A look at hidden economic concepts in the hit ABC hit comedy series Modern Family.
Manny’s girlfriend Sherry is staying with the Pritchett’s for a while and she and Manny have taken up improv in the hopes of becoming an improv actor one day. Jay isn’t amused and feels like Manny should focus on trying to get a different job.
See more: labor, nonpecuniary benefits, preferences, skills, talent
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
Manny puts up a fiberoptic 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 fiberoptic trees (environmental benefits) and negative externalities of the tree (Jay’s psychic costs). Jay decides instead that he and Manny should go out and cut down a tree for reasons of tradition.
Jay and Manny tried cutting 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 represent 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
Gloria and Jay have been having issues with Baby Joe’s behavior, so Gloria consults a priest. Gloria seems to think the men 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 and also to consider the role of omitted variable bias in determining the parents’ impact on children. Could there be some other factor that Gloria hasn’t considered?
See more: causation, correlation, nature vs. nurture, omitted variable bias
This scene takes place immediately following the Supreme Court decision that legalized gay marriage. In the marriage market, a law that prevents gay marriage is essentially a quota of 0 marriages, which leads to huge amounts of deadweight loss. At this extreme, the quantity demanded exceeds the quantity supplied, which can be seen in the second portion of the scene when the Jay and Manny arrive at the course house. There is a surprisingly deep conversation about the role of economics in same-sex marriage.
See more: demand, efficiency, inefficiency, markets, quotas, role of government, supply, transaction barriers
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
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. The teachers have used the incentive of a pizza party in order to encourage their classes to do their best in raising money. Jay is unhappy with this method and would prefer to write a check instead.
See more: altruism, charity, donations, incentives, self interest
The family is headed to Disneyland, but Manny is caught up in a simulated stock market game for school. It’s near the deadline and he wants to make sure he wins the competition, but volatility in the stock market has caused his portfolio to finish below expectations. Even though they’re playing with fake money, Manny dreams of the things he could afford if only he was rich, implying there’s a level of inequality among the haves and the have nots.
See more: income, income inequality, inequality, money, personal finance, stock market, volatility, wealth
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
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
Jay has a great new invention that he believes will revolutionize the closet industry. He believes he’s created a sock dispenser that will rotate his socks so that he isn’t always wearing the same socks over and over. In competitive industries, product differentiation like this can lead to short term profits – especially for early adopters.
Unfortunately, Manny brings his friend over he recognizes the potential that this new sock dispenser could provide her uncle Earn, who is also in the closet industry. Earl is a major competitor (and former partner) of Jay and he now realizes that his proprietary idea may be stolen if he doesn’t act fast.
See more: competition, entrepreneurism, innovation, market power, monopolistic competition, patents, product differentiation, proprietary technological knowledge, trade names
Jay got new glasses that make him look like an old man but they work really well. So well that he realizes that Gloria’s family members in Columbia are wearing his old clothes. Notice that Gloria says that they sometimes send the clothes back. In the US, people frequently donate clothing to people in less developed countries. Many economists argue that this is counterproductive and leads to a surplus of clothing in these countries. That surplus can hurt markets and cost jobs.
See more: charity, donations, efficiency, emerging markets, gift giving, growth, interdependent utility functions, preferences, utility
Manny lost Luke in a “sketchy” neighborhood. He and Phil enlist Gloria’s help to track him down. When they arrive in the neighborhood, they find that it has changed quite a bit since Gloria lived there. When searching for a girl, they have the option of visiting one of the four area cupcake stores, each specializing in a different area.
See more: gentrification, growth, imperfect competition, incentives, income inequality, market structures, monopolistic competition, preferences, product differentiation
Jay takes Joe out to the driving range and discovers that Joe is a natural. Joe’s natural skill is a form of human capital that gives him the potential to earn a large salary in the future. Human capital is often acquired through years of training, education and hard work. But sometimes, luck gives some people an edge over others. If Joe works hard and practices, he could follow the path of other young golfers with natural talent like Tiger Woods and Lexi Thompson. Jay wants to do all he can to make that happen.
See more: human capital, incentives, income inequality, labor, productivity, tournaments, wages, winner take all
Economists often suggests that competition improves efficiency in markets and Jay seems to agree. He fosters competition within his family to help them achieve their goals. In an earlier scene, we learn that Jay withholds praise to encourage his family, but this year they have all seemingly surpassed his expectations. 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. Jay’s decision to incentivize them with praise has some stark unintended consequences.
See more: cheating, competition, ethics, incentives, moral hazard, motivation, self interest, unintended consequences
Luke is baby-sitting for Gloria. She expects him to care for her son in a responsible way. When Luke posts a selfie on social media, Gloria worries that her son might be in danger. This represents the principal-agent problem. Luke is the agent and Gloria is the principal. Is he acting in her best interest? Of course not! He’s shirking. To cover up his shirking, Luke tells Gloria that he has a series of photographs of her son in dangerous situation but they’re all fake. Now, he needs a series of photoshopped pictures but doesn’t use photoshop. So, he decides to only give Manny something that he wants if he photoshops Gloria’s younger son in to dangerous situations. This represents trade through barter. Luke has a pass that Manny wants. Manny has a skill that Luke needs. They trade because they have a double coincidence of wants.
See more: barter, double coincidence of wants, exchange, labor, moral hazard, network externalities, principle agent problem, social media, trade
Manny is the first member of the family to graduate from high school despite the fact that he has an uncle who “just does orthopedic surgery.” Apparently you only need a degree to do heart and brain surgery.
See more: ability bias, education, human capital, human capital investments, signaling
Manny is about to receive an award for perfect attendance at graduation and his step dad shows up to help him celebrate that night. Before leaving, Manny and his father walk through a strong mist of cologne. Gloria notes that despite the terrible smell, she’s never seen him get a mosquito bite. The cologne imposes external benefits (no mosquito bites) also external costs (the awful smell) on the remaining members of the household.
See more: externalities, negative externalities, private benefits, social benefits, social costs
Gloria is sick and Cam tries to help around the house. Gloria’s family remedy for colds is a bit smelly and Cam accidentally uses Joe’s cape in the process. Gloria immediately recognizes this will be and issue and points out that Joe has a strict ranking set when it comes to that cape. Joe loves the cape so much more that he even places the cape above his own father. Part of utility theory requires transitivity, which is the ranking requirement of consumption.
See more: preferences, ranking, subjective value, transitivity, utility
Cam and Mitch went on vacation to celebrate their Honeymoon and brought back “gifts” to the family. Mitchell claims to have gotten sick because he wore socks on the beach, but his virus spread to the entire 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 wasn’t even patient zero.
See more: externalities, gift giving, health care, negative externalities, private benefits, social costs, substitutes
It’s time for Jay and Gloria to exchange gifts and Jay is anxious about his gift from his wife. He struggles finding the right gift because it always seems like a competition. If the two didn’t exchange gifts then the extra psychic costs wouldn’t exist. It turns out that Gloria actually really loves Jay’s gift, but Jay really wanted that watch.
See more: gift giving, inefficiency, irrationality, psychic costs, subjective value
One of the tougher topics to get across to students is why older Americans start to leave the labor force. One explanation for the leave is that they see a decrease in their human capital and that some of their previous training is no longer relevant. This clip does a good job bringing humor to a topic that often sounds derogatory.
See more: human capital depreciation, innovation, labor, life cycle considerations, technological change, technological knowledge
Economics of Modern Family 