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Video cassettes are being replaced by DVDs and streaming services and are becoming an outdated technology.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
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
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
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
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
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
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
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
Alex has landed a dream internship but it’s really high stakes and stressful. Meanwhile, Phil has a tough choice to make in a board game. Every time we choose to do something, we are also choosing NOT to do something else. Does Alex really want the internship? What is its opportunity cost? Also, what should Phil do?
See more: choices, human capital, opportunity cost, preferences, risk aversion, scarcity, tradeoffs