econlife - The Economic Side of T. rex by Elaine Schwartz

Since she (or he) died 66 million years ago, a T. rex has resided underground in eastern Montana. But then Kathy Wankel saw a part of its lower arm bone sticking out above ground. She dug it up, took it home, and called the Museum of the Rockies.

The story takes us to a mind boggling dinosaur discovery and the federal budget.


The Discovery

In September, 1988, the Wankel family was out camping near their Montana ranch where they raise Black Angus cattle. Called the Hell Creek formation, the area was the long ago home of dinosaurs and the ideal spot to search for bones. As Kathy Wankel explained, “The light was perfect. I could even see the webby pattern of the bone marrow.”

On that day though, because their children had school, there was no time for a dig. Instead, they returned close to a month later, unearthed some bones, and placed them in their beer cooler. At home, they washed them and then, at the end of November, drove it all to the Museum of the Rockies.

Used to getting random rocks and contemporary bones, the museum staff immediately recognized the significance of the find. Now, the rest of the story is 31 years of history. After “scraping” through tons of red tape and rock, they wound up with almost 90% of a “beautifully articulated” tyrannosaurus rex.

The Museum of the Rockies was the first to exhibit the T. rex bones. But the specimen was actually owned by the Army Corps of Engineers. So, once the Smithsonian had arranged a 50-year loan, 16 crates containing the T. rex were sent in a special FedEx truck to Washington D.C.

A replica that stands outside the Museum of the Rockies:

Yesterday, the doors of the  Smithsonian’s Museum of Natural History’s new fossil and dinosaur hall opened for us all to see an awesome T. rex. Assembled, it is 12 feet tall, 35-feet long, and chomping on a triceratops. Scientists call her (or him) MOR 555, in Montana she is Wankel T. rex, and the Smithsonian says it is the Nation’s T. rex.

You can see below precisely what they found. The bones shaded blue were the real thing while the rest is what they had to fabricate. Each tooth is the size of a banana:

This is how they did it:

Our Bottom Line: Fiscal Policy

Defined as spending, taxing, and borrowing, the federal government’s fiscal policy covers everything from your grandma’s Social Security check to reconstructing a T. rex. For fiscal 2020 (Oct. 1, 2019 through Sept. 30, 2020) federal spending will be close to $4.75 trillion. From that total, the Smithsonian gets close to $1 billion for its museums and research centers. And out of that $1 billion, the Natural History Museum needed $110 million to renovate its dinosaur and fossil hall. Because $40 million came from private donations, the federal obligation was $70 million.

This is the Smithsonian’s Museum of Natural History:

We could say that tax dollars from you and me helped to rebuild an awesome dinosaur.

My sources and more: Thanks to NPR’s Science Friday for introducing me to the T. rex discovery. From there, The Washington Post, here, here, and here had the whole story. But it was tough to find the spending until I discovered this Reuters article. Then, for the actual numbers, the Smithsonian had the details.

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 - Throwback Thursday: Was Sears, Roebuck the First Amazon? by Elaine Schwartz

#TBT: Looking back, we can say that Sears, Roebuck & Co. was the first Amazon.



Sears, Roebuck and Amazon

If you were asked how 30% of all Americans had access to 100,000 items in their homes, you might think of Amazon. Instead, the year is 1900 and the seller is Sears, Roebuck & Co. From a population of 76 million, 20 million Americans received the Sears catalogue. Through Sears, households could have items ranging from dresses to plows to tombstones delivered directly to their doorstep. They could even order some groceries.

Sears and Bezos (Roebuck left the firm he helped to start in 1895, only four years after it began.):

Where are we going? To their prefabricated homes.

Mail Order Houses

Sears’s Houses

Just imagine an Ikea delivery with more pieces. The Sears “kit homes” were sent by train. Arriving in a boxcar, they included framing lumber, cedar, and shakes. From doors to doorknobs, they had big and little parts. Sears said we could assemble it all in 90 days or less. (I suspect that the 30,000 piece home took a bit longer.)

From Sears home catalog:

Each Sears Prefab style had a name. This was the Alhambra:

Sears even sold prefabricated schoolhouses:

The house though was only the beginning. From there, Sears had the furniture, the appliances, and most of what you needed to put in and on them. Then, they completed the picture by offering mortgages in 1911.

Amazon’s Houses

As we know, Amazon sells most of what we need in our homes. And, it also sells the houses.

Two of the homes sold by Amazon:

Our Bottom Line: Infrastructure

Yes, talented entrepreneurs started a Sears and an Amazon.

But then, each uniquely optimized recently created information and transportation infrastructures for their business model. Using their era’s innovations, Richard Sears and Jeff Bezos both figured out how we could shop from home. For example, the Sears catalogue was reputedly sized as slightly smaller than the Montgomery Ward Catalog. The reason? So you would stack it at the top. Similarly, the allure of Amazon Prime makes us go there first.

Most crucially though, Sears and Bezos knew how to deliver. Sears used the newly created (1896) rural free delivery U.S. Postal Service and the railroads. For Amazon, it has also been the US Postal Service and of course, the internet.

And then they made it so easy that we could not resist…even a house.

My sources and more: For all of the facts on the Sears mail order home, this 99% Invisible podcast is perfect. But if you want more (as did I) the NY Times and MarketWatch had some Sears history and Curbed, the Amazon houses.

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 - How Legos Discovered It’s Not Easy to be Green by Elaine Schwartz

Many of us are happy to use fewer plastic straws. But elsewhere, it’s tougher to cut back.


Bio-Based Plastic Legos

We know what we expect from a Lego. They all match, attach, and detach perfectly. The colors of all the reds, the greens, and the blues are consistent. Falling, they are supposed to remain attached (mine never do) and they should not biodegrade or contain harmful chemicals.

Since plastic makes their precision possible, the goal is a plant-based plastic that creates fewer emissions than petroleum. So far, Lego has successfully made bio-based plastic foliage and dragon wings. However, the corn they tried was too soft for bricks. Wheat had color problems. And they could not achieve the perfect grip.

Below, Lego shows how they could use sugar cane:

Petroleum Products

Right now, petroleum is in an endless list of everyday products. Ranging from aglets to yarn and including tires, mops, aspirin, and crayons, the 6000+ products that contain petroleum are everywhere.

Shoelace aglets are made of petroleum based plastic:

Meanwhile, petroleum based plastics result from natural gas processing and crude oil refining. Then, looking at crude, you can see below how an entire 42 gallon barrel is used:

Our Bottom Line: Tradeoffs

Less petroleum-based plastic could mean a smaller carbon footprint. Although the EIA said it could not calculate how much of the world’s oil is used for plastic, the amount is substantial. But using less is not so easy. As economists, that takes us to tradeoffs.

When more corn is grown for bio-based plastic, we could wind up with more pollution from fertilizers, less to eat, and higher prices. On the production side, we’ve seen from Lego that we await the breakthrough discovery that creates a functional product. And even then, discarding bio-plastic can be tough. Landfill remains a real alternative, it could be recycled, and some might go to an industrial compost site (if we were disciplined enough to set aside our compostable products). One big concern is that like petroleum-based plastic, the plant version also can wind up at sea.

So yes, as Lego has discovered, it’s not so easy to be green.

My sources and more: Like Legos, creative articles, happily, have become more typical at WSJ. From there, this list of petroleum based products was ideal. But to start understanding bio-based plastics, this National Geographic article was helpful as were this Conversation and the EIA.

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 - Throwback Thursday: When Google Was Just Google by Elaine Schwartz

#TBT: Today’s Google is the result of 270 acquisitions. Let’s look back at what it (and others like it) used to be and then forward to what we have now.


Google’s Growth Spurts

During the past 23 years, Google was first BackRub (very briefly), then Google (for close to 16 years), and now Alphabet. At first it was a unique search engine developed by two Stanford graduate students, Sergey Brin and Larry Page. Created in 1999, AdWords was an early idea that generated some of their first revenue. Five years later, slightly more than 19.6 million shares were sold publicly for $85 apiece through an IPO (Initial Public Offering).

An early homepage:

Since then, they’ve acquired 270 companies. Close to 63% of that total was for potential (and actual) competitors that included companies like Doubleclick (ads), YouTube (you know) and Waze (maps). Meanwhile 20% involved expanding into new areas like AI and robotics. The remainder is varied.

This NY Times graphic shows all of Google’s growth spurts. 2011 and 2014 were the most active acquisition years:

A Superstar Trend

As we look back to when Google was simply for search and now at its multiple identities, we see a trend in which fewer firms have more market power. Like Google, companies are getting larger. Goldman Sachs calls it the emergence of the superstars. According to Goldman Sachs research, the number of firms that trade in stock markets is down while their size is up. In 1996 there were 8000 listed firms; now there are closer to 4,000.

Our Bottom Line: Concentration

When economists talk about market power, they use the word concentration. In concentrated markets, there are fewer firms, they are large, they dominate sales, and they have some price making power. To quantify concentration, we can use a Herfindahl-Hirschman Index (HHI). The higher the HHI number, the greater the concentration. The Index can be based on different scales but typically the closer to 10,000, the greater the concentration.

Below you can see concentration from 20 industry groups for firms that are listed in the S&P. Tobacco is at the top while Interactive Media and Services are a close second:

If 10,000 is at the top of the the Herfindahl-Hirschman Index, then 10,000 equals a monopoly. To calculate the Herfindahl-Hirschman index number, we can square the market share of each firm and then add them together. So, if a company is the only competitor, then its sales are 100% of the industry. The square of 100 is 10,000. However, if you have 100 firms, each with 1% of the shipments in an industry (or the sales, or for banks, perhaps the deposits), the HHI is 100:

1² + 1² + 1² + 1² + 96 other 1² = 100

When the U.S. Department of Justice uses the HHI to evaluate a merger proposal, it considers less than 1500 competitive, 1500-2500 moderately concentrated, and more than 2500, highly concentrated. Thinking of Alphabet (and Facebook), you can see why “interactive Media and Services is so concentrated.

My sources and more: The NY Times column on concentration and a (gated) Goldman Sachs report created the perfect synergy. As a final step, you might want to learn more about the HHI in an article from the St. Louis Fed and from the Department of Justice guidelines.

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 - How To Get Speedier Fast Food by Elaine Schwartz

When you pull up to the  Naperville, Illinois McDonald’s drive thru, a voice says, ” Hey there, Welcome to McDonald’s. What would you like to order?”  Because it’s their voice recognition software, just be sure your daughter doesn’t shout from the back, “I want onion rings, Dad.” (This really is a problem—unless you plan to order them.)

Where are we going? To how McDonald’s competes.

Drive-Thru Speed

In 2012, average drive-thru time at McDonald’s was 188.83 seconds. Since then, adding  several seconds or more each year, the wait has gotten longer and longer. The reasons relate to more complexity, more accuracy, and more cars:

But still, McDonald’s has a problem. They know that compared to nine other fast-food chains, their wait is the longest. At the top for speed, Burger King was almost two minutes faster:

For now though, McDonald’s voice recognition software creates menus that reflect the weather and trendy items. It also encourages the extras like a donut stick with your McCafe. In the future, we can expect that employees will start an order while AI is still talking to the customer. We should eventually have more accuracy as data accumulates and recognition improves. But what really grabbed me was license plate scanning. Sort of like the barista who remembers your name and order, drive-thru technology might soon know what we want from our license plates.

Our Bottom Line: Monopolistic Competition

During the 1950s, a milk shake maker salesman named Ray Kroc realized that two brothers had unusually high milk shake sales. Visiting the McDonald brothers’ California roadside establishment, he saw how they speedily served a huge lunch time crowd with their version of mass production. Kroc bought their name, perfected the concept, and conquered a monopolistically competitive market. Because you just need a grill and hamburger meat, market entry is easy. We could say the same thing for a McDonald’s breakfast menu. But to be successful and have some price making power, you also require something unique—the monopolistic part. And that takes us to McDonald’s quest for the automation that achieves drive-thru speed, customizing, and accuracy as a product differentiator.

Along the following continuum, each McDonald’s restaurant would be close to monopolistic competition:

And speed has been one way that it has always competed.

My sources and more: The WSJ story on McDonald’s robots reminded me it was time to return to the drive thru and to QSR Magazine for the data. Then, if you want more about voice activation implementation and problems, this article had the detail (and was interesting) while Chicago media told about the Naperville restaurant. Finally, Yahoo Finance had the earnings call transcript where McDonald’s expressed its focus on drive-thru speed.

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 - What the Grocery Store Says About Us by Elaine Schwartz

Boris Yeltsin’s visit to a U.S. supermarket could have changed Russian history. Some say it was really the Jell-O Pudding Pops.

The year was 1989. Soon to be the Soviet President, Yeltsin was here to see the Johnson Space Center. After the tour, with 20 minutes to spare, his group stopped at a Randall’s supermarket in Houston. The man was reputedly flummoxed.

He marveled at the variety of goods that were available:

Yeltsin later said in his autobiography that seeing, “those shelves crammed with hundreds, thousands of cans, cartons and goods of every possible sort, for the first time I felt quite frankly sick with despair for the Soviet people.” In the Soviet Union, consumers coped with dour clerks, long lines, and shortages.

Where are we going? To what our grocery stores say about our economy.

The Grocery Store

Store Variety

When you think of the 21st century U.S. grocery store, the big ones could first come to mind. Led by Walmart and Kroger, the top 11 include Amazon’s Whole Foods and Trader Joe’s. Looked at together, we see thousands of stores and huge spending. Alone, each store is a bit different. While Walmart represents bargains, Whole Foods has a pricier organic selection, and Kroger has been called middle market.

In the grocery store list that follows, huge grocery sellers like CVS (drug stores) and Costco (warehouse) were excluded. Out of a list of 50, I copied the top 11 grocers:

Product Variety

As consumers, we support an immense amount of product differentiation. Just choose an aisle. You could see chips that are plain, sea salt, cheese or onion. Who knew there could be so many kinds of yogurt? Even milk now could be almond, 2%, whole, non-fat, supermarket brand.

Our Bottom Line: More than the GDP

In a grocery store, the GDP and subjective well-being reinforce each other. Our GDP reflects the dollar value of the groceries we produce. But our groceries deliver more. Through variety, innovation, and convenience, they boost our subjective well-being.

When we have more to spend, our demand for quality and variety increases. Meanwhile, technological innovation has enabled the retailers to know us better. Keeping track of what we buy, they identify what we want. And here is where time enters the picture, Having access to all we need in one store minimizes the time/food shopping tradeoff. So yes, we  make an average of 1.6 grocery shopping trips a week. But, a working mom and dad can do them quickly in one place, and buy some prepared food as well.

Our visits seem to been diminishing. I wonder if online shopping could be one reason:

Returning to where we began with Boris Yeltsin and ending with 1.6 visits to the 21st century U.S., we can use a grocery store to learn about more than food.

My sources and more: Thanks to Duke professor Mike Munger’s blog for the link to the econlib grocery article. From there, the Washington Post takes an interesting look at Wegman’s while you can get the top fifty list from the Progressive Grocer. After that, for some history, the Houston Chronicle had the story of Yeltsin’s visit. And finally, if you still want more, do read Michael Ruhlman’s Grocery: The Buying and Selling of Food in America.

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.