Should You Read the Wealth of Nations?

Commercial Economics

It’s amazing what you can learn about economics from staying in a hotel.

Some things are completely unsurprising. For instance, it is difficult to sleep when six people (four of which are kids) are stuck in the same room. There was the initial dispute over property rights— “she’s on my side of the bed!!” Then there were externalities. I was awake after midnight because two kids had a cough that interrupted any sleep. Yet, none of these economics lessons were surprising.

The surprising lesson came from watching TV. At home, we have some streaming services, but we don’t have a traditional television provider. The hotel was the first time I’d seen commercials in months/years. And, of course, we had children’s shows on, so you can imagine what kind of commercials we saw.

Well, I’ll get to the kid commercials, but the first surprising thing was how many non-kid commercials there were. Like commercials for cars. Why are advertisers willing to pay for ad-space on a children’s network for a product no kid would ever purchase? Maybe enough parents watch Nickelodeon with their kids to make it worth it. Maybe those are exactly the type of people who buy these cars: the kind of people who are so bored with Blue’s Clues that a mildly well-produced car commercial in the middle of the monotony is enough to push them over the edge.

But the kid commercials really stuck out to me. So many of the advertised toys focused on gimmicks. The one that haunts me to this day is My Squishy Little Dumplings. You squeeze the toy, and legs pop out. That’s it. What in the world is fun about this? It’s exactly the kind of junk that my kids play with once and then forget about.

But that’s probably the point. Kids are incredibly susceptible to projection bias: the tendency to believe your current preferences will hold in the future. If you want to leverage projection bias, you can present a gimmick. “That looks fun, I want to play with it. And I’ll always want to play with it.” The maker of My Squishy Little Dumplings isn’t playing a long-game. He just needs something that will move product.

Here’s a parenting hack: look past the projection bias. Look for toys that will maintain their long-run value. The best toy investments at our house have been Pokemon plushies (like Manager Pikachu). These toys have no gimmicks. They’re just stuffed animals in the form of their favorite Pokemon, and they have become our kids’ life-long friends.

But more importantly, avoid projection bias yourself. Because your projection bias is often much more expensive.

Should You Read the Wealth of Nations?

At some point, a viewer asked me if it was worthwhile to read classic economics books like Adam Smith’s The Wealth of Nations. I thought this was an excellent question, especially because I have some distinct memories of reading Smith in my free time as an undergraduate.

Here’s the spoiler answer: no, don’t focus on that now. I explain more in this week’s video, and I point you to what I think is the most underrated resource for economics students.

The video is short (barely more than 3 minutes), so go to YouTube and check it out.

Venezuela Gold Farmers

I am fascinated by Venezuela: it went from the richest country in Latin America to the poorest in a relatively short period. This week I listened to a Planet Money podcast on how Venezuelans struggling to survive have turned to farming gold in Runescape.

There are so many interesting tidbits in the podcast. Why is it profitable for Venezuelans? Why Runescape instead of World of Warcraft? What happened when Venezuela lost power? How did other players respond to gold farming?

It’s so, so good. I would love a book about it.