Peanut Capers and Economic Theory

Date February 10, 2006

Warning: More anecdotal rambling about the UT-USD series.

When Greg Phelps was down for a visit last year, we went to a couple of UT baseball games together. Traditionally, I’d been a hot-dog-and-Coke guy at the games, but he got a bag of peanuts. Peanuts and baseball. As cliched as it gets…but they do go together! I, in turn, got Bill hooked.

At Disch-Falk, it’s $2-3 for a pretty good-sized bag of peanuts — plenty for two adults to split over the course of the game and be glad that they run out so that they don’t get themselves over-salted.

At Cunningham Stadium in San Diego, the peanuts were $2.75 for a bag about half the size. That would be one thing, but that injustice was piled on top of the fact that, for all of the other Torrero baseball games, admission is free. For UT, we got to pay $7/game. They made somre pretty nice bling out of their opponent…without even counting the concessions.

After Friday’s game, Bill and I stopped in at a grocery store and spent about $3.50 for a 2 lb. bag of peanuts. We split them into four half-pound bags, and we each snuck a bag in to each game. We just rolled them up in our sweatshirts and walked in. On Saturday, we didn’t even get a look from the ticket-lady. On Sunday, she asked me to unroll my sweatshirt. I started to ‘fess up, in my babbling/bumbling sort of way, which, apparently, the ticket lady took as me saying, “Well, okay, but there’s nothing in here.” I had it 3/4 of the way unrolled, and she waved me on along. Bill only got his halfway unrolled. Score!

Today, I was relaying this episode to Benton. Probably not the smartest thing to talk to a six-year-old about breaking a rule (“no food or drink can be brought into the stadium” signs in several places). But, once I’d headed down that path, I decided I might as well turn it into a micro-economics lesson.

So, we started by talking about the consequences if Bill and I had been caught. Benton asked if we would go to jail. I told him that, not only would we not go to jail, we would not even be kicked out of the game. They would just take the peanuts away from us. We then worked through the math to show that, even if we only got one of the four half-pound bags into the stadium over two days, it was still a worthwhile investment. I also pointed out that, if we had not been able to get the peanuts in, we would not have spent the $20 required to buy an equivalent number of small bags of peanuts in the stadium. So, we weren’t really depriving USD of *that* much revenue.

At this point, I also told him about the fact that we were being charged to see the game, when the rest of the USD games this year would be free admission. Admittedly, this was just rationalization on my part. And, forgetting the revenue, USD probably needed to charge admission just to adjust demand. As it was, two out of three of the days (Friday and Saturday), there were 200-300 people who were not able to get into the stadium and had to watch from outside.

I’m digressing. Back to the micro economics lesson…

After the “calculate the risk/cost against the benefit” for the peanuts, we talked about chemical companies and refineries and how they release pollution into the air as part of their processes. Pollution is bad, but the products these companies produce are, in many cases, very good. So, the government charges these companies — fines them, in a sense — based on how much pollution they release into the air. The companies have to calculate that they can sell their finished products for enough to offset the cost of these pollution credits. And, they’re incented (in theory) to find ways to reduce the amount of pollution they release into the air — either by fundamentally changing their processes, or by figuring out a way to capture the pollution to prevent it from dispersing into the air.

Not too surprisingly, I guess, Benton seemed to get it. We actually used a little math there, too, as an example.

I decided I’d pushed things as far as I wanted to — didn’t seem worth getting into a discussion of the debate over how effective these programs are in practice.

Fun kid.

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