Why An Economist Can't Love Dogs

Since we moved to Oklahoma, we have moved into a house with a fenced in backyard and we're doing well financially. I thought it fitting to convince Bryan that we needed a dog. Bryan has been anti-dog since we were dating. Partly because his family is a no pet family, but mostly because he's an economist.

Today, I sent Bryan a quiz from Animal Planet that tells you what breed dog will be the best fit for you. I thought maybe if he could find a dog that matched his personality and desire for little effort he might find his way to my side of the camp. Oh, boy, was I wrong!

Instead, this is his email:

Alright, I played your game. My result was:
A welsh corgi
http://animal.discovery.com/breedselector/dogprofile.do?id=1170

This does not mean I want a dog!

This site says the cost of owning a dog runs about $1,000 per year. $14,000 over the life of a dog.
http://www.peteducation.com/article.cfm?c=2+2106&aid=1543

The cost of a 1 week Mediterranean Cruise:
$2,000 for plane tickets to Spain
$2,600 for the cruise
$2,000 for gambling, drinking etc

Total: $6,600
http://www.royalcaribbeandeals.co.uk/fusion/detailship.pl?shipid=369&sid=7477

So would you rather have 2 amazing trips and have $800 left over for clothes or a dog?

Ha ha ha. See, I can play this game too.

Love you, my pet.

He beats me on the money and the facts. And that cruise sounds incredible. How can you argue love and affection of a dog against the reasoning of an economist? I'll have to keep trying.

An Economist's Birthday

My husband The Economist celebrated his birthday yesterday exactly how he liked.

His present arrived in the mail on Monday, and after a fascinating argument about opportunity cost, he convinced me to let him open it. Why should I let him wait two days to enjoy something that he could enjoy now?

Then, there was his cake. Of course, every year I make something different but it revolves around his favorite flavor: chocolate. This year, I made Snickers Cupcakes. It made sense to use two complementary goods to create one highly demanded product (man, I should be an economist!). These cupcakes are superior to all other cupcakes in that once they are baked from scratch, I cut the center out to fill it with Snickers pieces and frosted them with homemade frosting made from one pound of sugar. Sweet lord, they were sugary! Due to the diminishing marginal returns, we could only enjoy one.

For dinner, we went out to dinner the local steakhouse (there's only one in our small town). It was nice, and Bryan had one of his favorites: a thick, messy burger. We enjoyed some consumer surplus because the dessert was free!

Okay, that's enough of my attempt at economics. Next time, I'll be sure to get Bryan to help me, but it's his birthday, so a man should rest.

My husband is better than yours.

Part of being happy in my marriage is that Dr. Bryan Buckley is just so freaking awesome. One evening, he's going on about the literature of Ayn Rand over stir fry. Another night, he's explaining the economics of prostitutes over my roasted chicken.

The other night, Bryan provided everyone (and my reblogging friend Harrison) with a little economics lesson. Seems like he beat even THE economics blog to the punch: The Prisoner's Dillemma Makes a Reality TV Appearance.

Boom. Let's go out for margaritas and fajitas!

Economics of the Bachelor Pad

Note this economic analysis came not of Dr. Buckley's desire to watch the Bachelor Pad. He has a very convincing wife who loves reality tv and strategy gameshows.

Tonight was the finale of The Bachelor Pad, which if you haven't been watching, let me catch you up:
A bunch of the favorite and not so favorite contestants of previous seasons of the Bachelor (the dating game show with 1 guy and 25 women or 1 lady and 25 men) come together in one giant sexy house to compete for $250,000 and possibly a chance at love. Various alliances were made; many relationships formed; competitions were intense. For the final six, the top three guys picked a girl to create a team, or a couple. Everyone has been voted out except one couple Natalie and Dave.

Okay, you're caught up. We have Natalie and Dave. Natalie is a party girl, and she has kissed the most guys, drank the most and played on different sides of the ladies. Dave has backstabbed some of the guys, broken hearts of two ladies and had a good time. But, through all of this, the pair claimed they were developing a slow relationship which might possibly lead to love.

Here they are, so close to winning, and the host Chris Harrison offers them a choice. They can choose to share the $250,000 evenly, or they can choose to keep it all for themselves. Only, it gets more interesting.

If they both choose to share it, they will split the money evenly and each get $125,000.
If one chooses to share it and the other chooses to keep it, the one who chose to keep it gets the whole $250,000 and the other gets nothing.
If they both choose to keep it, the money gets split evenly among the contestants who've been kicked out and are sitting onstage.

Okay, get ready for some economics.

This is a Prisoner's Dilemma. What you need to think about is a Best Response Function. What is your best move in response to whatever they do?

Let's think about it from Dave's point of view. If she's definitely going to keep the money for herself, does he prefer to play keep and give the prize up to the losers of cast or does he prefer to share, so she can win? If Natalie's going to play share, what is his best response? Would he prefer to split the money with her or screw her over? If he preferred giving her the money rather than the chance of having to give the money to the rest of the cast, then share is his best response in either case.

Natalie might know that, and then she has her best response function. Does she want to share the prize money of $250,000 with him or does she want to keep it all? What do you think happened?

Cover Charges and Other Bar Economics

This weekend, we went to a bar that had a $5 cover charge. Once inside, we bought a round of drinks. And another. We were having fun with some friends, and I remembered we had beer at home.

I said, "Bryan, let's go home and drink some free beer!" Well, that was not the right thing to say. We paid for the beer, so it's not free.

I continued my non-PhD thought process and said, "Let's get one more round since we paid $5 to get in!" Again, not right.

Bryan explains that the $5 cover charge is a sunk cost, so it shouldn't have any bearing on our current decision making process. It's a common misconception called the Sunk Cost Fallacy.

Bryan continues, it should be as if we got in free; it's essentially the same. What you want to think about is the benefit of being there for another hour versus the opportunity cost of being there for another hour. Because the cover charge is something we've already incurred, it does not really affect the cost or benefit of being there for another hour.

And who says economics doesn't relate to the real world?