Saturday, June 18, 2016

Domino's & T-Mobile discover there is no such thing as free pizza. Too many took advantage of offer. They ran out

See T-Mobile Ends Free Pizza Promotion as Domino’s Runs Out of Dough by Saad Chandna of Bidness Etc. Why the give away in the first place? Competition: "With AT&T having launched a similar thank you service for its customers, T-Mobile needs to keep the ante up as rival carriers initiate methods to keep their own customers hooked."

Here is the definition of a scarce good I use in my classes:

Scarce-A good or resource is scarce when the amount available is less than the amount people would want if it were given away free of charge.

So pizza is scarce!!

Excerpt from article:

"T-Mobile Tuesdays has provided the un-carrier’s customers with a lot of free goods, but free Domino’s Pizza will not be one of those promotional items anymore

Domino's Pizza, Inc. (NYSE:DPZ) has had to back out of a T-Mobile promotion owing to a demand-supply discrepancy. The un-carrier recently launched its T-Mobile Tuesdays app on iOS and Android in a bid to say thank you to its customers for their loyalty. Among other freebies, T-Mobile offered coupons entitling customers to a free Domino’s medium pizza with toppings. The restaurant chain, however, has been unable to handle the surge in demand every Tuesday, and has now discontinued the service.

T-Mobile US Inc. (NYSE:TMUS) promotions tend to create quite a bit of a brouhaha, and T-Mobile Tuesdays was no exception. The app crashed soon after it launched, as customers rushed to get their hands on free goods. Demand has been so high that it put a strain on Domino’s stores, as they tried to cater to the orders. T-Mobile CEO John Legere acknowledged this in an internal Domino’s memo, saying that the promotion would not be renewed unless a viable solution was found.

The T-Mobile CEO noted in his tweet that the promotion will not be valid on the next Tuesday, June 21. Mr. Legere was appreciative of Domino’s efforts to facilitate the extra orders. According to his tweet, Domino’s sales went up by around three to four times the sales accrued on any given Tuesday, as a direct result of the T-Mobile promotion.

According to TechCrunch, Domino’s appreciated the number of T-Mobile customers who are fans of the pizza chain. However, the restaurant giant had already started capping the number of free pizzas per store, while some T-Mobile Tuesdays coupons were not accepted altogether. This understandably left a lot of customers unhappy."

Thursday, June 09, 2016

Criticizing the selling of Ali's memorial service tickets ignores economic reality

I submitted this to the San Antonio Express-News

At first glance, it might seem awful that some people were selling free tickets they had gotten to Muhammad Ali's memorial service Friday (June 10) in Louisville ("Some trying to profit off funeral," sports, June 9).

An Ali family spokesman said he was "personally disgusted" by this and that Ali "wanted this to be a free event, an event that was open to all."

Another person, who wanted to attend the service, said "The Greatest wanted his funeral to be accessible to everyone." Another fan, who was lucky enough to be given a ticket by someone else who had waited in line said "I'm glad that somebody has a heart out there" (as opposed to those who sold their tickets).

But the arena holding the service only seats 15,000. People started lining up the night before tickets were given out and thousands left empty handed.

That also seems heartless, to have people wait so long and come up empty handed. If tickets were sold for money, that would have been avoided.

Luckily the high temperature in Louisville was only 77 that day. But the next day it was supposed to be 85 and the day after 92. Just imagine what might have happened if people had waited hours in the heat and gotten nothing.

Anytime we don't allow a product to be sold (or sold for its market price)  some other mechanism will allocate goods and services. It could be on a first come, first serve basis, like in this case. That is, who waits the longest gets it.

Or, as happened in Rhode Island in 2006, two police officers used their badges to cut in line to buy the Playstation3 video game. The selling price was not high enough on the first day, so, like in the case of Ali's memorial service, people waited in line all night.

We should not be surprised when people sell "free" tickets. This happened in 2009 when comedian Jay Leno gave away free tickets to unemployed workers in Detroit. Some sold them.

Leno was not happy about this. But he required no proof from recipients that they were actually unemployed. And if a truly unemployed worker sold a ticket, maybe they needed the money more than Leno's jokes.

Free items can end in tragedy. This happened in India in 2004 when a stampede occurred while free saris were being given away. Twenty-one women and children (mostly poor) were killed.

Mr. Ali may have had a noble sentiment by insisting that tickets to his memorial service be free. But "free" items cause problems.

Some people were paid to stand in line. Although tickets might not be sold in those cases, it violates the spirit of what Mr. Ali wanted. But detecting such activity might be difficult.

Paying people to stand in line is common. Lobbyists have paid people to wait in line for them to get a good seat at Congressional hearings. Kathleen Elkins of Business Insider reported last year that there are companies that employ professional line sitters.

This happened up in Austin. People got paid to wait in line at Franklin Barbecue.

Calling the profiteering (selling free tickets) despicable, deplorable and heartless just ignores reality. Supply and demand set a price and when that is ignored, strange things happen.

Right now price controls are causing a human tragedy in Venezuela. The government mandates low prices and businesses can't make a profit. So they have shortages of food and medicine and other essentials. If they only allowed some "disgusting" profiteering, things might be better. 

Here are some related links:

People are paying up to $1,500 for someone else to take their place in line
Franklin Barbecue bans professional line-sitters
Cops in Trouble for PS3 Line-Cutting
Stampede for free saris kills 21 in India
Some looking to profit from free tickets to Ali services

Friday, May 06, 2016

Licensing Laws Are Shutting Young People Out Of The Job Market

By Ben Casselman of 538. Excerpt:
"A week ago, however, the Bureau of Labor Statistics released a trove of new data on licenses — who has them, how much they earn and how they compare to other workers. The numbers are based on a new set of questions added to the monthly Current Population Survey in 2015, so there is no historical information available, but the new evidence is broadly consistent with what the White House and other economists have found: Close to a quarter of workers, 22.4 percent, have a government-issued license, and 25.5 percent have either a license or a privately issued certification. Unsurprisingly, licenses were concentrated in the medical field, where mistakes can cost lives, but even in nonmedical occupations, nearly one in five workers had a license in 2015.1

Licensing rules are a particular problem for young workers trying to break into the job market, especially those without a college degree. The unemployment rate for adults ages 18 to 35 with neither a license nor a college degree was 9.9 percent in 2015; for those with a license (but still no degree), it was 5.2 percent.2 Those who do manage to find full-time jobs earn 13 percent less than those with a license. Good jobs that don’t require a license are scarce, particularly for women: Nearly two-thirds of young women without a license or a degree earn less than $540 a week, roughly two-thirds of the median wage for full-time workers. (For women with a license, about half earn at least $540 a week, in part because women dominate many medical occupations.) Licensing rules don’t explain all or even most of that gap — there are likely other differences between people who have licenses and those who don’t — but they probably do play a role. The earnings gap shrinks, but doesn’t disappear, after controlling for education, occupation and other factors.

Young workers aren’t the only ones affected. Among older workers, the earnings disparities between those with licenses and those without aren’t as stark,3 likely because they have had more time to find their way into a career (and perhaps also because occupational licensing wasn’t as widespread when they entered the workforce). But when older workers lose jobs, licensing requirements can make it hard for them to get back to work, especially if they need to change careers. Workers over 45 consistently face longer spells of unemployment when they lose jobs compared with younger workers; unemployment lasts more than 40 percent longer for those without a license.4

One solution, of course, is for workers without licenses to get them. But state licensing programs are often long and expensive, which can deter low-income workers or those who aren’t yet sure what career they want to pursue. And licenses can be barriers in other ways as well, making it hard for people to move to other states, where their license may not be valid, or to pursue entrepreneurial ideas, which may not fit with licensing requirements.

Both Democrats and Republicans have spoken out against excessive licensing in recent years. But the problem is that the winners from licensing laws are clear, as Josh Zumbrun noted this week in The Wall Street Journal. Particularly for workers without a college degree, a license brings higher earnings and a reduced risk of unemployment. The losers, even though there are probably more of them, are harder to identify. Someone who avoids becoming a hairdresser because of the mandated training, for example, may not think of herself as being a victim of licensing, even if she is. As a result, supporters of licensing have a stronger incentive to defend their interests, making it hard to roll back the laws once they’re in place."

Thursday, April 21, 2016

Are Millennials Buying Cars Again?

See Millennials are finally arriving in the car market by DEE-ANN DURBIN of AP. Excerpt:
"DETROIT (AP) — Millennials were once a source of panic in the auto industry. Dubbed the "go nowhere" generation, they weren't getting driver's licenses, never mind buying cars. Headlines declared it was "The End of Car Culture."

New data suggests at least some of that worry was misplaced. Millennials — especially the oldest ones — are these days buying cars in big numbers. They just had a late start.

Now the largest generation in the U.S., millennials bought 4 million cars and trucks in the U.S. last year, second only to the baby boomers, according to J.D. Power's Power Information Network, which defines millennials as those between 21 and 38 in 2015. Millennials' share of the new car market jumped to 28 percent. In the country's biggest car market, California, millennials outpaced boomers for the first time.

Industry watchers say it's been hard to get a read on millennials because the generation is big and diverse, ranging from recent college graduates to settled-down suburbanites. Automakers were also unsure about the impact of new transportation choices, like ZipCar and Uber, which helped millennials delay car buying. But as they got jobs and started families, millennials headed into car dealerships just like previous generations.

"This whole idea that they're not going to need cars is absolutely ridiculous," said Steven Szakaly, the chief economist for the National Automobile Dealers Association. "The new car buyer age is just happening much later."

It's a very different story from 2010, when millennials — who make up around 30 percent of the population — bought just 17 percent of new cars. Auto executives wondered aloud if the trend would be permanent.

In 2011, a University of Michigan study showed a steady decline in the number of young people getting their driver's licenses. In 1983, the survey found, 87 percent of 19-year-olds had a license. By 2010, that had fallen to 69 percent. Millennials told the study's authors that they were too busy to get licenses and were happy to hitch rides from others.

But there was more to the story. The advent of graduated licensing laws — which make teens practice driving in stages before granting a full license — was one reason millennials were getting their licenses later. An even bigger reason? The economy.

For many millennials, the Great Recession hit just as they were getting their first job or graduating from college. By 2010, millennials' unemployment rate reached 13 percent — four percentage points higher than the national average — according to a report by the White House Council of Economic Advisers. For teens, things were even worse. The teen unemployment rate rose from 15 percent to 26 percent between 2006 and 2012.

Millennials' unemployment rate has improved to around 8 percent. Add low interest rates and low gas prices to the mix and the car market suddenly looks more enticing to young buyers."
Another interesting article is The baffling reason many millennials don’t eat cereal by Roberto A. Ferdman of The Washington Post.

Friday, April 15, 2016

Anxious? High Strung? You Might Be The Ideal Worker

There was an interesting article a few years ago in the New York Times magazine called Understanding the Anxious Mind by ROBIN MARANTZ HENIG. It discusses a study of anxiety that looks at subjects from birth as they age. Here is one interesting excerpt:
"LOOKING AT THE neurology of anxiety raises the inevitable question of why a trait that causes so much mental anguish would have evolved in the first place. For the species as a whole, it is most likely an advantage to have some group members who are hypervigilant and who see everything as a threat, always ready to sound an alarm and leap into action. For the individual, though, being inhibited can mean having fewer mating opportunities, not to mention the psychic burden, wearing yourself ragged with a brain that’s always on high alert.

In the modern world, the anxious temperament does offer certain benefits: caution, introspection, the capacity to work alone. These can be adaptive qualities. Kagan has observed that the high-reactives in his sample tend to avoid the traditional hazards of adolescence. Because they are more restrained than their wilder peers, he says, high-reactive kids are less likely to experiment with drugs, to get pregnant or to drive recklessly. They grow up to be the Felix Ungers of the world, he says, clearing a safe, neat path for the Oscar Madisons.

People with a high-reactive temperament — as long as it doesn’t show itself as a clinical disorder — are generally conscientious and almost obsessively well-prepared. Worriers are likely to be the most thorough workers and the most attentive friends. Someone who worries about being late will plan to get to places early. Someone anxious about giving a public lecture will work harder to prepare for it. Test-taking anxiety can lead to better studying; fear of traveling can lead to careful mapping of transit routes.

Kagan told me that in the 40 years he worked at Harvard, he hired at least 200 research assistants, “and I always looked for high-reactives. They’re compulsive, they don’t make errors, they’re careful when they’re coding data.”
He said he would bet that when the United States sends people up in space, the steely, brave astronauts were low-reactive as infants, and the mission-control people down on the ground, doing the detail work that keeps the craft aloft, were high-reactive.

An anxious temperament might serve a more exalted function too. “Our culture has this illusion that anxiety is toxic,” Kagan said. But without inner-directed people who prefer solitude, where would we get the writers and artists and scientists and computer programmers who make society hum? Kagan likes to point out that T. S. Eliot suffered from anxiety, and that biographies indicate that he was a typical high-reactive baby. “That line ‘I will show you fear in a handful of dust’ — he couldn’t have written that without feeling the tension and dysphoria he did,” Kagan said."
Here is the link to the letters about the original column

Friday, April 08, 2016

This was a commercial back in 1986. It paints a bleak picture of America in the future, presumably caused by the growing national debt ($2 trillion then, it will be about $19.43 trillion when the fiscal year ends on Sept. 30, according to the White House Office of Management and Budget). I think this thing is way over the top but there may be some real dangers from the debt that I mention below. You might have to watch a brief commercial for some product first. We have been covering the deficit and debt this week in my macro classes. If the embedded video does not appear, use the link below it.

Ridley Scott - W. R. Grace Deficit Trials

Real problems the national debt might cause
. About 34% of the debt is owed to foreign citizens. When they get paid back, they come and buy American goods. That leaves fewer goods for Americans (who can't afford to buy as much due to higher taxes that were needed to pay back the debt). BUT THIS MIGHT NOT BE A CONCERN IF WE ORIGINALLY BORROWED THE MONEY FOR A GOOD PURPOSE.

People borrow money all the time to buy houses and cars. Then they pay it back to a person outside of their family or household. We don’t consider this a burden since the money was put to good use. Right after World War II, the national debt was 120% of the GDP. This was much higher than it is now and we survived. No one complains that we borrowed to win the war.

2. Raising taxes might hurt economic incentives. At higher tax rates, people might want to work and invest less. Fewer businesses might expand and fewer new ones created since you will get to keep less profit. But again, THIS MIGHT NOT BE A CONCERN IF WE ORIGINALLY BORROWED THE MONEY FOR A GOOD PURPOSE. Also, if taxes only go up a little, and the debt is slowly paid off each year (like after WW II), it may not hurt too much.

3. We may have fewer government services in the future if we pay back the debt by lowering government spending. But this means that we are trading more government services today for fewer in the future. THIS IS NOT NECESSARILY A BAD THING IF THE MONEY IS SPENT WISELY (which everyone not might not agree on).

If taxes and interest rates are higher in the future due to the debt, that will lower our future economic growth rate. We will still probably grow, but not as much.

Friday, April 01, 2016

Should your company or insurer reward you for meeting exercise goals?

See Let your boss track your fitness, get an Apple Watch by ANICK JESDANUN of the Associated Press.

This reminds me of what economists call "asymmetric information." This is a situation in which the seller knows more about a product than the buyer (sometimes the buyer knows more about something important like how healthy or risky they are as it relates to insurance). These markets do not operate optimally. If insurance companies don't know how healthy or risky you are, they can't be sure of how much your premiums should be. But with fitness tracking, they learn more about you. My students might recall I discussed this after we played the supply and demand game in class. A good example is the used car market. Sellers usually know alot more about the product than the buyers.

Excerpts from the article linked above:
"You know you need to exercise more, but there's always next week, or the week after. To entice you to stop procrastinating, your company or insurer might soon reward you for wearing a fitness device to track your steps, heart rate and more.

For instance, in one program announced Wednesday, some workers can buy a $350 Apple Watch for just $25 by meeting exercise goals for two years. Miss goals, and see your discount shrink. Vitality, a provider of disease-prevention and lifestyle programs, is initially bringing the offer to U.S. employees at three companies, along with John Hancock life-insurance customers. It has been testing the program in South Africa since December.

Other programs let you redeem points from fitness activities for gift cards and other rewards. Submit to biometric screenings and nutrition classes, and in some cases you can earn insurance discounts."

"Adrian Gore, CEO and founder of Vitality parent company Discovery Group, says that for many people, the benefits from exercise might not be apparent for a few decades. Reward programs make the payoff more immediate."

"On Tuesday, health insurer UnitedHealthcare started offering up to $1,460 a year in credits toward deductibles for meeting daily goals while wearing a custom tracker. Oscar, which sells health insurance directly to consumers, has been giving out free Misfit trackers for opportunities to earn up to $100 a year in Amazon gift cards. Fitbit works with employers such as Indiana University Health and Emory University in Atlanta to subsidize fitness trackers for their staff."

"These programs are typically voluntary, but you must be willing to share data to earn the most rewards and insurance discounts.

Sound creepy? Program officials say that data from fitness trackers typically go to outside administrators, such as Fitbit or Vitality. Employers and insurers get only broad totals to verify eligibility and not details on heart rate and sleep. But participants need to trust that these systems won't get hacked.

Mike Doughty, president and general manager of John Hancock Insurance, says premiums won't rise if a screening uncovers higher blood pressure or other risks. Rather, he says, wellness incentives are about promoting longer lives — and collecting life-insurance premiums longer.

There's no proof that providing fitness trackers directly lowers health care costs, but there's plenty of evidence that exercise leads to better health, which in turn can improve productivity and reduce absences. Michael Staufacker, Emory's director of health management, describes the thinking as a "value of investment and not a hard-dollar return on investment as it relates to medical or pharmacy costs.""

"Programs from Vitality and others typically won't let you earn insurance discounts simply by exercising. You'll need to earn additional points by completing questionnaires and getting flu shots. You sometimes get bonus points simply by staying within recommended limits for cholesterol, blood pressure and other measures. Smokers can also get points for joining programs to help them quit.
"You change one thing about your behavior, and you can be more motivated to work on these other aspects," says Tammy Smith, who manages the employee wellness program at IU Health.

DaVita HealthCare Partners says health care spending by its employees slowed significantly after it offered tracker-based incentives through Vitality. But DaVita also increased the deductible on claims and started such initiatives as Fresh Fruit Wednesday. That makes the effect of the fitness program difficult to isolate.

With the Apple Watch program, you must pay back Vitality each month you miss your fitness goals, which typically call for four substantial workouts a week. The goals are meant to be achievable, but tough enough to change habits."

Some research shows that if the reward is not delayed, people are put in groups where only those succeeding get rewarded (since people hate to see others get a prize they could have had) and if the participants lose money if they don't meet the goal (called loss aversion), the policy is more successful. See Paying Employees to Lose Weight.

Older posts on similar topics:

Should Overweight People Pay More For Health Insurance?

Should We Pay People To Adopt A Healthy Lifestyle?