Monopoly is Always Evil

I love McDonald's I eat their all the time but during Monopoly season I practically eat their every day. McDonald's once a year does a Monopoly game for a month by placing game pieces on their food items. Though this seems like harmless fun McDonald's is using behavioral economics to control what you buy. They do this by threshold values and money illusion.

These threshold values are just behavior economics, during monopoly season people tend over-value certain items because they have symbolic value. Not only do you get food but you also get a fun game in your meal, with a possibility of winning prizes (up to a million dollars). McDonald's is heavily advertising their million dollar prize because there is heavy meaning behind a million dollars. I mean who doesn't want to be a millionaire!
This is where money illusion comes in because if you win you're not gonna be a millionaire. McDonald's has it set up in payment plans where you would get $50,000 annually for 20 years. So you wouldn't be a millionaire. But maybe you are thinking hey $50,000 is still awesome, and it is but $50,000 won't buy in 20 years what it would today. McDonald's is just hopping that American's don't realize this. This is money illusion because costumers are thinking about what the money prize value is worth now not the real value.

So how much would you actually receive of this 1 million dollar prize over 20 years. Well the average inflation rate in 3.5%, so that would turn your 1 million dollars into $735,000 in today's dollar value. Then don't forget about taxes (ugh don't you just hate taxes). With taxes and inflation your 1 million dollars now turns into more like $500,000. But hey money is money its better than nothing so I'm not complaining.
McDonald's earns a lot of money at this time, even though they are giving out a bunch of free prizes and money because they strategically place there monopoly game pieces. An example is how they place the 4 pieces on large fries, this is to make you think "well I guess I can spend an extra 30 cents for 2 more game pieces." Also the "awesome" free prizes they give out are always their least sold items, this is so they can get people to try these items and maybe start to like them and buy them more often.

Also they don't give that many chances to win the big prizes. In the photo above you can see that they always mass produce some game pieces but for every section they save one piece that they only make a few of. When looking at this you also need to take into consideration the amount of people who don't play. Who just eat and throw their game pieces away without looking, or forget to take them off. That is another thing McDonald's is banking on.
So McDonald's is the real winner of Monopoly but hey it's still fun . . . it's at least better than Ekern Monopoly.

Steel or No Steel

Beginning in the mid-nineteenth century, the steel industry has been a huge part of the UK's economy. Despite the blue collar nature of them, many people kept steel-industry jobs for their entire lives and in turn the Steel Companies have become family businesses of sorts. This export has been a key piece to the steadiness and success of this economy, but now the industry as a whole is in jeopardy. Since 2000, there has been a rapid incline of Chinese produced steel. The Chinese steel production is cheaper and faster than its UK counterparts and anyone else across the world.

Lookee here.

While reading an article about the steel situation, the risk of good intentions came into my mind. As many as 40,000 jobs are on the line at the moment, a huge portion of that being from the Tata Steel Company in the UK. Things have gotten so desperate that Britain's foreign secretary is practically begging China to cut back on its production. The thing is, I think that there is hardly any chance that this will happen. China's steel production has become a behemoth in terms of producing and exporting steel. Additionally, since China's economy has been struggling lately, I highly doubt that they would be willing to cut back on production purely for the sake of Britain. Although I hate to say it (because, you know 40,000 people have their jobs on the line) but I don't blame China if that is what was ultimately decided. The Chinese Steel Companies figured out a way to win the international market over with cheap prices and technically won "fair and square". However, this does not make this situation any less tragic.

Port Talbot, Wales.

Port Talbot, a small, steel-dependent town in Southern Wales, is likely going to be hit extremely hard. A working-class town with less than 40,000, the town's very existence seemingly hinges on its steel mill's success. The Original Port Talbot Mill was built in 1901, and in 1961 it closed. But soon after, another steel company purchased it. Eventually this was absorbed by Tata Steel Company (an Indian company), all the while preventing the town from suffering a crushing blow of losing the industry altogether. But this time has been different. The bleakness of the situation is intensified due to the UK's recent decline in steel production, and the likelihood of a heroic purchase from an outsider company is slim.

If You Thought Monopoly Was Vicious, Just Wait Until We Play This

For those of you unfamiliar with the show Cutthroat Kitchen, prepare to be blown away by what is probably one of the best shows on television. Now I don't say that lightly -- I love TV, and I know what constitutes good TV, and this is really freaking good TV. 

Actual quote from the show serving as definitive proof that CTK is the best.

The concept is simple: four chefs compete in three different rounds of cooking to make whatever the assigned dish is. The dish is then judged on taste, presentation, and whether or not the dish actually reminds the judge of what it's supposed to be. Seems pretty strange that one of the criteria is actually making the assigned dish though, right? Like, how hard can it be for professional chefs to be told to make a loaded baked potato and actually produce a loaded baked potato? As it turns out, it can be very hard, because when making a loaded baked potato in Cutthroat Kitchen, you might not have a potato to use, because it was confiscated and replaced with a bowl of crushed potato chips. 

Not what most consumers would consider a viable substitute.

That's the real trick of Cutthroat Kitchen. Each round begins with an auction in which chefs can purchase sabotages to hurt the other chefs' ability to cook properly, thus making it easier for them to get eliminated. The chefs are of course not meant to use their own money for buying sabotages. At the beginning of the episode, each competitor is given $25,000 in cash to use in the auctions. Whatever money you use is taken away, and if you win you only keep whatever you did not spend of the $25,000. Now that money disappears fast, and CTK is a really hard game to play, but with some understanding of economics (particularly behavioral economics and personal finance), you can employ strategies that just might get you out of Cutthroat Kitchen alive. 

Section 1: Bidding vs. Saving

So, like I said, each chef gets $25,000. However, the winning chef does not always (if ever) walk away with $25,000. That $25,000 prize is hard to come by, because it would mean surviving three rounds of sabotages being thrown at you without getting to sabotage anyone else. Because the idea of leaving with $25,000 (or a similarly high sum) is so enticing, many chefs are tempted to save their money and bid rarely, if ever, and only in small amounts. See, the mistake these chefs are making is accepting the $25,000 as theirs and seeing any time they spend the money as them "losing" their prize money. However, in reality, none of the chefs own that $25,000. People who get too wrapped up in not wanting to surrender the money that they now view as theirs to take home results in over-saving and elimination. What the chefs need to keep in mind is that if get eliminated, they walk away with $0, even if they had the whole $25,000 saved. That $25,000 they refused to spend is of absolutely no use to them if they don't actually get to take it with them. Logically, it is better to spend $24,000 and win, because while $1000 is a small prize compared to $25,000, it is a big prize compared to $0. 

Pictured here: all the things that can be bought with $0

So in the auctions, it's definitely better to spend, right? Well, in true economics fashion, the answer is yes, but also no. You see, there's basically no benefit to saving all of your money. However, you also can't blow all of your money right away. You have three rounds to get through, and if you spend too much too fast just trying to make it to the end with way less money than your opponent, you basically have two options: you can save the rest and allow your opponent to stick you with whatever sabotages are in the last round, or you can spend all of your remaining money to sabotage your opponent and walk away with only a victorious title and the pride of winning.

Pictured here: all the things that can be bought with the pride of winning.

To sum it up, when questioning whether to bid or save, it's generally better to bid because all that money you save does you no good at all if you get eliminated because you got stuck with a sabotage you could have bought your way out of, but don't get crazy! You want to save at least a little bit of that money, because whatever method you happen to come by walking away with $0, walking away with $0 sucks. 

Section 2: Sabotage Strategy

Now that we've established the basics of spending or saving when it comes to auctions, let's discuss a few of the more nuanced strategies of sabotaging other chefs. The first one I think is pretty obvious, but people fall still into the trap pretty often. 

Rule #1: Don't jump the price for no reason. Let's say the bidding starts at $500. You raise to $1000. Someone else raises to $1100. You raise to $1200. They raise to $1300. You raise to $7000 for no reason at all. Seriously, what are you doing? What are you trying to prove there, buddy? Assuming the other chef stops bidding and just lets you take it, your "victory" is winning an auction item for $7000 that you possibly could have gotten for $2000. Who cares if the other chef keeps raising just above your price? Keep going in small amounts until they're done. You don't know them. You don't know that there's something magical about the price of $7000 that they would have continued to bid until you got there and you just saved everyone a lot of time. No. All you did was jump the gun and spend more money than you needed to. That has to be like a golden rule of economics or something. Do not spend more money than you need to. People who do this are not being efficient with their limited resource of money - that money is not being optimally allocated. And now, guess what, there's another sabotage coming up and you just over allocated your cash to one thing and now you might not have the funds to feel like you can get over this one as well. Bid in $100 increments. Don't spend more money than you need to spend. Allocate your limited resources appropriately. 

This is the face of someone who is about to spend $7000 on those spoons.

Rule #2: Don't feel like you need to spread out your sabotages evenly. 

Seriously, what are you, like the Bernie Sanders of ruining someone's day? This isn't socialism, sweetie, this is Cutthroat Kitchen. Don't fall into the trap of thinking that it's best to just freely sabotage every chef who isn't you. In fact, because of the rules of this game, that's one the the worst strategies to have. Here's an example: the first sabotage of the first round is almost always the same. One out of the four chefs can buy the opportunity to confiscate some essential ingredient from the other three chefs and replace it with a less-pleasant substitute. People tend to like to spend more money on this sabotage because of behavioral economics: whoever buys this sabotage feels like they're getting more bang for their buck because they get to sabotage three chefs at once. However, this is actually a less valuable sabotage than a single-target sabotage for two different reasons. You see, on Cutthroat Kitchen, you don't need to have the best dish each round. There's no benefit to having the best dish. In fact, you don't even need to have a good dish. You just need to not have the worst dish. So if three other chefs are all sabotaged more or less equally, that can sort of even itself out. And now that you've sabotaged your three competitors, you've painted a big target on your back for them to all be gunning for you when Alton Brown brings out the next sabotage (which is a flawed strategy for the same reason. if they hit you with that sabotage, each chef will have a sabotage and each dish will have a flaw, which means the judge will have to be nit-picky and you might go home.) It's a much better plan of attack to hit one or two chefs with every sabotage you can, not even as collusion per say, just as everyone acting in their best interest to sabotage the people who are already getting sabotaged and stack up as many obstacles for them as possible. Much like a lot of things in economic competition, your product doesn't really have to be good. It just has to be slightly better than the competition and you're golden.

Cutthroat Kitchen is a really great show, but it's also a really great example of economics. Everything seems to involve economics these days, but with this show, basic economic principles we've talked about can really help with strategy. We can all rest assured that if I ever compete on CTK, my downfall won't be a lack of economics knowledge, it'll be from things like me not knowing what a Baked Alaska is or me arbitrarily not liking mushrooms or something. 

Keep an eye out for me, I might just be the next one in the shame cone.

Drowning In the Regret

PSA! This is the sequel to an adventure story of a lifetime, and it can only be read if you refer to this blogpost first!

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Part Two: Maybe a Sin....

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A brief recap: Japan makes bad life decisions and the US has to play fair.

We're all aware that the Fed has had their eyes on some nice hikes for this year, and I don't mean scenic mountain climbing in the Appalachians. Last December, the greatest person of all time, Janet Yellen, made the executive decision that the United States economy was strong enough to handle a slight raise in interest rates, after almost 10 years of levels at nearly 0 percent. The battle plan was to enact 4 different rate hikes throughout 2016 to raise interest rates to a nice healthy level. Welp, it turns out the enemy has a trump card: being economically helpless little failures.

You had ONE job Japan. ONE JOB.

In a competitive universe, economic failure in one country should translate to an advantage for the other side, that being America. Our US-centric world, much like the ideal competitive world, thrives on competition and strategy. However, there's one caveat: we are surprisingly not the independent go-getters many Americans believe ourselves to be. The presence of a united, world economy that is composed of equally dependent nations for imports and exports is what allows countries to survive and thrive. This idea is how the world makes economic decisions. Of course we aren't all completely altruistic nations, but we do often take into consideration how we can best improve our own lives without bringing damaging effect to our allies. This is why something as devastating as the drastic, economic measures used to prop up the Japanese economy is so important to the United States.

Recently, the Fed held a meeting to announce their decision to put on hold the expected rate hikes for this year. Cue my immediate shock. Now, let's first take note of the fact that I hadn't yet learned of Japan's financial crisis and was only basing the following opinions on Fed decisions.

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....Nearly a Tragedy

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For about the first time in my life, I actually doubted Janet Yellen...

Sound fx: gasp!

... Yea. I'm even ashamed of myself right as I type this all out, gosh how I could make such brash decisions. My reasoning at the time seemed clear, but I realize now the ignorance. I thought it was a bad decision on Janet Yellen's part to actually put the rate hikes on hold. In December, the simple announcement of raising interest rates had boosted American hopes that we have actually, finally recovered from our economic meltdown during the Great Recession of 2008. The responses in the stock market and some news outlets were albeit a little frantic, but that's only because some people immediately hit the brakes and had little crises when they hear the words, "interest rate hikes." Chill. But there was lots of optimism in the health of our economy when the Fed had laid out their plan to continuously raise interest rates throughout this next year, because that meant our economy had finally recovered and was fully capable to handle any increase in money required to satisfy the interest rate.

This was my mistake. There are many things that affect what the Fed decides, not just what happens on the domestic scale. Although the plan was for four rate hikes, there can be outside factors that change the Fed's decision. In this case, the outside factor was Japan. The US and Japan both have strong trade relations, so we depend greatly on Japanese imports as Japan depends on America's exports. For this reason, raising interests rates would not be in any nations' s best interest, because then the natural order following raised interest rates is a stronger American dollar. The dollar strengthens because foreign investments increase due to the benefit of higher interest rates. So, if the dollar for the US is stronger, then that means our foreign exchange is a lot greater. While this is all great, when one of our allies is struggling, it's not very considerate. So, it makes sense for the US to force their hand by putting off the rate hikes once again, because we do depend a lot on our trade with Japan, and those exports to the Japanese would be suffering greatly if the dollar exchange is so different.

Such friendship. Very ally. Many trade.

Sometimes being a strong country and doing what's right for our people is the best plan, but often times it's important to remember we aren't alone in this world. Sometimes what is right for our citizens means what is right for other nations's citizens. So, I'm sorry Janet Yellen, you were right again. I'm sorry I ever doubted you.

A GIF, Milton Friedman, and Trucker Bob?

Usually people like seeing GIFs. They can be hilarious but when I hear the word GIF I don't think about economics. But this GIF below show China's trading with the U.S. from 1985 to 2015.

This GIF shows that the value of the goods we import from China is much greater than what we export to China. The GIF also shows the United States' new trade deficit that has hit a new record of $365.7 billion dollars.

Now this doesn't mean we need to panic because this doesn't necessary mean that we are in trouble or as some candidates would say China is "beating" us. There are always two sides to every story, trade deficit is no different. Below are two arguments given to you readers, after you read them make you decision.

Side 1 - THIS IS TERRIBLE!
Dear U.S. Citizens,
Please do not be fooled by people telling you trade deficit is ok, it is NOT ok. Do you people have no shame, free market economies and Chicago economies are the only ones who see the tragedy that is trade deficit, except Donald Trump of course. Do you not remember what I thought all of you? Its simple, a good trade deficit is the best possible outcome we can have! More money for us!
- Milton Friedman

Side 2 - It's not so bad.
Dear whoever reads the blog,
I know it sounds like it's a bad thing that we have a high trade deficit but like for me it helps. It's been hard to find work and when there is trade deficit, employment is actually a lot better. And like I don't know if you noticed but when we start to import lots of stuff from China our U.S. businesses start to get really competitive and make a lot nicer things. Which is always good for me because it means they usually need an extra hand to do some work. So I like high trade deficit because it increases the number of jobs available.
- Trucker Bob

so what do you think? Is trade deficit good or bad?

The Complications of Altering the Minimum Wage

Over the last several months in particular, there has been a national debate about increasing the minimum wage and the effects that this alteration can have on the national and global economy. This has especially been a focus of the 2016 Presidential Election. The easiest proposal that has been considered is raising wages, and therefore improving the costs of living. Take the Sanders campaign for example (yes I know lawl Bernie is mah fave).  The nation wide idea of $15 minimum wage has been a center piece of that campaign in particular. His emphasis on the need for fixing income inequality has led him to be incredibly successful in many working class states.

Cute cute cute.

But the real question is--does it really work? & how do we go about doing it?

In the last 10 months or so, and even in the last several weeks, a few states have announced that they will be raising minimum wages gradually to $15. Oregon, New York, and California are the first to announce these huge increases. While these will be done gradually, there are many concerns that are being raised along with the wages. See what I did there? 

Probably you rn.

That's the interesting thing. We don't know what's going to happen in this case. Because this kind of jump in wages (even though it's gradual) hasn't necessarily happened in our nation's economic history. While I would encourage all of us to be wary of these changes, but I would also add that it is equally as important to avoid passing such immediate judgement. It's a necessity to have a living wage to keep one's head above water and many people live below the poverty line in this country and this is sometimes out of their control. So despite the fact that I have no way of knowing how this will truly affect our economy, I think it's crucial to keep an open mind and an eye on these three states till the concrete increase in 2019. There may be many more states to come.

The Government Actually Gets Something Right

Most people who know me know that I'm not always the biggest fan of the government. I mean, nothing gets me down like The Man. But according to this article, there is at least one thing that the government and I agree on: hoverboards are pretty much the worst. 

A necessary evil

An unnecessary evil

See, I find hoverboards to be pretty annoying. First of all, they don't actually hover. I see those wheels touching the ground. They aren't fooling anyone. When you can get me a full-on Jetsons, fly-around, 1970s-vision-of-what-2003-looks-like type of hoverboard, I am totally game. But these monstrous little creations can just wheel themselves right back into whatever Pit of Evil they came out of.

Acceptable hoverboard that is NOT made of lies

In addition to not actually hovering, hoverboards are annoying, not as fun as they claim to be, and are really dangerously unsafe. There have been countless reports of them malfunctioning and catching on fire, along with the obvious elements of the ease with which a user could face-plant into the concrete. Now, like many of the things Americans just can't get enough of, hoverboards are manufactured in China and imported into the United States. However, ability to import this product is soon to change. The International Trade Comission has moved to stop the import of hoverboards so they are no longer a viable, legal thing for China to export to America. Along with hoverboards being declared unsafe by another American agency, the U.S Consumer Product Safety Commission, there have also been some legal issues concerning the technology used in hoverboards, which the American company Segway claims to have a patent on. Personally, I think people fighting over who gets to claim they created the hoverboard is like all the different European countries fighting over who really caused the conflict in World War I. Yes, eventually someone gets to claim "credit," but is it really a victory? Who's to say.

Anyway, international trade is an important facet of the American economy. Americans like stuff, and  we like stuff cheap, and a majority of that cheap stuff we like comes from foreign countries. However, international trade can't always be free trade. International trade is important to our economy -- it keeps money flowing not only within the U.S but between the U.S and other countries that creates circular flow on a grander scale -- and its importance is exactly why it needs to be regulated. Governing bodies, like the ITC, sometimes have to intervene in import and export policies to make sure that Americans aren't purchasing goods that are too problematic. Because international trade is, well, international, it involves a lot of different countries with different policies regarding what is safe and viable as a consumer good. Some goods that are deemed sellable in other countries do not meet the safety standards or legal practices in the U.S, which means that importation of these items needs to be stopped, at least until there is further investigation. And I don't think we need to do too much investigating to decide that hoverboards don't really need to be a player in international trade. 

Same, news update thingy. Same.