Do Movies About Women Make A Higher Rate Of Return?

See The Dollar-And-Cents Case Against Hollywood’s Exclusion of Women by Walt Hickey of fivethirtyeight.com. Excerpts:

 "One of the most enduring tools to measure Hollywood’s gender bias is a test originally promoted by cartoonist Alison Bechdel in a 1985 strip from her “Dykes To Watch Out For” series. Bechdel said that if a movie can satisfy three criteria — there are at least two named women in the picture, they have a conversation with each other at some point, and that conversation isn’t about a male character — then it passes “The Rule,” whereby female characters are allocated a bare minimum of depth. You can see a copy of that strip here."

"The median budget of a film that failed the test was $48.4 million. The median budget of a film that passed was $31.7 million, or 35 percent less."

"The total median gross return on investment for a film that passed the Bechdel test was $2.68 for each dollar spent. The total median gross return on investment for films that failed was only $2.45 for each dollar spent."

 Using the numbers from above, this implies that "male" movies grossed about $118 million on average (2.45*48.4). If we subtract that $48.4 cost from the $118 million, we get about a $70 million profit.

Using the numbers from above, this implies that "female" movies grossed about $85 million on average (2.68*31.7). If we subtract that $31.7 cost from the $85 million, we get about a $53 million profit.

How long does it take to shoot a movie, six months? If you are the head of a studio, would you rather make $70 million over those six months or $53 million?

Now if it takes less time to make "female" movies then things might be different. For example, if takes 75.7% as long to make a "female" movie as it takes to make a "male" movie, then the returns are the same because 53/70 =.757. And maybe it does take less time since the "female" movies cost less to make (the less time everyone works, the less they get paid).

But if they take the same length of time to make, "male" movies make 32% more money (70/53 =1.32).

There is also a marginal/average issue. The Hobbit: The Desolation of Smaug grossed $950 million and cost $250 million to make. So it got $3.8 in revenue for every $1 of cost. If they had spent another $100, would that have generated $380 million in revenue? Probably not. If so, they left alot of money on the table.

Only so many people can see a movie. At some point, the rate of return has to fall off. With "female" movies, maybe the next $1 million spent on making it might only return, say $2.67 million in revenue. Then the next $1 million, only $2.66 million. A similar drop off would occur for "male" movies.

But if alot more money is spent on any given "female" movie, then the average rate of return would be alot lower than 2.68. We just don't know how much it would fall. And making more "female" movies has the same problem. People will be less excited with each new movie of any genre and revenue will tail off.

It is a little like a grocery store that only makes a 1% profit on, say, cans of soup. But soup might have a high turnover rate. So they sell lots of them each day for a given space on the shelves. So they make a big profit.

They might make a 100% profit in caviar but sell very little each day. So it occupies very little shelf space. We don't tell the store to carry more caviar and less soup. The store already knows the right balance of each one to maximize profits. Maybe the studios know something similar about "male" and "female" movies.

Firms want to maximize profits. So they produce a quantity (Q) that makes marginal revenue (MR) = marginal cost (MC). "Male" and "female" movies could have different MR & MC lines, like in the graph below (blue for male, red for female). In this example, more "male" movies get made, they have a higher total profit and a higher profit per movie, yet "female" movies have a higher return on investment or rate of return. And since MR = MC for both types of movies, studios have no reason to produce more "female" movies or fewer "male" movies.

The first thing to notice is that the MC is 9 for "male" movies and 6 for "female" movies. That is about the cost ratio mentioned in the 538 piece.

Male movies: Q = 11, total revenue (TR, the area under the MR curve up to a Q of 11) is 159.5. Total cost is 11*9 = 99. Profit = 159.5 - 99 = 60.5. Profit per movie is 60.5/11 = 5.5. Return on investment is 159.5/99 = 1.61 (that is TR/TC). So $1 spent making a "male" movie, leads to $1.61 in revenue.

Female movies: Q = 8, total revenue (TR, the area under the MR curve up to a Q of 8) is 80. Total cost is 8*6 = 48. Profit = 80 - 48 = 32. Profit per movie is 32/8 = 4. Return on investment is 80/48 = 1.67 (that is TR/TC). So $1 spent making a "female" movie, leads to $1.67 in revenue.

Who Really Benefits From The Mortgage Tax Break?

See Mortgage Tax Break Said to Trickle Up by Nick Timiraos of the WSJ.Excerpts:

"Federal tax benefits for homeowners primarily help wealthier people borrow more money to buy larger houses rather than boost homeownership, according to a new study."

"...tax preferences, particularly the mortgage-interest deduction, have helped drive up the size of houses by as much as 18% in the nation's most affluent areas while not broadly encouraging people to buy homes."

"...a growing body of economic research that suggests Americans don't benefit broadly from the tax preferences, which the study estimates cost the government $175 billion annually in forgone revenue."

"... tax subsidies for housing "don't encourage homeownership in any meaningful way. People just end up buying larger homes," said Andrew Hanson, an associate professor of economics at Marquette University who conducted the study along with two other economists."

"...tax benefits have contributed to the average home size being about 1,400 square feet larger than if the benefits didn't exist."

"... owners benefit from capital-gains avoidance when realizing a $250,000 gain from a home sale, a provision that benefits households in coastal markets with greater home-price appreciation."

" Robert Dietz, an economist at the National Association of Home Builders, said tax filings also show larger families tend to take larger deductions, and larger families need more space."

"... tax benefits for owner-occupied homes generally accrue to a minority of households. Homeowners with incomes above $100,000 were between three and four times as likely to claim the tax benefit as those earning less than $100,000."

"The average annual savings for households claiming housing tax benefits are $12,300 in San Francisco and $10,700 in Los Angeles, compared with $1,600 in Detroit and $2,900 in Dallas, the study found.

Meantime, residents in San Francisco who earn more than $100,000 save $8,000 annually from the mortgage-interest deduction, compared with savings of $3,700 for residents who earn less than $100,000. In Detroit, higher earners save more than $4,000, while those earning less than $100,000 save $1,600."

Better Looking Real Estate Agents Make More Money

In Real Estate, Looks Can Sell: Attractive agents both list and sell homes for more money than average-looking agents, say researchers studying the effect of beauty on sales. From the WSJ, 5-31-2013. By Sanette Tanaka. Excerpts:

"When selling real estate, beauty pays off, says Sean Salter, associate professor of finance at Middle Tennessee State University and co-author of a study on how an agent's looks affect property sales. Attractive real-estate agents list homes for $20,275 more and sell for $15,622 more than average-looking agents, researchers found.

"When you see a more attractive person, you think 'Superman.' They're going to be good at whatever they do. You think they're attractive, they're smarter, they're funnier—they're probably a better real-estate agent," Prof. Salter says."

"The findings: Every one-point increase in a listing agent's attractiveness score added $10,989, on average, to the home's list price. Every one-point increase in a selling agent's score added $8,467 to the home's sale price.

"All else being equal, we give attractive people a little bump," Prof. Salter says."

"Over time, though, the price differences evened out. Although they made more money per transaction, attractive agents carried 17 fewer listings and made 11 fewer sales, on average, during the seven-year period. It also takes attractive agents longer to sell a property. That means that agents who are considered beautiful "actually are using their beauty to supplement other productive characteristics," Prof. Salter says."

Obesity And The Benefit Of Losing Weight

See The Magic Number That Could Fix America’s Weight Problem by Dan Kloeffler of ABC/Yahoo News.

"First, the average American male weighs a little more than 195 pounds, the average American female, weighs about 166 pounds. Based on these averages, and the CDC’s table for Body Mass Index if average American Joe’s and Jane’s dropped 20 pounds, they would no longer border obesity, but rather border what is considered normal weight.

Ever tried dropping a few pounds? Then you know that 20 can seem like a ton. It’s not, actually. It’s about the weight of a spare tire or a case of beer; interesting to note that one is the namesake for a belly, while the other is often the cause of its existence.

If we did lose 20, white women might find themselves with a little extra cash, according to Dr. John Cawley, economics professor at Cornell University. He examined 30 years of data, collected on a cross-section of the U.S. population. About 70,000 people were observed from different economic situations, educational levels, and races. As the subjects were monitored over three decades, Cawley noticed a pattern among white women; those that were heavier, tended to earn less money. In most cases, the wage difference was between 2.8 percent and 5.6 percent.

Keep in mind, this study did not come to the conclusion that weight gain automatically causes a drop in wages, or that lower wages causes weight gain. However, the observation is worth attention, considering that changing your figure, could change some figures.

But even without pay raise, if we lost 20 pounds, we’d have more money to spend, thanks to saving billions on healthcare costs. According the Cawley’s number crunching, those Americans considered obese spend about $2,700 a year on healthcare, over someone classified as normal weight. If we eliminated these bills by losing 20 pounds, the country as a whole, would save about $190 Billion dollars in healthcare costs associated with obesity."

100 Years Of Inflation

The Bureau of Labor Statistics has records going back to 1913. See CPI Detailed Report: Data for January 2014. It is a PDF file and you need to find Table 24.

It might be easier to see all the data at this site.

The base year is 1982-84. The Consumer Price Index was closest to 100 in 1983 when it was 99.6. In 1913 it was 9.9 and in 2013 it was 232.957. That means it took $232.957 to buy what cost $100 in 1983.

The compound annual inflation rate from 1913-2013 is about 3.21%. But some years were much higher and we had years that were negative. The CPI was 9.9 in 1913. So what cost $1.00 back then would cost over $23.00 now.

The compound annual inflation rate from 1983-2013 is about 2.873%.

Prices fell about 20% from 1929-1932 with a fall of  9.9% in 1932. The table below shows how much prices changed in each 10 year period.

Period	CPI Change
1913-1923	72.73%
1923-1933	-23.98%
1933-1943	33.08%
1943-1953	54.34%
1953-1963	14.61%
1963-1973	45.10%
1973-1983	124.32%
1983-1993	45.08%
1993-2003	27.34%
2003-2013	26.61%

The chart below shows the annual inflation rate for each year since 1914. There are two methods. One that only looks at the CPI in December of each year and finds the percentage change (blue line). The other method averages the CPI for all 12 months in each year and then finds the percentage change. Notice that they tend to be pretty close. But not always. See a post from 2010 called What Was The Rate Of Inflation Last Year? Was It Positive Or Negative?

GDP Per Capita, 1929-2013

This is adjusted for inflation (using 2009 dollars). The second graph is GDP divided by number of people in the labor force (that starts in 1947 since that is when we started using age 16 and older). The third graph is GDP divided by the number of people with jobs. The fourth graph is GDP per capita from 1947-2013.

Widest earnings gap for college grads in 48 years

Click here to read the AP story by Hope Yen. Excerpts:

"Young adults with just a high-school diploma earned 62 percent of the typical salary of college graduates. That's down from 81 percent in 1965, the earliest year for which comparable data are available."

"... college graduates ages 25 to 32 who were working full time now typically earn about $17,500 more annually than employed young adults with just a high school diploma ($45,500 vs. $28,000); those with a two-year degree or some college training earned $30,000. In 1965, before globalization and automation wiped out many middle-class jobs in areas such as manufacturing, the inflation-adjusted gap was just $7,449.

Meanwhile, median earnings for high-school graduates have fallen more than $3,000, from $31,384 in 1965 to $28,000 last year.

Young adults with just high-school diplomas now are also much more likely to live in poverty, at 22 percent compared to 7 percent for their counterparts in 1979."

"About three-fourths of all college graduates say they regretted not doing more during school to better prepare themselves to find a job, such as getting more work experience, studying harder or looking for work sooner."

A Special Valentine's Message On Romantic Love

Below is a repeat of last year's Valentine's day post. I am not sure if the links are still working:

The first one is Researchers at AAAS Annual Meeting Explore the Science of Kissing . The following quote gives you an idea of what it is all about: "Kissing, it turns out, unleashes chemicals that ease stress hormones in both sexes and encourage bonding in men, though not so much in women." I guess economists call this "interdependent utility functions." Meaning that what brings one person pleasure brings brings the other person pleasure, and vice-versa.

The other is Cocoa Prices Create Chocolate Dilemma. The article opens with "Soaring cocoa prices are creating a Valentine's Day dilemma for chocolate makers. They don't want to raise retail prices when recession-weary consumers are trying to limit their spending." The problem is crop diseases in Ivory Coast and Ghana. You might need to be a WSJ subscriber to read the whole article.

Here is a new article from yesterday's San Antonio Express-News (2-13-2011). Romance in bloom at workplace: Survey indicates 59% have taken the risk-filled leap. It seems like many people admit to having a romance at work and/or meeting their spouse at work. So what starts out as economic activity leads to some other needs being met.

Now the economic definition of romantic love.

Abstract: "Romantic love is characterized by a preoccupation with a deliberately restricted set of perceived characteristics in the love object which are viewed as means to some ideal ends. In the process of selecting the set of perceived characteristics and the process of determining the ideal ends, there is also a systematic failure to assess the accuracy of the perceived characteristics and the feasibility of achieving the ideal ends given the selected set of means and other pre-existing ends.

The study of romantic love can provide insight into the general process of introducing novelty into a system of interacting variables. Novelty, however, is functional only in an open system characterized by uncertainty where the variables have not all been functionally looped and system slacks are readily available to accommodate new things. In a closed system where all the objective functions and variables must be compatible to achieve stability and viability, adjustments in the value of some variables through romantic idealization may be dysfunctional if they represent merely residual responses to the creative combination of the variables in the open sub-system."

The author was K. K. Fung of the Department of Economics, Memphis State University, Memphis. It was from a journal article in 1979. More info on it is at this link. The entire article, which is not too long, can be found at this link.

Then there was this related article: Love really is blind, U.S. study finds. Here is an exerpt:

"Love really is blind, at least when it comes to looking at others, U.S. researchers reported on Tuesday.

College students who reported they were in love were less likely to take careful notice of other attractive men or women, the team at the University of California Los Angeles and dating Web site eHarmony found.

"Feeling love for your romantic partner appears to make everybody else less attractive, and the emotion appears to work in very specific ways in enabling you to push thoughts of that tempting other out of your mind," said Gian Gonzaga of eHarmony, whose study is published in the journal Evolution and Human Behavior.

"It's almost like love puts blinders on people," added Martie Haselton, an associate professor of psychology and communication studies at UCLA."

More links:

How to Be a Better Valentine, Through Economics by economist Paul Oyer.

Can Giving Up Money And Material Things Lead To More Love?

What Do Men In China Need To Get A Bride?

Adam Smith, Marriage Counselor

A Special Valentine's Message On Romantic Love

Can You Put A Price Tag On Love?

Do Opposites Attract? Not Usually, Except Maybe When It Comes To Money

Return of the Love Headhunters

eHarmony To Provide Personal Counselors To Help You Find Mr. Or Ms. Right

Economist Paul Zak, aka Dr. Love (he studies the brain with "neuroeconomics")

The San Antonio Express-News Printed An Article By Me

It was printed Feb. 1. Here is the link: False choice to separate work and passion. In the print edition it was titled "Passion not antithesis of hard toil." My article was a response to one by Esther Cepeda. Here is the link to her article: Esther Cepeda: The rewards of hard work.

"I think Esther J. Cepeda presents a false dichotomy between “following your bliss” and “grinding it out” (“Hard work trumps doing what you love,” Other Views, Jan. 24). She says we need more people who “grind it out” and work hard starting businesses instead of people doing what they love and that “love and passion” are no “substitutes for hard work.”

What if hard work and passion complement each other? This would erase the conflict she sees.

Anders Ericsson, a psychology professor at Florida State University, says “when it comes to choosing a life path, you should do what you love — because if you don't love it, you are unlikely to work hard enough to get very good.” And he advocates hard work — lots of it.

You will “grind it out” if you are doing something you love. Some neuroscience research says that when we do what we love, we form new connections in our brain that increase our skill. At the same time, the release of dopamine that gives us pleasure also helps form these connections.

Cepeda did not mention mythologist Joseph Campbell, who championed “following your bliss” in the 1980s. He wrote the book The Hero With a Thousand Faces (one of the inspirations for “Star Wars”).

It is not commonly known that Campbell said entrepreneurs, the grinders Cepeda lauds, were the real heroes in our society. Business can be a fulfilling adventure, like art or science.

Maybe our society does not have enough grinders starting new companies because of our negative attitudes toward business. Look at popular portrayals of capitalists such as J.R. Ewing and Gordon Gekko. This may be why young people are not likely to see business as a noble and worthy quest. Our national narrative needs to change.

Nobel Prize-winning economist Edmund Phelps has pointed out that we have lost our innovative spark, and certainly the images of capitalists in movies and TV do not help.

Calling entrepreneurs heroes does not mean we should exempt them from ethical behavior. It is not a license to defraud or harm the public. We cannot, however, completely avoid some negative effects of business, such as pollution. But that is something we can tax.

Educator Candace Allen has pointed out that if we do not honor entrepreneurial accomplishment, we will not get enough entrepreneurs.

As President Barack Obama has said, “No government program alone can take the place of a great entrepreneur.” Our national dialogue needs to include the vital role they play. Even those who start, as Cepeda says, boring businesses such as dry cleaner and fast-food franchises.

Those entrepreneurs may be the heroes on the front line of our economy. And who does not love being a hero? That might get people to do the hard work Cepeda wants done."

Click here to see the article with the quote from President Obama. It was in The Wall Street Journal, May 2, 2013. The article was titled "Billionaire Executive Pritzker Picked for Commerce Post."

Which Nation Just Voted To Impose Higher Taxes On Junk Foods?

The Navajo Nation. See Navajos Vote to Try Junk-Food Tax in Fight Against Obesity by Ana Campoy of The Wall Street Journal.

This week two of my classes picked a chapter on obesity to read from the book The Economics of Public Issues. Rising obesity rates are partly a result of food getting cheaper and people leading more sedentary lives (which in turn is a result of rising relative pay for jobs that don't require as much physical exertion).

Here are excerpts from the WSJ article:

"Leaders of the Navajo Nation, whose people are struggling with obesity, along with those of numerous other Native American tribes, voted to impose higher taxes on junk foods while eliminating taxes on healthier alternatives.

The changes, passed Thursday by the Navajo Nation's tribal council, represent the latest attempt by U.S. communities to use legislation to encourage people to eat more healthily.

Under the proposed laws, which require approval by the tribe's president, taxes on soda and fatty snacks will go up to 7% from the current 5%, while fresh fruits, vegetables and nuts won't be taxed at all."

"Opponents, including some Navajo lawmakers, said members of the impoverished tribe couldn't afford higher taxes on anything. They predicted the tax changes would drive some to purchase items such as soda and potato chips at stores outside the reservation."

"Supporters of the Navajo junk-food tax said it was necessary given the rate of obesity and diabetes on Indian reservations. Roughly one in three Navajos is diabetic or pre-diabetic, and anywhere between 23% and 60% are obese, according to data presented to the tribal lawmakers.

Native Americans in general are 60% more likely to be obese than non-Hispanic whites, and more than twice as likely to be diagnosed with diabetes, according to the U.S. Department of Health and Human Services."

 Another thing  about obesity is that it seems like if you are obese as a very young child, you tend to stay that way. See Obesity Is Found to Gain Its Hold in Earliest Years by GINA KOLATA of The New York Times. Excerpt:

"For many obese adults, the die was cast by the time they were 5 years old. A major new study of more than 7,000 children has found that a third of children who were overweight in kindergarten were obese by eighth grade. And almost every child who was very obese remained that way.

Some obese or overweight kindergartners lost their excess weight, and some children of normal weight got fat over the years. But every year, the chances that a child would slide into or out of being overweight or obese diminished. By age 11, there were few additional changes: Those who were obese or overweight stayed that way, and those whose weight was normal did not become fat."

Do Good Looking People Get Better Loan Terms?

See Love & Loans: The Effect of Beauty and Personal Characteristics in Credit Markets by Enrichetta Ravina of Columbia University (this is a technical paper). Here is the abstract or summary:

"I examine whether easily observable variables such as beauty, race, and the way a loan applicant presents himself affect lenders’ decisions, once hard financial information about credit scores, employment history, homeownership, and other financial information are taken into account. I use data from Prosper.com, a 150 million dollars online lending market in which borrowers post loan requests that include verifiable financial information, photos, an offered interest rate, and related context. Borrowers whose beauty is rated above average are 1.41 percentage points more likely to get a loan and, given a loan, pay 81 basis points less than an average-looking borrower with the same credentials. Black borrowers pay between 139 and 146 basis points more than otherwise similar White borrowers, although they are not more likely to become delinquent. Similarity between borrowers and lenders has also a powerful impact on lenders’ decisions. In my sample personal characteristics are not, all else equal, significantly related to subsequent delinquency rates - with the exception of beauty, which is associated with substantially higher delinquency probability. The findings are consistent with personal characteristics affecting loan supply through lenders’ preferences (taste-based discrimination a la Becker) and perception, rather than statistical discrimination based on inferences from their previous experience."

81 basis points means that if the average looking person gets a loan for 5.81%, the good looking person would get it for 5%. If your loan is for $100,000, it means if you paid it back in a year, the good looking person would get to pay $810 less.

For a non-technical article about how peer-to-peer lending works, see It's Like eBay Meets Match.com: Does peer-to-peer lending work? by Ray Fisman of Slate. Very entertaining.

Here are some earlier posts on the money value of looking good:

Do looks matter? 

Do Looks Help In The Job Market? 
 
From The Life Is Not Fair Category: Better Looking, Tall, Thin People Make More Money