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Seinfeld Economics: The Lessons of Festivus, Re-Gifting, and Double Dipping

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On the Economics of Seinfeld, Professors Linda Ghent, Alan Grant, and George Lesica draw economic lessons from the greatest show about nothing.

In the episode “The Stall,” for example, the authors illustrate the economic principle of scarcity:
Elaine is in the bathroom, and finds her stall out of toilet paper. She asks the woman in the next stall if she can spare a square, but the woman says no. The woman turns out to be Jerry's date, and eventually he defends her by likening the scarce toilet paper to water in the desert: “You wouldn't ask a dying man in the desert for his canteen, would you?”
Minyanville spoke to Professors Ghent and Grant to get some further thoughts on what Seinfeld tells us about free-riders, the recession, and how the retail sector (the SPDR S&P Retail ETF (XRT) includes holdings like Netflix (NFLX), Whole Foods (WFMI), GameStop (GME), Expedia (EXPE), and AutoZone (AZO) is up 23% this year) is shaping up ahead of Festivus.

1) Throughout the series, Kramer takes all kinds of things from Jerry’s refrigerator. What does Economics tell us about “mooches”?
GHENT: Everyone is a mooch to some extent. People make decisions by weighing benefits and costs - so we LOVE getting things for free! Of course, if Jerry was a different type of guy, he may have reacted to Kramer's mooching by not keeping his fridge well stocked or keeping his door locked so Kramer couldn't go in and out as he pleased. That would have limited Kramer's ability to mooch. But he didn't. I think that means that Jerry was willing to put up with the mooching to have Kramer as a friend.

GRANT: In economics, we call Kramer's behavior "free riding," and we usually see it when someone can't be excluded from receiving the benefits of a good even if they don't pay for it. Fireworks shows are an example. But while it's hard to keep someone from watching your fireworks show, it's another thing entirely to keep him out of your fridge. So I'm forced to conclude that either 1) Linda is correct, or 2) Kramer's voracious appetite will save him the trouble of cleaning unidentifiable leftovers out of his fridge.

2) Elaine tells George that he’s “very careful with money.” But in an era where austerity is the “new normal,” is there an argument to be made that George is really the most financially responsible?
GHENT: I love that phrasing, by the way. Very careful with money is really NOT the same thing as cheap. While George was cheap, he also didn't put in much effort to make himself more productive. That would have actually increased his standard of living in a much nicer way. So no, I don't think he was the most financially responsible. That would be Jerry, with a steady job and paycheck and relatively moderate spending habits.

GRANT: On the one hand, we continually bemoan our low savings rate and say that it stifles investment and reduces production. On the other hand, we also know that increased saving comes at the expense of reduced consumption, and reduced consumption can throw us into a recession that . . . stifles investment and reduces production. Macroeconomists call this the "Paradox of Thrift," which is a really nice way of saying "Damned if you do; damned if you don't." Microeconomists, of course, think that it's a nice way of saying "Macroeconomists get paid a lot for knowing very little."

Right or wrong, policymakers generally try to revive a flagging economy by getting people to open up their wallets and begin spending. We don't really think it's coincidence that the Bush tax rebates gave a family of four just enough money to purchase a 48" flat-screen TV, do we?

3) A central tenant of Festivus—the holiday “for the rest of us”—is a rejection of commercialism. With holiday sales expected to be flat this year, do you think we could see an uptick in Festivus related activities?
GHENT: As a fan of conspicuous consumption, I have to say that I am not excited about Festivus. My guess is that individuals may try to give special gifts that are lower cost but have some personal meaning. Of course, I am a big believer in cash as a gift. Jerry tried this once too in "The Deal" by giving Elaine $184 for her birthday. She was less than thrilled. Go figure!

GRANT: With unemployment still in the high 9% range, my models predict a 3% decline in gift giving and a 7% increase in the Festivus traditions of airing grievances and feats of strength. One ironic bright spot for retailers: a 6.2% increase in demand for Festivus poles.

4) In the episode, “The Label Maker,” Elaine and Jerry suspect Tim Whatley of being a “re-gifter.” What, if any, affect does regifting have on the economy?
GHENT: Regifting can improve efficiency. One of the reasons why economists like cash as a gift is that it lowers the deadweight loss associated with gifts (where the gifts costs the giver more than the value of the gift received by the recipient). Regifting moves gifts from low valued users to possibly higher valued users. Of course, if the recipient does not like the gift, they too can regift it! (See why we should all stick to cash?)

GRANT: Why spend perfectly good money on a gift someone will hate when you can find something they'll hate just as much in your own basement?

Linda is exactly right. And I think she's going to love the concrete garden gnome I'll be giving her this year.

5) It’s been 12 years since Seinfeld aired. Do your students still know the show?
GHENT: Yes. Most of them still watch it on TBS. I just gave a talk about Seinfeld at Berry College a couple of weeks ago and asked them if they had seen the show. It was clear that most had and they could all name the four main characters and some other recurring ones as well (Puddy, Newman, Susan, J Peterman). The scenes themselves are so great that, even for those who haven't watched the show, seeing a clip introduces them to the comedy genius that is Seinfeld.

GRANT: They know it better than I do!

6) And last but not least: Your take on the recession – One dip and end it? Or double dip?
GHENT: Double dips are nasty! So with great hope, I say single dip, done, that chip is gone!

GRANT: Well, I'm sorry, Linda, but I don't dip that way. You dip the way you wanna dip, I'll dip the way I wanna dip.

Thanks, Professors, for your insight.  We look forward to keeping up with the site.

But perhaps the greatest lesson of all? The power of syndication. Since going off the air in 1998, Seinfeld has brought in $2.7 billion.

Prettttty, pretttty, pretttty good.
POSITION:  No positions in stocks mentioned.