econlife - What We Will Miss in the Mall by Elaine Schwartz

The year was 1956 when Victor Gruen convinced developers that there could be a new way to shop. Until then groups of stores had an “extroverted” design. Opening outward to the perimeter of a shopping center and inward toward pedestrian walkways, these malls required a lot of walking. Instead, Gruen’s new Southdale Center Mall in Edwina, Minnesota was “introverted.”

Now with the coronavirus pandemic changing malls and stores, let’s look at the past and the present.

Shopping Mall History

The First Mall

Victor Gruen imagined a community–a space that pulled us together.

Whereas existing shopping centers were on one level, his design was for two stories, connected by escalators. A revolutionary idea, they would all have the same controlled climate, an anchor department store at each end, a skylighted garden court, balconies, and a cafe in the middle. A Time article said it was a, “…pleasure-dome-with-parking.”

This four-minute mall history has the whole story:

The Second Generation Mall

With Gruen having created the shopping mall concept, a developer named Alfred Taubman used design details to nudge the shopper around the mall.

In 2004, Taubman told Malcolm Gladwell that a mall’s shopping corridor should max at the equivalent of three city blocks–maybe 1000 feet– the farthest a typical shopper will walk. He cared about “adjacencies”–that is stores that complement each other. If you have a clothing establishment, then place a shoe store nearby. As for restaurants, busy at lunchtime, they empty and become dead space so their location has to be peripheral. Even the slope of the property mattered so more parking could be near second floor stores. Shoppers, he explained, are like water. They flow downward more easily. And the lights have to obscure the setting sun so people feel no inclination to go home.

Our Bottom Line: New Land, Labor, and Capital

As economists, we can look through a land, labor, and capital lens to see the pandemic impact on malls.

Simon Property Group (the largest mall owner) told CNBC it would limit occupancy to no more than one person per 50 square feet of space and offer shoppers free masks, hand sanitizer, and temperature tests. Hours would be abbreviated to allow more time to clean “hi-touch” areas like food court tables and escalators. In restrooms, every other sink would be taped and new decals would direct traffic flow.

Meanwhile, stores are greeting customers with hand sanitizer, disposable masks, and sticky blue mats that clean shoe soles. Hoping that people will grab and go, they are stocking shelves with less clothing and using every other fitting room. In many places, alteration services, beauty consulting, and cosmetic testers have disappeared. As for payment, the goal is no contact, and, if possible, a curbside pickup.

Returning to the first modern mall, we see that its concept of community has been reversed.

My sources and more: The best story of the first malls was from Malcolm Gladwell in The New Yorker. Then, CNBC told about the mall response to the coronavirus pandemic while The Washington Post had a detailed look at store changes.

Please note that parts of today’s Taubman paragraphs were in a previous econlife post.

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 a $350 Meal Became $35 Takeout by Elaine Schwartz

In Chicago, there is a restaurant called Alinea.

Legendary for its cuisine, Alinea’s multi-course meal can cost $395 a person (without the wine). At Alinea online, when you make your reservation, you also pay for the meal. But since the amount depends on the time and the day, diners can save some money by booking a Tuesday instead of a Saturday.

The Alinea website conveys their upscale image:

Now, with the pandemic lockdown, Alinea is vastly different from what it used to be.

Alinea’s Pandemic Takeout Plan

After Alinea’s owners saw Hong Kong’s restaurant reservations dive from 96 percent to zero, during late February they started to plan for the pandemic. They realized that staff would have to hand wash hourly, social distance, and do temperature checks. Once the lockdown started, they closed, furloughed staff, and sent all full time employees a $1,000 check.

Meanwhile though, they were designing their own kind of takeout. By requiring pick up time slots, they could pace the kitchen. With just one entree, volume was feasible.

On March 16, their first day, they sold 500 short rib Beef Wellingtons at $35 apiece. Figuring diners would return for a new entrée several weeks later, by May, they had moved onward to coq au vin and cassoulet. Meanwhile, nightly meal capacity ascended to 1,000 and then 1,250, revenue climbed, the staff grew, and they added courses. For their 15th anniversary, offering a six-course meal for $49.95, they sold 1,250 meals a night for 10 days straight. For Easter they sold 3,000 meals.

Below you can see an Alinea takeout reservation. I added the arrow showing the takeout time slot:

Our Bottom Line: Price

I would suggest that price was one reason for Alinea’s success.

In a market system, price sends a message. It tells customers that a $10 t-shirt is inferior to one that costs $100. However, for Alinea, we have the opposite. Few people assumed that a $35 price tag represented a meal equal to other establishments charging the same amount. Everyone instead perceived a bargain. It was their one chance to eat $350 food for one-tenth the price. As is always true for the market, prices said it all.

My sources and more: I enthusiastically recommend the Eater’s podcast, “How Alinea’s Takeout Business Became a Massive Success Story.” Then, with my mouth watering, I went onward to this article.

Our featured image is an Alinea dining room from their website.

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 Empty Stadiums Could Do To MLB by Elaine Schwartz

When dad, mom, and their two kids go to a major league baseball game, they spend approximately $234.38 on tickets, parking, food, and merchandise. If this season is “fan-less,” the revenue hit would be massive.

Let’s take a look.

MLB Revenue

At their typical 162 game season, gate receipts are close to $2.84 billion. Without fans, the total plunges to zero. Also, with an empty stadium, no one pays for parking, hot dogs, and new baseball caps.

On the upside, national TV contracts remain. At $1.7 billion in 2019, the deals include Facebook, ESPN, Turner Sports, and Fox. The eight-year Fox contract that ends in 2021 was renegotiated for seven more years. Also, MLB has its $2.1 billion from local TV stations, and a $1 billion central fund shared by teams from radio, TV, and assorted revenue sources. Then, to all of that, we can add close to $600 million in licensing and sponsorships.

This table summarizes the estimated revenue for a full 162 game season and one sliced in half. As you know, right now, we are not sure of length nor if fans will be there:

MLB Expenses

Player salaries will depend on the number of games that could be as few as 50, far less than the usual 162. However, 114 and 81 are also possibilities. Negotiations between the owners and players seem to be moving toward a prorating consensus. Both could be willing to base player salaries on the proportion of the season that they span.

MLB spending estimates assume that a half season would cut expenses by close to 50 percent:

The cuts though have been uneven. Teams still have a front office, staff, minor leagues, and the MLB central office. However, they’ve been furloughing some employees, drafting less, and slashing minor league obligations.

Our Bottom Line: Cost and Revenue

Like all other businesses, Major League Baseball is concerned with its costs and revenue. A firm’s costs can be fixed or variable. Fixed costs are constant like stadium maintenance that continues, even without any games. As for variable costs, player salaries are the ideal example. Based on the number of games, they will rise or fall.

Meanwhile, company revenue can be seen as a total amount when we consider all the firm receives for sales and other services. We also can calculate average revenue by dividing total revenue by the quantity sold. Perhaps most crucially though, we need to know marginal revenue–the amount collected for one extra good or service. When we compare marginal cost and marginal revenue, we can make the best decisions about profitability.

At $234.38, the lost revenue from dad, mom, and the kids is about much more than a game. It reflects the impact of coronavirus on most businesses.

My sources and more: Always good for something interesting, Fivethirtyeight had the basics for the MLB story. From there, the NY Times, FanGraphs, and CBSSports, had more up-to-date facts, as did USA Today.

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.

Teaching Using Movies by Mike Siekkinen

I love a good movie! Sometimes I even love a “not so good” movie. 

I've found that Hollywood has made some very good historical movies over the years and I use them in my classroom whenever I can. Now, many say that simply showing students a movie is a waste of time and if that were all I did, it would be. But by using good support materials, even using full length feature films in the classroom can be fun, educational and meaningful for students. 

An example would be what I did when studying the Civil Rights movement with my students. I showed students the movie The Ernest Green Story. This is an older Walt Disney owned title. I purchased this for about $10.00 so had my own copy.

I had students do vocabulary used in the movie first to understand the terms used. Then I had students research the Little Rock Nine and desegregation in general along with applicable court cases, Jim Crow Laws, etc. I then showed the video over two class periods. Students had to do a KWL chart at the beginning as well as completing questions throughout the movie. 

Following the video, students had a reflective writing piece to complete and we discussed what occurred, compared it to different versions found on the internet and in textbooks. It was an experience that students enjoyed, learned the required standards and when questioned, all told me it was an enjoyable learning experience. Using full length feature films in the classroom, if prepared and coupled with research and writing, can be a powerful tool.

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 Reopening Role of the Restroom by Elaine Schwartz

One of the stars of The Irishman, a 3 1/2 hour movie with Al Pacino and Robert De Niro, said, “…just go to the bathroom before it starts…” Now, as we end pandemic lockdowns and reopen theaters, stores, and stadiums, we need to resolve restroom problems.

Resolving (Coronavirus) Restroom Problems

Coronavirus worries converge in the restroom. Many of us are concerned with social distancing, airborne germ droplets, and sanitizing hands and surfaces. Whether it’s a drive-in theater, an outdoor music festival, or a restaurant with curbside dining, the establishment needs a restroom policy.

One drive-in theater owner said she was increasing the number of portable toilets. But still, the lines would be a problem. Meanwhile, in public restrooms, a high speed hand dryer could spread COVID-19 droplets. Enclosed stalls are a worry because those droplets can be virulent for eight minutes. We also might have sinks that are too close and infected surfaces we all touch.

The solution is expensive retooling. McDonald’s said that with touchless sinks and sensor-activated towel dispensers, the cost of a restroom renovation could exceed $25,000. A group that oversees beach restrooms said they would be charged $250 for the cleaning they want to repeat every 90 minutes.

Our Bottom Line: Spillover

The economic term spillover seems uniquely appropriate for tracking the connection between lockdown reopening and the public restroom. Defined as the positive or negative impact on unrelated third parties, the spillover from a restroom flows to economic growth.

At movie theaters, ball games, parks–wherever we share public space–we depend on restrooms. According to Slate, a California water use textbook tells us that a typical office worker flushes the toilet somewhere between 2 and 3 1/2 times a day. In restaurants, half of all diners use the facilities.

As we reopen, accelerated economic activity will require a new kind of restroom. When we are willing to leave home to see a three hour movie, we create a spillover through the employees theaters hire, the popcorn they sell, and the movie studios they support.

My sources and more: During a family dinner discussion, I learned that restrooms were a big reason that the summer music festivities in Tanglewood could not open. From there, The Washington Post and Slate confirmed their plight.

Our featured image is from Pixabay.

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.