Phil walks in on an Intro to Real Estate course, which is starting the semester off with microeconomic analysis of real estate. Phil isn’t as impressed with the teacher’s style and focusing too much on the boring numbers and not enough on the exciting emotional connections of real estate. Similar to teaching economics as a whole, some instructors get wrapped up in the numbers of the graphs and lose site of the emotional connections of the theory.
The teacher takes this opportunity to give away his class and Phil becomes the newest instructor at the community college.
See more: college, education, human capital, human capital investments, skills, student motivation
Claire and Cam want to flip a house, but Phil and Mitch are against it. Phil pretends he is for it leaving Mitch to put his foot down, but eventually Mitch decides to play the good cop as well and leave Phil to put the brakes on the house.
See more:game theory, incentives, interdependent utility functions, prisoner’s dilemma, sequential moves
Claire is feeling a like she is not contributing to the family because she doesn’t have a job. She has applied to 5 jobs recently, but despite her college degree is rejected from all of them. Because she has been out of the labor force for so many years, he human capital has depreciated.
See more: college, education, human capital, human capital investments, human capital depreciation, job search, labor force, labor force participation, labor market, skills, unemployment
Jay is shocked that Manny won’t eat pickles, so he won’t let him leave the table until he tried one. Gloria thinks Jay is being a hypocrite and forces him to try blood sausage. Then Jay decides Gloria need to try something new too: scratching the dog, Stella’s, belly. While they all seem to hate what they try at the time, we see Gloria petting Stella’s belly voluntarily and Manny surreptitiously eating a pickle at the end of the episode. This highlights the need for full information in order to know your true preferences.
See more: behavioral, full information, preferences, tastes and preferences, utility
Cam’s dad, Merle, is fighting with Cam’s mom and they are considering a divorce. After seeing Jay with Gloria, Merle thinks he might be able to do better, but Gloria paints a bleak picture of his future. Does Merle really have better options waiting out there or would he maximize his expected utility by staying with his current wife?
See more: cost benefit analysis, expectations, opportunity cost, tradeoffs, utility
The family is visiting Australia and has a hike planned for the day. On their way to the van, Cam and Mitch get a text from an old friend inviting them to join him on Hugh Jackman’s yacht that day. Now Cam and Mitch have to decide between time with their families or time with famous people.
See more: cost benefit analysis, opportunity cost, tradeoffs
Video cassettes are being replaced by DVDs and streaming services and are becoming an outdated technology. Before getting rid of their VCR, Claire and Phil are going through their VHS collection and watching the movies one last time.
See more: create destruction, opportunity cost, tastes and preferences, technological change, technology, tradeoffs
Manny puts up a fiber optic Christmas Tree, because it is better for the environment, but Jay thinks it is ugly and does not want it in his house. This clip highlights both positive externalities of the fiber optic tree (environmental benefits) and negative externalities of the tree (Jay’s psychic costs). Jay and Manny have been trying to cut down their own Christmas tree for hours, but it is not budging and keeps ruining their tools. Jay has finally had enough and says Pritchetts know when to give up. All their previous effort is a sunk cost, and it would take too much effort relative to the reward of a half burned tree to keep going.
See more: behavioral, negative externalities, positive externalities, private benefits, private costs, social benefits, sunk cost, technological change
Alex in babysitting her cousin Lily. Lily wants to play dolls, but Alex suggests reading an empowering story. Lily insists on playing dolls, and the first doll she shows Alex is a wife who does not have a career, but shops.
See more: gender roles, nature vs. nurture, pre-market discrimination, societal discrimination, specialization
Gloria and Jay have been having some issues with baby Joe’s behavior, so Gloria consults a priest. Gloria thinks the med in her family have been kissed by the devil, but the priest insists it is the families that shape who children become. This is a great clip to introduce the nature versus nurture debate.
See more: causation, correlation, nature vs. nurture
While Alex is freaking out about her junior year grades, Haley doesn’t need to study because her community college asks her to bring glue sticks. Education may serve as a signal of ability instead of actual skill building, which would be shown by the requirements or competitiveness in the application process.
See more: college, education, human capital, human capital investments, signaling, signals, skill building
It is the first day back to school for the kids, but also Claire’s first day at her new job working for her father, Jay. Claire’s husband Phil tries to be supportive, but refers to the last 20 years that Claire has spent as a stay at home mom as a vacation.
See more: employment, household labor supply, household production, labor force participation, specialization, tradeoffs, unemployment
This scene takes place immediately following the Supreme Court decision that legalized gay marriage. If we think about the gay marriage market, a law that prevents gay marriage is essentially like a quota of 0, which leads to huge amounts of deadweight loss. As soon as the quota is removed/the law is changed, the lines at the courthouse are long as all of those previously prevented from marrying rush to get married.
See more: demand, efficiency, inefficiency, markets, quotas, role of government, supply, transaction barriers
Lily lost her first tooth and got $100 from the Tooth Fairy. Cam and Mitch are trying to convince her that the Tooth Fairy made a mistake and she should give the money back, but Lily wants to keep the money until Hayley tells her this would almost certainly put her on Santa’s naughty list. Now Lily has to decide what she values more: $100 or Christmas presents.
See more: opportunity cost, rationality, tradeoffs
It is career day at Luke’s school, and the teacher asks Claire to speak about her job as a stay at home mom. She points out that she actually has a lot of different jobs, and while she would like to go back to work, it is hard to find a job after you have been out of the labor force for 15 years.
See more: household labor supply, household production, human capital depreciation, job search, labor force, labor force participation, labor market, skills, tradeoffs, unemployment
The Tooth Fairy leaves Lily $100 for her first tooth. Mitch says the going rate must be $5 tops and that theTooth Fairy must have made a mistake.
See More: demand, equilibrium, expectations, market price, prices, supply
Phil has programmed everything in the house to be controlled by his iPad. He can now turn on lights, the TV, and the fireplace from his device. He notes that it is like being in the future.
See more: economic growth, productivity, standard of living, technological change, technology
Cam and Mitch have decided to get Jay and Gloria a special gift off registry for their new baby’s nursery. Mitch seems concerned that they will not appreciate it.
See more: altruism, gift giving, imperfect information, irrationality, rationality
Cam has started making is own soy based bacon alternative called facon. He insists that it is indistinguishable from real bacon, but Mitch and Alex are able to tell a difference.
See more: entrepreneurism, imperfect competition, markets, product differentiation, tastes and preferences
Phil wants to ride his street strider, but his whole family thinks it is very uncool. Luke points out that he has friends on the street that might see, and Claire not so subtly threatens to leave him if he rides it suggesting she is not getting any joy from him enjoying his street strider and in fact it is harming their relationship.
See more: externalities, negative externalities, private benefits, social costs
Luke and Manny’s class is having a yard sale to benefit UNICEF, but Jay hates when people haggle. Someone goes into Jay’s house and tries to buy his toaster, but isn’t willing to commit because it’s a used toaster and he’s unsure of its quality.
See more: asymmetric information, insurance, market for lemons, used goods, willingness to buy, willingness to sell
Luke and Manny’s class is having a yard sale to benefit UNICEF. When Mitchel doesn’t want to donate Cam’s pants, Luke tries to re-frame the charity attempt to guilt his uncle into donating more money. Framing is one tactic to get people to do something they may not have done under the original design.
See more: altruism, behavioral, charity, framing, incentives, inequality, poverty
Claire believes Alex’s boyfriend is gay, but Alex doesn’t think that’s the case. She believes that since he invited her to prom and then they kissed, that it must mean he can’t be gay. Signaling is when one party has more information about a transaction than another, but displays some traits or “signals” to convince the other party of the true outcome.
See more: behavioral, signaling, signals
Luke and Manny’s class is having a yard sale to benefit UNICEF, but Jay hates when people haggle. Even though the ash tray is marked at 50 cents, he is unwilling to accept a lower payment from a man who clearly can afford the full ticket price.
See more: consumer surplus, exchange, prices, producer surplus, reservation price, transactions, willingness to buy, willingness to sell
Luke and Manny’s class is having a yard sale to benefit UNICEF. Manny thinks the point is for them to learn about global altruism, while Luke thinks to point is to beat the other class.
See more: altruism, charity, donations, incentives
Claire is proud of how she almost scared a man to death last Halloween, but Phil points out that it was overkill and she could have been scarier with less makeup.
See more: decreasing returns, diminishing marginal returns, government regulation, marginal utility, negative externalities, negative returns, role of government, utility
Manny is playing the stock market game at school and gets so involve that he doesn’t enjoy the family’s trip to Disneyland because he is worried about the market volatility.
See more: income, income inequality, inequality, money, personal finance, stock market, volatility, wealth
Phil and Luke are trying to go on as many rides as they can at Disneyland, but after a while Phil can’t take it anymore. It’s clear that Phil’s utility is diminishing at a much higher rate than Luke’s.
See more: decreasing returns, diminishing marginal returns, marginal utility, negative returns, utility, utility maximization
As part of his new job as partner in his own real estate firm, Phil has decided to put on a seminar for new homebuyers, but as he is discussing it, he realizes people could just write it all down and then they wouldn’t need his firm anymore. He did not think about how to protect his intellectual property.
See more: barriers to entry, industrial organization, intellectual property, patents, property rights
Since Lilly is now in school and Cam and Mitchell are not adopting another baby, Mitchell thinks it is time for Cam to get a job. Their friend Longeness offers him a job at his boutique to help Mitchell out. Cam accepts because it does seem like a great match for his tastes and skill set, but Jeoux let’s the cat out of the bag that it wasn’t a sincere offer, and Cam is very offended that Mitch thinks he is too lazy to get a job.
See more: household production, human capital, labor force, labor-leisure tradeoff, marginally attached, nonpecuniary benefits, search, tastes and preferences, tradeoffs, unemployment
Mitch and Cam have promised Lily that they can adopt a cat and name it Larry. Unfortunately, when they go try to adopt a cat they realize that there are a lot of non-monetary costs involved in the cat adoption process. Cam points out that they would not have a surplus of cats if they made the process easier (or essentially lowered the price).
See more: allocation, costs, demand, excess quantity, prices, quantity demanded, surplus, transaction costs, wasted resources
Phil went on a gameshow in his early 20s and won a lifetime supply of dual blade razors, which was cutting edge razor technology at the time, though now it is not uncommon to find razors with 3, 4, or 5 blades. Phil is very disappointed to see that his “lifetime supply” has run out.
See more: behavioral, endowment effect, growth, technological change
Kenneth, an old neighbor who idolized Phil, comes back to visit. He tells the Dunphy family that he dropped out of college and bounced around at small jobs until he started an investment company. Haley who is currently evaluating her college options realizes that if he had gone to college, he would have become successful 4 years later. Kenneth’s opportunity cost of college would have been very high making his decision to drop out a good one.
See more: acquisitions, college, education, entrepreneurism, human capital, human capital investments, mergers, opportunity cost, tradeoffs
When a classmate’s house burns down, the Pritchett family bands together to find things to donate to their cause. Manny and Luke are put in charge of a remote controlled helicopter that Manny has been coveting. Luke convinces Manny to fly it and they promptly lose the helicopter. Manny is scared of what Gloria will do when she finds out and threatens to walk to Canada if they do not find it. Luke replies that he hopes Manny likes taxes. Canada does tend to have higher tax rates than the United States, but there are also differences in the services provided by the two governments.
See more: budget balance, comparative systems, inequality, macro, role of government, taxation
Phil has to decide whether to leave his own firm and start his own with two old co-workers, but he only has a limited amount of time to decide. He remembers that he is not good under pressure by recalling a time that he bought an alpaca because it was the last one and he panicked.
See more: choices, cost benefit analysis, irrationality, rationality, tradeoffs
Phil finds gift certificates to a spa that he and Claire had won in a charity auction in a drawer, but they expire today. He wants Claire to use them because otherwise their money just goes to charity, but Claire doesn’t know how she will. Phil is falling victim to the sunk cost fallacy, while Claire is thinking in terms of the additional costs and benefits of using the certificates.
See more: irrationality, opportunity cost, rationality, sunk cost, tradeoffs
When adopting Lilly, Mitchell only gave her his own last name and not both his and Cameron’s because he was scared Cameron would leave. As an apology he writes a story about two monkeys adopting a panda. He and Cameron think they have found a niche market with stories for gay parents, but they realize the market is already pretty saturated after a trip to the bookstore.
See more: advertising, demand, entrepreneurism, market power, monopolistic competition, product differentiation, tastes and preferences
Claire and Jay are visiting a competitor’s business. The competitor wants to buy Pritchett Closets, but Claire and Jay have a different idea. The new company is focused on creating smart closets that can pick outfits for the person based on the weather and their current size. They have great technology, but they don’t have the manufacturing capabilities to fulfill all their orders. Pritchett Closets, on the other hand, has the manufacturing space, but they haven’t invested much in technology. Claire proposes that they merge instead.
See more: acquisitions, industrial organization, mergers, proprietary technological knowledge, technological change, technological knowledge, technology
It is Phil’s birthday and also the day the iPad is being released. Phil is willing to spend his birthday waiting in line to be sure he gets the new iPad, but Claire offers to do it for his birthday but instead of getting there early she falls asleep on the couch. When she finally gets to the store, they are all out, and Phil ends up wishing he had handled it himself.
See more: costs, demand, early adopters, gift giving, innovation, nonpecuniary benefits, preferences, tastes and preferences, technological change, technology
Pam’s ex-boyfriend is back in town and wants to get back together. Mitchel is all in favor of the reconciliation, but Cam is against it. Why is Mitchell so eager for her to move out? As long as Cam’s sister is in the apartment upstairs, they aren’t able to rent the apartment out and earn extra money. While Cam is trying to be generous for his family, Mitchell sees the missing dollar signs.
See more: altruism, cost of capital, implicit cost, opportunity cost, personal finance, rental income, tradeoffs
Haley is at a staff meeting. She’s worried that she hasn’t had enough good ideas lately. Her fear is that this will lead her boss to believe that she isn’t working hard on behalf of the company. Haley signals that she’s a good worker by suggesting that Gloria sell a family recipe to the company (NERP). Gloria has long held the recipe secret. The recipe is an example of private technological knowledge. The recipe is valuable to Gloria because of the family tradition. The recipe is valuable to NERP because it could give them an edge in the lifestyle industry. Will Gloria sell? (Note: Jay also makes a fantastic joke about the value of a bachelor’s degree that can be used for discussion on human capital)
See more: entrepreneurism, human capital, human capital investments, moral hazard, signaling, signals, technological knowledge
Alex is practicing her college interview for Princeton in the mirror when Haley comes in to style her hair. Princeton is an Ivy League school that is very prestigious and gets a lot of applications. Princeton does not know which applicants it should let in so it screens them. Screening is an action taken by an uninformed party in a situation characterized by adverse selection. There are many things that colleges do to screen applicants. They require high school transcripts, a certain GPA, test scores and they conduct an interview. When someone is interviewed, it’s an opportunity for them to send a signal. A signal is an action taken by an informed party in a situation characterized by adverse selection. Alex wants to signal to Princeton that she’s a good candidate for admission into the university. Haley shares her thoughts about the message that Alex is actually sending.
See more: adverse selection, asymmetric information, college, human capital, human capital investments, imperfect information, interviewing, signaling, signals
The Dunphy’s neighbor has a new boat that they leave in the driveway. Many of the family members are impacted by the visibility of the boat. This represents spillover effects and mean that an externality is present in the market for boats. Some family members see the boat as having a positive externality. Others see the boat as having a negative externality. As there is a relatively low number of people impacted by the boat (the Dunphy’s and other nearby neighbors), Coase theorem suggests that an efficient outcome can be negotiated. But will the Dunphy’s be able to get to it? Claire is immediately interested in finding regulations that restrict how residents can store large property like a boat. Many communities, especially home owner associations (HOAs), have rules pertaining to this situation. These rules are designed to lower the transaction costs associated with these externalities by providing a standardized process for dealing with conflicts between neighbors that settles disputes, thereby increasing the likelihood that an efficient outcome is attained. However, often these processes can end up creating problems themselves. What happens, for example, if the neighbors get together and decide that it’s OK to store the boat in a visible place? If they do and the enforcement agency requires a change, it can make things worse.
See more: Coase theorem, externalities, negative externalities, positive externalities, private benefits, private costs, property rights, regulation, social benefits, social costs, spillover effects, transaction costs
Phil has plans to give Haley the perfect git for her 21st birthday – a new car. He has spent months doing research and planning without actually going in to a dealership. His work has been online and he landed an incredible deal. But Jay is convinced that he can do better. In this scene, Phil is sad because Jay made his deal fall through but Jay has a surprise. Jay did some hard core negotiating and beat that unbeatable deal…. or did he? Buying a car is different from many other markets. The price on the sticker is rarely what people pay. Instead, both buyer and seller go in to the transaction with the understanding that they will negotiate the price and features of the car.
See more: bargaining power, economic signals, gift giving, imperfect competition, negotiations, prices
It’s Haley’s 21st birthday. She and Claire have decided to get coordinating tattoos. Claire got hers first and now Haley is having a change of heart. In this scene, we see time inconsistency and imperfect information. Haley is concerned that her preferences will change over time so she decides against getting the tattoo. Meanwhile, Claire already regrets her tattoo because Haley won’t be getting one – but it’s too late for Claire. Tattoos do not have a return policy! If Claire had known that Haley would change her mind, she would not have gotten a tattoo (imperfect information). This clip can also be used to compare and contrast two types of games in game theory – sequential games and simultaneous games. If you decide to get a tattoo with a friend but only because you’re doing it with a friend, make sure you get them simultaneously!
See more: behavioral, game theory, imperfect competition, intrinsic rewards, preferences, sequential moves, tastes and preferences, time inconsistency
Cam convinced Mitchel that he needs to be kinder so Mitch invites a messy colleague who is going through a breakup to spend the night at their place. Unfortunately, she takes him up on it. Determined to keep their beautiful, brand new, designer white sofa (their one nice thing) in mint condition, they give up their bed for her and sleep on the floor. In this clip, they wake up and discover that she has moved onto the couch. This couch is more expensive than one from Rooms to Go and so it counts more towards GDP. Owning an expensive couch is an indication of Mitch and Cam’s high standard of living. Yet, does a high standard of living mean a higher quality of life? Robert Kennedy didn’t think so:
[GDP] counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman’s rifle and Speck’s knife, and the television programs which glorify violence in order to sell toys to our children. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are Americans.
–RFK, Speech at University of Kansas, March 18, 1968.
Another perspective on this clip: resources are scarce. At it’s heart, economics is about how we choose to use those resources. Purchasing this couch moved Mitch and Cam on to a higher indifference curve than before they purchased it so their utility is higher than it used to be. But could they have been on an even higher one if they chose to buy a cheap couch and spend their money on something else? Traditional economics says that Mitch and Cam are rational and made the best decision. Is it possible that they could have made a mistake? What if they incorrectly estimated the cost of maintaining the couch. Could this also demonstrate time inconsistency?
See more: altruism, GDP, gross domestic product, luxury goods, opportunity cost, quality of life, risk, risk aversion, standard of living, tradeoffs
It’s Thanksgiving. For the first time, Claire is leaving the cooking to Phil…. or is she? She’s not. She made a fallback turkey, just in case Phil’s doesn’t work out. This demonstrates fallback position. Economists who study the family suggest that a person will stay in a relationship as long as the in-relationship utility is higher than the fallback position. While Claire isn’t considering leaving Phil for her fallback turkey, this clip can be used to discuss fallback positions. Claire has entered into a contract with Phil in allowing him to cook the family turkey. She will remain in that contract only as long as the benefit of eating Phil’s turkey is greater than the utility of eating her own turkey.
See more: fallback position, interdependent utility functions, marriage, risk, risk aversion, trust
Cam and Mitchell own a duplex. They usually rent the upstairs unit but Cam’s sister, Pam, needed a place to stay when she was pregnant so he offered it to her (rent free). This has put a bit of a strain on their relationship because she’s stayed longer than planned and they need the money from the rental.
See more: cost of capital, implicit cost, opportunity cost, personal finance, rental income, tradeoffs
After receiving a nomination to a major closet expo, Jay receives a phone call who expects to be full of congratulatory remarks. He instead finds the dial tone from a fax machine that has misdialed the number the intended. Jay, who isn’t the most technologically savvy member of the family, wonders why anyone might still be using a fax machine.
See more: demand, growth, innovation, technological change
There’s a lot going on in this clip. The main focus is on Claire and Jay. Pritchett Closets (which Jay founded and Claire runs) has been selected to participate in the Expo Internationale du Closet! Both Claire and Jay are over the moon excited. But why? Participating in this event exposes them to an international market. They can expect a big increase in demand for their product. The second focus is on Manny. Manny has moved out but found that there are certain things about living at home that he really misses. This is something that a lot of people discover when they move out. These early lessons in personal finance can be tough!
See more: demand, expectations, international trade, personal finance, trade