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
Video cassettes are being replaced by DVDs and streaming services and are becoming an outdated technology.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
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
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
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
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
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
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
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
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
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
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
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
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
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
Claire surprises Phil by purchasing the magic shop of his dreams. The previous owner sold it for very cheap, but then Claire starts to wonder if the magician had information she was unaware of. Despite the concern, this is a unique opportunity for Phil to become an entrepreneur.
See more: asymmetric information, competition, entrepreneurism, free entry
Claire and Phil go to a magic shop and talk business with the legendary Mister Ekshun. The magician laments that he can’t be at the shop everyday because he’s booking “road jobs” which we should infer have a higher payoff than the shop’s profits. Phil is curious about how a magic trick works, but they need to make sure Claire (a non-magic person) isn’t able to hear the trick. Phil learns that he had an opportunity to become a magician on a cruise ship earlier in life, but Claire had never told him about the call because of how busy their lives had been.
See more: counterfactual, licensing, occupational licenses, opportunity cost, physical capital, proprietary technological knowledge, scarcity, substitution effect, technological knowledge
Phil is trying to sell the house next door to a couple. In order to make the house as desirable as possible, he wants to put his family’s best foot forward. He wants the buyers to want to live beside his family. So, he has the kids outside gardening. This demonstrates adverse selection, signaling and the importance of spillover effects/positive externalities. Good, helpful neighbors are desirable and can increase a property’s value, especially if they take good care of their yard. Thus, there are positive externalities associated with landscaping. To discuss signaling and adverse selection, consider that someone is less likely to move if the neighbors are good than if they are bad. So, it’s entirely reasonable to consider the housing market as being characterized by adverse selection. Phil is doing all he can to signal that he and his family are good neighbors in order to get the couple to by the house and to pay a high price for it. But are they good neighbors? (At the end of this clip, you’ll see the other possible new neighbors. Which new family would each of the Dunphys prefer to live beside? Why?)
See more: adverse selection, externalities, housing markets, negative externalities, positive externalities, preferences, private benefits, private costs, self interest, signaling, social benefits, social costs, spillover benefits, tradeoffs
Alex is graduating from high school soon so Phil, Claire and the kids are visiting Cal Tech. Claire thinks Cal Tech is the perfect place for Alex but she’ll find out soon that she and Alex have different preferences. College is one of the ways that we build human capital. As we learn more things, we become more productive and our labor is more valuable. Alex is already really bright and loves academics so college is a good fit to set her up for doing impressive things in the future.
Claire wants a great school that’s close. Alex wants a great school that’s far away. We also learn that Cal Tech has 5 Nobel Laureates on staff, suggesting that Cal Tech itself has a lot of human capital, making it a highly productive college.
Alex learns why Cal Tech might be a better choice for her than an East Coast school. What is more important: the quality of the program or proximity to home? Choices are tough and everything has a cost. Here’s Alex’s current dilemma: stay close to home and attend the best program in the country OR go to a college on the east coast with a weaker program.
See more: cost benefit analysis, human capital, opportunity cost, preferences, school choice, signaling, skill building, tradeoffs, utility
Claire is feeling under the weather but has too much to do. Phil offers to help her out with her errands and pick up some slack until she feels better. One of the gains of partnerships is that if one person goes down, the other can pick up the slack.
See more: gains from trade, gains to marriage, risk pooling, risk sharing, utility
Cam and Mitch are trying to get Lily into the best preschool they can, and preschool admissions are normally very competitive, but they think that being gay and having a minority child will give them a leg up in the admissions process. The market for daycare appears to be a monopolistically competitive environment in which firms differentiate their offerings to appeal to different parents.
See more: allocation, competition, demand, inefficiency, monopolistic competition, prices, product differentiation, rationing, signaling
Claire is going to meet an old friend from work, but her kids are surprised to find out that she once had a job. She describes why she chose to leave the workforce.
See more: comparative advantage, division of labor, labor force, labor force participation, labor supply, preferences, specialization, tradeoffs
When Phil had a health scare, Claire gets dressed up for the hot firemen who are coming for him. She admits this to Phil before his procedure and her reminds her of it upon waking. After Claire apologizes, Phil says he will be fine with time even though he is fine with it now. Phil believes Claires guilt will grow over time giving him more bargaining power in the future.
See more: bargaining power, markets, prices, reciprocity, trade, value
The Dunphy’s call Phil’s parents in the sweaters they were given as gifts. The call goes awry when Claire sees what looks like a cigarette burn in the sofa. In her anger she calls the sweaters ugly while still on the phone with Phil’s dad.
Phil surprises Claire with a new bracelet for their anniversary and Claire reciprocates with coupons for 5 free hugs, which Phil points out are usually free already. Claire is proud of her gift because Phil never wants anything, but Phil can list off many things he would like. Gift giving can be inefficient if it’s the two givers aren’t fully aware of the others’ preferences.
See more: coupons, exchange, gift giving, inefficiency, irrationality, medium of exchange, preferences, store of value, unit of account, wants
Phil thinks both he and Claire get up at 7am to start taking care of the kids, but Claire informs him that she actually starts her day as a stay at home mom at 6am. Because Claire has a comparative advantage in getting the kids ready for school in the morning, Phil gets an extra hour of sleep.
See more: comparative advantage, division of labor, specialization
Alex chooses the cello to play in the orchestra because she thinks cellos are in demand in university orchestras. Claire and Phil had recommended she play the violin so that she wouldn’t have to carry around so much, but Alex thinks she’s made the right choice.
See more: choices, demand, expectations, supply, tradeoffs
After bumping Lily’s head on the doorframe, Mitchel calls his sister for reassurance. Claire lets Mitchell know it’s fine because her youngest son was hit on the head a lot and he’s fine, but that correlation ends up worrying Mitchell more.
See more: causation, correlation, health care
Claire is trying to get the kids downstairs for breakfast and is shouting across the house. Hailey doesn’t understand why Claire won’t just text them, but Claire refuses. Improvements in technology should make everyday life more efficient, but Claire wants to stick with tradition.
See more: efficiency, technological change
Claire has a creative (and often illegal…) way to dispose of Phil’s possessions that she does not like.
See more: subjective value, tastes and preferences
Claire tried to make friends with the owner of Closets, Closets, Closets, Closets (CCCC) but Jay convinced her that the friendship was just a ruse to steal information about the business. In retaliation, Claire and Jay decide to “poach” CCCC’s most valuable employee, Lazlo. While trying to recruit him to their closet business, they learn that the friendship was genuine. But now, they really can’t trust each other and both businesses will be hurt.
See more: competition, cooperation, duopoly, game theory, labor, oligopoly, preferences, Prisoner’s dilemma, tit-for-tat strategy
Homes and yards that are improperly maintained decrease the property value of neighbors. This is a negative externality. To prevent this from happening, many modern neighborhoods have an HOA. The HOA decides what changes homeowners are allowed to make to their property and act as a non-market solution to externalities. They only allow changes that either do not impact the property value of other homes (no externalities) or that increase the property value of other homes (a positive externality). In this clip, Claire attends her HOA’s meeting. She submitted a proposal to build a “she shed” in her backyard that was denied. She believes this was not appropriate because the shed won’t be visible from the street and will not impact neighbor property values. What she doesn’t know is that her son, Luke, intercepted the request and responded with a fake denial so the HOA doesn’t understand why she is so belligerent. Phil shows up to warn her but is a little late….
See more: Coase theorem, collective action, government regulation, negative externalities, non-market solutions, permits, regulation, role of government
Jay and Claire discover that Alex and Luke have started a business selling used shoes online. Jay praises Luke for taking the initiative to build a business from nothing. Claire praises Alex for making the business successful. An argument ensues that makes it clear that this is personal for Jay and Claire. Jay built a closet business but retired a few years ago and let Claire take over. Under Claire’s leadership, the company becomes even more successful and receives international acclaim. They fight over who deserves credit for the success and honors that the business currently has. The reality is that both are responsible. They both demonstrate entrepreneurialism and each played a different and equally important role in building the business. Entrepreneurs start and grow businesses. But can they admit this to each other?
See more: entrepreneurism, human capital, labor, management
Economics often suggests that competition improves efficiency. Jay seems to agree. He fosters competition within his family to help them achieve their goals. But are they really achieving those goals? Later in the episode, we find out that there were some unintended consequences of his actions.
See more: competition, extrinsic rewards, incentives, intrinsic rewards, labor, motivation, perverse incentives, unintended consequences
Phil goes into the wild to live like Robinson Crusoe. In doing so, he provides a fantastic example of the factors of productivity. Productivity (Phil’s ability to survive in the wild) is determined by his human capital, technological knowledge, physical capital and natural resources. He has natural resources in abundance – fish, sticks, blueberries, honey and fresh water. He has some good technological knowledge because he knows how to build a fire. It’s not clear that he has the experience (human capital) to successfully build the fire. But, having lost his physical capital (fancy camping gear), it’s not clear whether or not he will be able to survive.
See more: factors of production, human capital, natural resources, physical capital, Robinson Crusoe, technological knowledge
Economics often suggests that competition improves efficiency. Jay seems to agree. He fosters competition within his family to help them achieve their goals. But are they really achieving those goals? The truth comes out in this clip. It turns out that they’re a family of cheaters and not a family of winners.
See more: cheating, competition, ethics, incentives, moral hazard, motivation, self interest, unintended consequences
Phil and Claire get a special coin made to determine decisions they disagree on. As a final decision, they flip to decide how to spend their retirement account. Unfortunately for the kids, the coin decides that they spend it on a beach condo.
See more: cost benefit analysis, decision making, either-or-decisions
On their way to Phil’s father’s wedding, Phil asks his family to dress like 1920 gangsters, but it seems like they are the only guests their in costume. Phil is notorious for embarrassing his family and each member relates a time Phil did something that made him happy, but imposed social costs on others.
See more: externalities, negative externalities, private benefits, private costs, social costs
The Dunphys are having their house fumigated so they have to squeeze into a small hotel room. The neighboring dogs are barking all night and a train runs through around night time. Luke tries to set off a cologne bomb and ends up stinking up the whole room.
See more: externalities, negative externalities, private benefits, private costs, social costs
Mitch gets sick on his honeymoon, but spreads it to everyone else in the family. Each member goes through the pain they endured because Mitch didn’t quarantine himself. Only later in the episode do they find out that Mitch isn’t patient zero.
See more: externalities, gift giving, health care, negative externalities, private benefits, social costs, substitutes
The Dunphys are having a great summer while Alex is away building houses for the less fortunate, but as soon as she returns everything takes a turn for the worse. Everything seems to think Alex is the cause of the tension and as soon as she leaves then things start to look better. While these actions may be correlated with Alex’s presence in the house, she certainly can’t be the cause of the tension, could she?
See more: causation, correlation