The Simpsons and Economics

Is The Simpsons more than just a funny cartoon series with animated gags for laughs? Or could it possibly hold deeper content about business, economics, culture, and everyday life? Recently, I was watching some episodes of The Simpsons, when I realized not only could economics be applied but it could be used as examples for certain economical concepts.

One episode entitled, “Homer vs. the Eighteenth Amendment,” the people of Springfield start pushing for prohibition after an incident where Bart accidentally gets drunk on television during a parade on St. Patrick’s Day (which is this upcoming Tuesday). The town then discovers it currently has an old law in place that prohibits drinking, so Springfield reinstates the prohibition.

Although a ban is in place, demand for alcohol is still high. This ban acts as a different type of price ceiling, but instead of limiting the highest price in which one can sell, it limits the quantity to be sold, and in this case limits it to zero. Of course at a quantity of zero there is a tremendous deadweight loss and this is where organized crime came into the episode and began supplying Moe’s Tavern (called “Moe’s Pet Shop” in this episode to hide what was really going on) with alcohol to help diminish this deadweight loss. After law enforcement stopped this supply of alcohol from organize crime, Homer decides to take responsibility into his own hands and begins supplying Moe with alcohol by himself. Homer is now a monopoly of the alcohol supply for Springfield. With demand still high and a low quantity of alcohol supplied, the price of one beer raises to $45.

With prices now skyrocketing, Barney states, “This better be the best beer in the world.” (Then he chugs it) “You got lucky.”

Sure at a price that high some people who would normally demand alcohol, will now try to find other alternatives, but there are still some people (and in Springfield plenty) willing to pay a high price to be one of the few to get it. Barney, in this case, represents a person with a high demand willing to pay a high price for the good.

The episode ends with them finally reading the next line of the charter which after the 200 year old law of prohibition, someone reads; 199 years ago they revoked the prohibition.

Another episode which contains some lessons in economics is entitled, “Bart Gets an Elephant.” Bart wins an elephant from a contest from a local radio station. They keep the elephant chained in their backyard and at one point a couple of kids ring the doorbell.

The girl says, “Can we see your elephant?”

The boy states, “We’ll pay you.”

Homer yells, “For the ninth time, no!”

Then he slams the door and walks away when he says to himself, “wait a minute… this gives me an idea.” The scene cuts to him hammering a sign reading, “Go Away,” in his yard.

Bart interrupts, “Uh, here’s a better sign, dad,” holding up a sign reading “See the elephant $1, Ride the elephant $2.”

There is an opportunity cost of having people pay to see or ride the elephant, instead of just keeping the elephant and not make any money. Homer did not recognize this opportunity cost, but Bart did. Later the episode deals with profits and losses. A firm in a market not making money must leave the market and in order to make a profit a firm must sell its goods at a higher price than the costs to manufacture those goods. Homer faces this situation and Marge confronts him about it.

Homer exclaims, “Look at this, Marge: $58 and all profit! I’m the smartest business man in the world.”

Marge claims, “The elephant’s food bill today was $300.”

Homer says, “Marge, please, don’t humiliate me in front of the money.

Although Homer was earning revenue from the elephant, the revenue was not greater than the variable costs to keep the elephant. Homer decides to raise prices instead of leaving the market (getting rid of the elephant). The new prices are “See the elephant $100, Ride the elephant $500.” Homer didn’t know the correct demand line for wanting to see or ride the elephant, the prices were way too high, and revenue quickly fell to zero.

After finally deciding to get rid of the elephant, Homer must choose to who he is going to sell or give the elephant. The first man offers to give the elephant a good home at an elephant refuge with thousands of acres of simulated African Savannah for it to roam.

Lisa excitedly says, “Its perfect dad.”

Homer responds to the refuge man, “I only have two questions. How much and give it to me.”

The man replies, “Well, we really can’t offer you any money, we’re a non-profit organization.”

Homer says, “So your bid is zero?”

The man says, “Well… we like to think of it as…”

Homer interrupts, “Thank you.”

Man says, “You know I really think…”

Homer again interrupts saying, “Thank you,” and turns his head.

Here, Homer does not take into account the positive externalities of giving the elephant away to a good environment for it to live. Nor does he take into account the negative externalities of selling it to a suspicious man who also offers to take the elephant off their hands. He offers a large sum of money for the elephant which worries Lisa.

Lisa says, “Dad, I think he is an ivory dealer. His boots are ivory, his hat is ivory, and I’m pretty sure that check is ivory.”

Homer remarks, “Lisa, a guy who has lots of ivory is less likely to hurt the elephant, than a guy whose ivory supplies are low.”

Homer’s point, although humorous, is based on the concept of utility, and that someone with a great deal of a certain good, ivory in this case, will have a diminishing marginal utility for each additional unit they receive.

At the end they decided to give the elephant to the refuge who would take good care of it, but not without first teaching us a few lessons in economics. Maybe The Simpsons is a much deeper show than just cheap gags for laughs or maybe people can over analyze anything to make a point, either way economics is all around us.