why? Because Swedish traffic authorities focused on traffic laws and infrastructure instead of the drivers, walkers, and bikers.

Many of Sweden’s roads have new safety features. The wider arteries that installed guard rails between oncoming traffic diminished deaths by 80%. Their use of the 2+1 road boosted safety by having one direction-switching lane that permits passing. In addition, Sweden built more roundabouts and rotaries because they reduce how fast people drive and eliminate the hazard of left turn accidents.

But it’s about more than the flow of traffic. In places with bikers and other unprotected road users, top speed limits are 30 kilometers an hour (18.6 mph). At so low a speed, people struck by vehicles have less than a 10% chance of dying. In 50 kilometer zones, the percent rises to more than 80. On long stretches of country roads safety cameras are supposed to “nudge” people to drive more slowly rather than nab speeders.

Smiling, I can say this is what Sweden’s traffic planners avoid:

Our Bottom Line: The Cost of Road Safety

Below you can see that the Americas have 15.9 road-related fatalities per 100,000 population. In Africa that number soars to 26.6 per 100,000.




As economists we have a mindset that asks the cost of eliminating those deaths. Thinking at the margin (as we might also for diminishing air pollution), we can compare two numbers. We can ask the extra cost and the extra benefit for every life saved. And, when cost exceeds benefit, our life-saving initiative stops.

Sweden disagrees.

My sources and more: In WSJ, in Quartz, and at City Lab,  Sweden was the perfect traffic safety starting point. A much more recent WEF discussion confirms what those 2014 articles say.

Our featured image is a roundabout visualization of a Texas I-35 improvement plan.

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.

Educational Travel by Mike Siekkinen

I have written in the past about the benefits of educational travel and continue to push this approach for many reasons. For many teachers, the thought of organizing a trip with students sounds scary. There is a certain amount of risk when taking students outside the safety of the school.

To be honest, there have been years, based on the students I had, that I did not do any field trips. There were a few years where I wouldn’t have taken my students across the street, much less to an educational destination due to student behaviors. So I understand why some teachers shy away from doing “trips.”

At the same time, showing students real world applications, actually touching history and visiting historic places, can be magical for students.

For those new to educational travel, I would start small. Perhaps a single destination for a shortened period of time. A museum or public park program is a good start. To be successful you need to plan, and then overplan. Look at how many students you are taking and consider their age. Obviously the younger the student, the more supervision. You may need parent volunteers to help on the trip.

Also consider cost. Where will the funds come from? Will you need to fundraise and if so, what is your school’s policy concerning fundraising? You will have to arrange transportation to and from the event. Also consider contingency plans if this is an outdoor event. Will you be gone during lunch and if so, how and where will students be fed? Student medications will need to be arranged and brought on the trip as well, so coordinate with your school nurse. Additionally, parent permissions for these events need to be received.

This may seem like a lot to do and can be daunting for someone the first time it is done. I still see this as a rewarding experience for students and well worth the extra work to set up. Give it a try!

Have you taken any students on an extended trip? Share your stories and/or photos with us!

Dr. Mike Siekkinen, a retired U.S. Navy submariner, became a teacher as a second career. He teaches history at St Marys Middle School as well as Adult and Career Education at Valdosta State in Georgia.

econlife - The Best Reasons For Later School Start Times by Elaine Schwartz

Last September, a bill flopped in the California state legislature. Advocating an 8:30 (or later) start time at schools, it fell far short of the votes it needed. Currently they are reconsidering.

I wonder if those lawmakers know they are really talking about the GDP.

The Wake up Call

In California. the average school start time is 8:07. By moving it 23 minutes later, we could diminish tardiness and car accidents. Researchers hypothesize also that graduation rates would rise.

Studies show that teens would go to bed at the same time but sleep later if school began after 8:30. They would also get better quality sleep during the morning hours. In dollars, a Rand study reports that after the initial cost, the benefit to California alone would be $10 billion ($83 billion for the entire U.S.) if you just project fewer auto accidents (20% of teen accidents from sleepiness) and higher graduation rates. From there, they say, students then move onward to better jobs and more of an economic contribution.

The predicted gains in state domestic product could be considerable:



As did I, you might suspect that some of this reflects a statistical leap. But even when we consider the high cost of compressed bus schedules and lighting for later activities, the basics make sense.

Our Bottom Line: Human Capital

Really, we are just talking about human capital. As a resource that fuels economic growth, human capital includes our education, entrepreneurial spirit, and health. With U.S. economic growth at a 2.2% rate for Q1 (2018) and 4.1% for Q2 (2018), maybe we could sustain the increase by giving adolescents a bit more sleep?

And finally, I could not resist this xkcd cartoon. After all, the impact of sleep deprivation extends far beyond teens.



My sources and more: This LA Times article tells about the California schools sleep bill rejection while this site has the update. But for a report chock full of detail, do look at the original paper from Rand or this summary.

Please note that I repeated several phrases from a past econlife post on the same topic.

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 - Why Aretha Franklin Should Have Earned More From “Respect” by Elaine Schwartz

Otis Redding’s “Respect” was No. 4 on the R&B charts in 1965. He wrote the song. He first performed it.

Two years later, Aretha Franklin made it unforgettable:

So yes, Mr. Redding created “Respect” but Ms. Franklin’s version gave it a new life. Still though, when they play the song, commercial radio stations pay Mr. Redding (and his heirs), not Ms. Franklin. Why? Intellectual property law.

Before we move onward to music and the law, for a tear or two, do look at this magnificent 2016 video from the Kennedy Center. As Ms. Franklin sings, we also see the reaction from Natural Woman co-songwriter Carole King, and Michelle and Barack Obama:

Copyright Law

Aretha Franklin (March 25, 1942-August 16, 2018) made money from “Respect” through her concerts and record sales. In fact, at her concerts, she insisted on being paid in cash before she sang. According to New Yorker writer David Remnick, she received stacks of hundred-dollar bills. Then her body guards kept an eye on the money during her performance.

By contrast, Ms. Franklin did not receive money from commercial radio for the millions of times it played “Respect” during the past 51 years. The reason? Copyright law says that radio stations should pay the songwriter and the publisher but not the performer.

Now though the House just passed the Music Modernization Act and the Senate is considering it. Simplifying complicated territory, we can just say that the Congress has begun to move music law into the digital age. Listening to the musicians, tech companies, radio broadcasters, song writers, and music publishers, they are clarifying ownership issues. One goal is to increase performers’, songwriters’, and creatives’ royalty payments.

Out Bottom Line: Who Owns the Song?

As economists, our concern is private property. Like a tangible good, the songs we create belong to someone. They are someone’s intellectual property.

Tangible and intangible private property are crucial for a market system. Only through ownership can we create the incentive to invest, innovate, and profit. The music industry has used “Respect” as the primary reason for changing the copyright law that applies to performers.

My sources and more: This NY Times article is a good starting point for understanding why Aretha Franklin earned less from “Respect.”  Then, if you want to learn more about music industry copyright law, this NY Times explanation is clear. However, if you would just enjoy a firsthand look at Ms. Franklin, do go to the New Yorker.

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.