The U.S. is a second-class blockbuster nation.

(All box office statistics from Box Office Mojo)

As more and more Hollywood studio tentpoles do more and more of their business overseas, the above statement becomes more and more true. America, while still a box-office titan, is becoming a second-class blockbuster nation. But not just to any one country – to the rest of the world as a whole. Look at some recent examples:

Pacific Rim  – Worldwide Gross: $411,002,906;  Domestic Gross: $101,802,906 (24.8%);  Foreign Gross: $309,200,000 (75.2%)

Gravity – Worldwide: $716,392,705;  Domestic: $274,092,705 (38.3%);  Foreign: $442,300,000 (61.7%)

The Amazing Spider-Man 2 – Worldwide: $633,169,864;  Domestic: $172,169,864 (27.2%);  Foreign: $416,000,000 (72.8%) – (still in theaters)

Notice a trend? These three films aren’t isolated incidents, but part of a larger pattern that shows a massive shift not necessarily in how American films do overseas (they’ve always been massively successful in foreign cinemas; the majority of screens in other countries show U.S. films, often times dubbed, as opposed to movies from their own country), but in how this money compares to the business these films do here. Foreign box-office is no longer just a portion of a film’s overall take, for blockbusters, it’s often times the biggest portion. Three of last year’s 5 top-grossing films (#2, Iron Man 2, #3, Frozen, and #4, Despicable Me 2) did more than 60% of their business overseas, while the other two in the top 5 (#1, The Hunger Games: Catching Fire, and #5, Man of Steel), accounted for more than 50% of their box-office from foreign grosses. And we’re not talking chump change.

Put simply, foreign box-office rules blockbuster movies today (indie films and studio prestige pictures play in a different, less expensive ballpark). If Pacific Rim gets a sequel, it’s because international audiences want it, not because U.S. moviegoers do (not that I’d complain about getting Guillermo Del Toro another $190 million dollar movie to play with). The Amazing Spider-Man 2 may be getting stomped on in the U.S. by the combined power of Godzilla and Zack Effron’s abs, but overseas it’s doing pretty  well (even though its overall take will probably be less than the first ASM, and therefore be the lowest-grossing film of the series; that’s a conversation for another time).

Why is this happening? Well one reason might be the fact that foreign audiences are just hungrier for special-effect filled, blockbuster films. In the U.S. we’re very much used to seeing these kinds of pictures. In fact, the average moviegoer might be confounded by the very idea of a blockbuster that doesn’t rely heavily on CGI and other digital wizardry. The studio system of the U.S. is rich, and the infrastructure is constructed in such a way that studios here can afford to bankroll $250 million dollar films (like ASM2), while studios in other countries simply can’t. Spain, for example, has a very weak, highly exclusive film industry, and can’t afford to spend even $100 million on a tentpole film (and for those of you who think $100 million is high, you don’t know Hollywood – most tentpole films cost between $150 and $200 million, with some bigger films like Spider-Man or X-Men: Days of Future Past getting $250 million or higher budgets). These countries aren’t domestically capable of producing CGI spectacle films, and the U.S. is happy to fill that gap for viewers. Foreign markets aren’t as oversaturated with blockbusters as the U.S. is – many countries (such as Spain and South Korea) have quota systems in place to ensure domestic films get into theaters, thus preventing Hollywood from totally dominating, but without comparable studios, these countries have no other way to fulfill demand for spectacle other than to release U.S. films. Foreign audiences get from American pictures what they can’t get from their own.

To that, I’d like to posit another idea: maybe the U.S. is losing its sense of filmgoing awe. We are living in an age of casual magic (and I strongly suggest you read the linked article, both because its author is an excellent writer, and because it raises some powerful points about films and filmmaking today). Because of all these blockbusters, we have become used to seeing the amazing. We expect it. And filmmakers are still trying to figure out how to wow us again. That’s why a lot of these movies don’t make as much money at the domestic box office as they do abroad. In America, we look at a giant robot wrestling with a massive monster in the middle of the Pacific ocean and shrug to say “what else you got?” In an age where pretty much anything we can imagine can be created on a computer, filmmakers have exploited their new abilities so much that we’ve become numb to it. Spectacle has become so much of a focus that actual storytelling has become lost in the process, and the box office says that as a nation, we appear to be unimpressed.

But all is not lost. Some filmmakers are still trying to create magic that awes us. Alfonso Cuarón, with Gravity, is proof of that. So is Gaerth Edwards, who’s Godzilla was just released last Friday. These, and others, are movies that treat their massive budgets and CGI wizardry not as a fact but an opportunity. They want to show us things we’ve never seen before, but more importantly, they want us to be amazed by them. For filmmakers like this, a blockbuster isn’t an obligation to throw a bunch of money and pixels at a screen and hope audiences will swallow whatever crap they wrap it around (I’m looking at you, Amazing Spider-Man 2 and Transformers). It’s a chance to create.  And maybe U.S. audiences are catching onto that idea. The box-office numbers for Gravity and Godzilla are prove that. Audiences are demanding blockbusters that give them the unexpected, that show them something truly awe-inspiring, and there are filmmakers fighting to do just that.

I hope they win.

I had to make a trip to Econo Foods to buy lab snacks for my geology lab on Tuesday today. I set myself a budget for $10 to supply snacks for the 19 people in my lab group. I decided that I wanted to buy granola bars as a snack, since most people this week in lab will be traveling to different sites for their group research projects and granola bars would be the easiest to take along. Upon reaching the granola bar section and comparing the prices of the bars (and based on which bars I prefer personally) I found that these two options, shown in the budget constraint diagram, worked with my budget. The Quaker Chewy bars were offered for a 2 for $5 sale and had 8 bars in each box, so if I spend my entire budget on this deal I would end up with 32 bars. Also, I could pick up to 4 different varieties with this offer. The Nature Valley Variety Pack included 24 bars per pack at a price of $5. If I spend all of my budget on this offer I would end up with 44 bars, 12 more than the Quaker Chewy bars deal. However, with the variety pack I’m limited to 3 flavors.  I could either spend my entire budget on either one of the deals or I could’ve bought 1 Nature Valley pack and 2 Chewy bars packs. However, since I was getting the most out of my budget with the Nature Valley deal with 44 bars I decided to go with that one. The budget constraint diagram illustrates exactly the options that were available to me with my $10 budget. Of course, if I increased my budget I could have bought more of either one or mixed between the two more.

One other point to consider during this decision was the fact that I could only buy the Chewy bars in sets of 2, otherwise the sale wouldn’t have applied and 1 box of bars would have cost about $3 (I don’t remember the exact price, but it was more than $2.50). If I did buy an odd number of Chewy bar packs this budget constraint diagram would not be an accurate representation of my options. There would be separate points on the diagram representing the bundles if I were to buy an odd number of Chewy bar packs. If I bought just 1 Chewy bar pack for $3 and spend the rest of the $7 on 1 Nature Valley bars pack, this situation would be outside of the current budget constraint (represented by the red dot) and the line would not be continuous.

On USATODAY’s website, Paul Davidson wrote an article last week, entitled, More states, cities raising minimum wage.  Recently more and more fast-food workers paid hourly wages have rallied for a raise in minimum wage across the United States.  With the gap between the upper and lower classes only rising throughout the world, a change like increasing the minimum wage would reduce such a wide gap.  President Obama seems to be in favor of this change and supports a bill that plans to raise the federal minimum hourly wage from the current $7.25 to $10.10 in the next two years.  Federal wage aside, ten states have already passed similar increases with more talks of increasing rates in more than thirty other states.  Even cities have put this idea into motion; urban centers such as San Francisco, Santa Fe, San Jose, Washington D.C. have already increased their minimum wage to $10.10.

People in favor of this increase argue that it will help low-wage industries like restaurants and retail stores which accounted for 22% of jobs lost and 44% of the jobs added since the recession.  This seemingly large raise to the minimum wage will increase the pay for 28 million workers as well as add a $22 billion into the economy (because, Cooper argues, low-wage workers spend much more of their paycheck than high wage workers).

Michael Saltsman, research director for the Employment Policies Institute, argues that if minimum wage increases by almost three dollars, then businesses would have to lay off workers or hire less people.  This likely means that fast-food franchises could replace their workers with devices, like touch-screen ordering systems, reducing the need for workers.  Because fast-food franchises would rather charge less for their products, by “boosting the federal minimum wage to $10.10 per hour would lift 900,000 Americans out of poverty, but [also] reduce employment by about 500,000 workers.”

As Davidson’s article shows, labor wages has been a particularly heated discussion in the United States since the recession.  With the increase in minimum wage, the indifference curve for labor wages would shift upward with the equilibrium point increasing from $7.25 to $10.10 on the y-axis (wages per hour).  Unlike many other goods, the substitution and income effects, which usually work together, would contradict one another in this instance.  In the lower half below the equilibrium point, the substitution effect dominates which states that the worker should work more hours because now leisure time has become more expensive.  In the higher half above the equilibrium point, the income effect dominates which states that the worker should work less because they are better off than before and are able to buy more things, like leisure.  By increasing the minimum wage, there will be less of a need to have more workers.  It is uncertain until it happens, but this increase could cause the workers to work less because they can afford it, which may actually prevent them from earning much more money than they already do without the minimum wage increase.  Because the low-wage workers’ earnings are less, the $22 billion dollars economists hope will be fed into the economy will be lower than expected.  So, is an increase in minimum wage really worth it for the economy?  I don’t really have an answer just yet…  But, come 2016, I am very curious to see how the raise in minimum wage will actually affect the American economy and where the country will go from there.

Claire Spencer

Coming out of school, many students face challenges with their newly granted freedom. Some struggle dealing with the job market while others may have to deal with different financial issues (student loans, financial independence, etc.). A major question some are faced with upon graduation is “Where will I live?” Many factors go into deciding whether or not one should rent or buy (or find another alternative) and what type of place to live in. There is no correct answer, as there are advantages and disadvantages to all options.

A major deciding aspect for this question is opportunity cost. (For this assignment we will be under the assumption that free housing/living at home is not an option, as free housing is not common and I do not currently plan to live at home after graduation.) If one were to rent part of a house (or an apartment), they wouldn’t own any of it, but they may have extra money left over. This money could go toward short-term payments for food, clothes, etc., or long-term investments. An opportunity cost of renting a living space and not owning any of it but making money off of investments from left over money would be buying a house and accruing equity on it. One could view the house as an investment—put down a certain percent and borrow the rest. After the house is paid off over a certain amount of years it is owned by the buyer. As an owner one could rent part of the house. If the house had not been bought, the opportunity cost would be one not accruing ownership with payments but also not paying taxes, insurance, or other such payments on it. In that same situation, if one rented with less out of pocket, they could spend the money on certain educational training and earn extra in the long run or invest the money and earn on investment returns. Those investments may grow to a point where they could potentially buy the house sooner full-on. There are many opportunity cost scenarios associated with this decision.

Marginal utility is another component of this decision, especially when deciding on the size of the house. The marginal utility of the first few hundred square feet of a house is much larger than the last few, as for each amount of square feet added, the marginal utility of the space (most likely) would decrease. Is as much value from added space gotten in return for the increase in cost of buying a larger house? Elasticity can be tied into marginal utility with regards to this question. The amount of square footage here is elastic after the minimal amount of square footage is taken into consideration. The basic level of square footage would be relatively inelastic, since some form of living space is necessary. This can be viewed as if it was on a graph: the unit cost per square foot (price) would be the y-axis and the number of square feet (quantity) would be the x-axis. The demand (for square footage) curve would be negatively sloped with an inelastic curve at the beginning due to the necessary basis, but as the amount (quantity) of square footage increases (as the curve approaches the x-axis) the curve becomes more elastic and the curve’s slope approaches zero (horizontal). As the quantity of square footage reaches a certain amount, the house becomes unaffordable and unnecessary. The supply curve for this graph would be positively sloped, as usual. One’s personal level of elasticity determines where the two curves intersect to form the equilibrium point.

Determining a post-graduation living situation can be very challenging as there is so much that goes into making such a big decision. Some act accordingly and lay out all options to make the best decision—others don’t think it all the way through and end up worse off financially than they began. Using simple economic concepts can help make such a choice easier and better in both the short run and the long run.

The Metropolitan Museum of Art is planning renovations to improve its modern and contemporary art wing in order to be able to better compete with other museums in New York City. The article from The New York Times about the renovations can be found here. The Metropolitan Museum is one of the best art museums in the world, but in New York City there are many competitors for modern art galleries.  The Museum of Modern Art and the Whitney Museum are two examples of competitors in this market. In other areas, the Met has almost no competition, with a near monopoly on pre- modern art displays. Competition between museums is interesting because it is not perfect competition, since only one museum can own a specific piece of art and works by famous artists are a very scarce resource, making it harder to compete in the market. The Met recently received a donation of 79 cubist paintings, so in order to take advantage of this the museum is looking to create a new space that will allow these pieces to be well displayed. These pieces will help draw consumers (art audiences) to the Met from other modern museums throughout the city.

Another important thing about this renovation is that it will be a sunk cost, but after it is completed variable costs will be fairly low. Once the space has been completed it will hopefully encourage more art collectors to donate pieces, which would have no cost for the museum. The space itself though, especially if it is completely from the ground up, could cost hundreds of millions of dollars and close down parts of the museum for long periods of time. This would be an implicit cost since closed down wings will deter some visitors, taking away the admission donations they would have paid. Once the wing is open though, there would be small variable costs once the art is hanging and on display. Overall it seems like this renovation is a good idea since it will attract more audiences to the Met, which in the long run will outweigh the cost of the renovation. And art is a wonderful part of our world that deserves to be shared and viewed and admired.

I was going through the blogs in class trying to find a short blog that I thought could be interesting. As summer is approaching and I remember my prom being around this time in May of last year, Freakonomic’ s blog post titled “Prom Effect” caught my eye. The link is provided: http://freakonomics.com/2009/09/23/the-prom-effect/

Although the blog post is from 2009, the bloggers stated that studies have shown less educated women has been studied to have their babies born in the winter. They affiliated this pattern in conception to “soirees” such as prom. And as prom is usually in spring, the nine months period for baby development will mean the baby will come out in the winter supporting the study. I refuse to believe that prom and other social events will have anything to do with the patterns of conceptions. Firstly, less educated women are often lower in the socioeconomic status and the fact is that most of them cannot afford to go to prom and if they do the opportunity cost of spending money on a dress, limo, dance ticket, dinner, etc is much too high relative to other products of consumption they can get.  There demand and willingness to pay for prom is much less compared to other individuals. As a high school, prom tickets are also never lowered as those are sunk costs needed to be paid to rent the prom revenue thus demand of the lower socioeconomic women will never meet the quantity supplied at a lower price. Other costs that, if the person does decide to go to prom, are variable costs that are determined by the individual such as the prom dress, jewelry, and transportation. Secondly, the study given by the bloggers do not list the age of the less educated women so you cannot affiliate the less educated women with younger students. Although there has been a rise in teenage pregnancy, I don’t believe that seniors in highschool especially who are preparing for college will risk their total utility  (happiness) for the next nine months for a higher utility without the proper protection.

There are many other factors that can contribute to the findings in the study other than prom. For example, December is the cutoff date for when  a couple can claim a year’s worth of deductions for only 1 or 2 months of actually having the child to care for so having a baby in December could be what the family is shooting for. Thus the demand for children is highest around spring because that will help with tax deductions. Inaddition, the seasonal change in spring could have led to a scientific explanation for hormonal changes in the women which has nothing to do decision-making.

Inconclusion, I think the blog post is extremely narrow-minded in pointing out young individuals as the cause of the seasonal pattern of conception and assuming that social parties such as prom, etc will contribute a significant amount of conception to births in winter.

I love coffee. Coffee fuels me when I can’t fuel myself, and for that I am entirely grateful. But I also (ashamedly—don’t judge me) love lattes. There is nothing better than a few shots of espresso in frothed milk, and if my coffee drinking habits came with an indifference curve, I’d probably be willing to give up upwards of three cups of regular coffee for a latte. Even so, regular coffee still means a lot to me, so I’m not willing to give up good ol’ coffee for any quality latte. The lattes from Sayles are sore excuses for lattes. Simply putting some coffee in a cup of milk does not cut it; this is a despicable practice. For a latte worth drinking, I have to travel from my cozy dorm all the way on the east side of campus to Blue Mondays in downtown Northfield to purchase a latte that lives up to its name.

As a busy college student, time is precious to me, and I am most inclined to drink coffee or travel to Blue Mondays during the days I have to study the hardest. This means that the thirty minute round trip journey to Blue Mondays comes with a pretty steep opportunity cost—not only do I have to pay for the $4 latte, but I give up thirty minutes of well spent studying regardless of if I choose to stay and work at BMs or not. Also on a -50 degree (with wind chill) day, the opportunity cost of traveling to BMs includes warmth and no chance of frostbite. If I choose not to go to BMs, I save a lot of money, because even though I don’t get the latte I prefer, I get free coffee in my personal giant mug from the dining hall, and then I just study in the warmth of my dorm without making the thirty minute trip. Think of how much econ studying I could do in those thirty minutes! I’d probably be real economist by now.

So the question is, then: Is a Blue Mondays latte worth it? I don’t know—my indifference curve and preference for lattes is pretty steep (three cups of coffee is a big deal to a caffeine addict). Even given this preference, though, my marginal utility per dollar is probably highest for regular coffee most of the time, since I enjoy it, and it’s free and convenient. Every once in awhile, though, I might want to venture to Blue Mondays to treat myself because I value it so much—especially if I have the time to spare. It’s worth it. After all, it’s economics.

This article regards taxes on firms lowering their employment rates. The article, written by Jim Spencer (my uncle), discusses how a tax that was approved to help pay for national health care reform is costing the med-tech industry 33,000 jobs and causing many companies to “cut spending on research and development as a result of the new 2.3 percent tax on gross revenue.” Some companies even “expanded overseas operations as a result of the tax.” Repealing this tax has become a new priority to the U.S. medical device industry.

This can be related to what we’ve learned thus far in class in multiple ways; however, the main way is through the taxes we studied. When making our graphs in class, we labeled the original price and the price the buyers pay as well as the price the seller receives after paying the tax. Due to the circumstances, it appears the sellers here (at least, for the most part) are the ones bearing the most burden from the tax, causing them to cut employees and cut spending elsewhere. In these graphs we also calculated the amount of government revenue being produced from taxes. It is the area of the rectangle enclosed by the difference in the price the buyer pays and the price the seller receives after paying tax (width) multiplied by the new equilibrium quantity after the tax (length). Here, the government revenue is reflected by the 2.3% tax on gross revenue.

This tax on Advamed may be causing their company to become less efficient. The companies involved are losing potential gains due to the government raising the tax by laying off workers who could have increased the company’s productivity. The tax is being used to fund health care reform. Much of today’s medical care involves medical devices, but this tax may cause less medical devices to be produced or less research to be done to create new devices. It may be the case that this tax ends up hurting what its funding.

As the main attractions of Spring Term approach I have found myself suddenly shifting my attention from schoolwork to other things, most poignantly displayed by the scene set in the CMC on Saturday morning: Barcelona vs Atletico Madrid, the last game of La Liga, one that would decide the title (alas the blaugrana failed to get the win they needed) is on and my friends and I decide that the computers in the CMC will be the best place to watch.  It ended with a raucous celebration of Aaron Ramsey’s overtime goal to propel Arsenal to the FA Cup trophy over Hull City.

A little something to introduce a discussion about the economics of choosing a FIFA team.  No one wants to play with their local MLS team, and no one wants to play with the team they support every time, and so the process of choosing one becomes an elaborate ordeal.  And what about the casual FIFA player that doesn’t really follow European football?  I talked to Avery Rux, a former member of Carleton’s tennis team, about his infatuation with the German club Borussia Dortmund.  “[On why he plays with Dortmund] Mario Gotze man, is the next best player in the world.”  In the soccer video game FIFA, Borussia Dortmund is quite good but they aren’t too good (likewise with Gotze).  This is a problem I have with being a Barcelona fan: that every time I win with them when I play FIFA, people assert that the only reason for my victory was because I was playing with the best team in the game (and something about Xavi being overrated).

So let’s consider us as producers  in the very competitive market where we fight for wins and where the team we pick  is a raw good that we’ll have to mold.  I’ll assert that our demand for Borussia Dortmund is high because they are the best team of their rank (four and a half stars).  Usually when coming up with a match up, teams will be chosen with the same rank, and so while people complain about me playing with Barcelona, the difference in ability between Barca and another five star team like say Chelsea, is equatable to the difference in ability of Borussia Dortmund and Tottenham.  Even though this is true, the phrase “Dortmund is too good it’s not fair,” is never said.  And so Mr. Rux, in choosing Dortmund, is being quite clever, in that he is capping his competitors ability to produce at the same time as he maximizes his ability to produce.  It’s something akin towards putting millions of dollars into R&D for clean energy innovations in your company and then lobbying Washington to force your competitors to do the same after you’ve already figured everything out.  An advantage.

I don’t think that has much to do with what we are learning but my mind is on the Champion’s League this weekend (anyone but Real is my new motto).

Link to the article

This article discusses some of the reasons behind why cable prices are raising so rapidly.  The author says that this trend is a result of cable companies working together to artificially raise prices.  They do so by competing over issues like recording space instead of over price.  Since cable companies are largely similar to the average American, people do not benefit from switching providers.

I think that there might be other reasons affecting this price increase as well.  The supply for cable packages is strange.  In some circles, like students or the tech savvy, cable has a direct substitute in internet service providers.  A subscription for Netflix, Hulu, and Antenna costs 27$ per month total,  as opposed to the cheapest cable providers $50 dollars a month.  Therefore, since these products are substitutes, the demand curve for cable amongst the tech savvy is highly elastic.  In fact, since the prices of internet TV providers are so much cheaper than cable, we can assume that anyone who views these products as substitutes will have already switched from cable to internet TV.

However, for many, internet TV is not a substitute.  Perhaps they cannot figure out how to work netflix, or prefer to watch on a large screen TV.  Maybe they just enjoy classic programming and like the ease of being able to turn on the TV and flip through the station.  Whatever the reason, to them internet TV is not a substitute for cable.  We can then assume that their demand for cable is relatively inelastic. Since they must buy from one of the cable companies, cable companies can increase their costs to make up for lost demand by internet users.  To me, this is the more likely reason that cable companies have increased their costs so dramatically.  It is interesting that the demand for cable can be both highly elastic and highly inelastic at the same time.