Friday, April 9

Economic concepts through country music

After 23 years of living in the dark, I recently stumbled upon the joys of country music. Though many country tunes appear to be about the joys of beer, corn, trucks, rain, farms, Southern women, being a redneck and country music itself, one of the things I've noticed is that economic concepts are at the heart of many country tunes.

Here's a look at some basic economic concepts through the eyes of country songs:

Property rights: Property rights are an essential component of a successful economy. When people own something, they take better care of it. When people share ownership over a product — fish in the ocean, for example — it tends to get overused, leading to a tragedy of the commons.

Martina McBride's I Just Call You Mine and Carrie Underwood's Before He Cheats offer a good contrast between what can happen under a successful property rights regime and what can happen when property rights are non-existent. McBride, by being able to call something hers, is exercising her property rights. Despite many people demanding the good she possesses, by having property rights she can derive direct benefits from her property, such as having her winter turned into spring and fulfilling a "dream that [she has] been chasing after years of waiting."

In contrast, Carrie Underwood shows us what society can devolve into when it lacks property rights. We can see that there is clearly an overconsumption of Underwood's man, and society descends into anarchy with people digging "keys into the side of [people's] pretty little supped-up four wheel drive[s]" and smashing property with baseball bats. While the lack of property rights and Underwood's behaviour will increase job opportunities for auto body mechanics, 19th-century economist Frédéric Bastiat explains how this is inefficient because "if [Underwood's ex-boyfriend] had not had a [vehicle to fix], he would have replaced, for example, his worn-out shoes or added another book to his library."

Perfect complements: Some goods are perfect substitutes: they're completely interchangeable. Coke and Pepsi are the textbook example. Other goods can be perfect complements: we only want one if we can have the other. Shoes and shoelaces are a good example. There's not much use in just having shoelaces, and shoes without shoelaces are pretty flimsy and not too useful.

In Chicken Fried, the Zac Brown Band makes an inspired case for the complementarity of cold beer and fried chicken. It seems that fried chicken is not very enjoyable without beer, and that the consumption of beer is vastly enhanced when paired with fried chicken.

Diminishing marginal utility: Economists generally believe that as people consume more of a product, they desire it less and less. Somebody with an empty canteen in the desert is going to desperately want  the first few sips of water, but once they've quenched their thirst, their demand for additional water will be less than their demand for those first few drops. In fact, 19th-century economist Hermann Heinrich Gossen famously argued that there comes a point when people's wants are fulfilled, or "satiated," and they won't demand any additional units of a product.

But in I Like It, I Love ItTim McGraw disputes on Gossen's law, arguing that his demand for a product cannot be satiated. By suggesting that he first "likes" a good, then "loves" it as he consumes more, wanting "more of it," McGraw is suggesting he experiences an increasing marginal utility function, contrary to what most economists would believe. Perhaps McGraw is describing his demand for an addictive product such as cocaine or heroine (or maybe love), as his increasing marginal utility is consistent with Nobel prize winner Gary Becker's theory of rational addiction.

Labour-leisure tradeoff: One of the most basic premises of labour economics is time allocation: people must decide how much time they want to spend working, and how much time they want to spend doing other stuff — what labour economists consider "leisure." Labour economists tend to assume people don't like working, but do it so that they can purchase goods that they want to consume with the wages they earn.

Josh Thompson illustrates this concept nicely in Beer on the Table. He experiences disutility from labour, noting work is "somewhere I don't even want to go." But he concedes that "working hard all week puts some beer on the table."

Discount rates: Economists generally believe that people discount the future. We put more importance on consumption today than tomorrow. This explains, for example, why many people have difficulty saving for retirement, or have high credit-card debt.

In Green Bananas, Jake Owen explains why he heavily discounts the future, which results in him never purchasing unripe bananas. However, he seems to confuse risk aversion (when people don't like taking risky gambles) with discounting the future, arguing "I don't play the lottery" because "I don't plan that far ahead."

The Trailer Choir has their own take on discount rates with their song In My Next 5 Beers. They reject making a five-year plan in favour of simply focusing on what will happen before they finish drinking five more beers.