Intro
In the “A very Planet Money Thanksgiving” episode of the Planet Money podcast, the team explores the economics behind Thanksgiving, from the price of turkeys to the challenges of seating arrangements. They also delve into the concept of home production and its impact on the economy. Join them as they unravel the mysteries of Thanksgiving economics.
Main Takeaways
Turkey Pricing and Seasonal Demand
- Thanksgiving is about feasting on economics, not just food.
- Turkeys are always on sale during Thanksgiving, but their wholesale price increases.
- The mystery of why turkey prices go down during Thanksgiving is explored.
- During the holidays, turkey demand spikes 750% but the price of all those turkeys actually goes down by an average of about 20%.
- Economists call this phenomenon counter-cyclical pricing.
- Turkeys could be used as a lost leader by stores to draw in more consumers and then they would buy a cartful or a basketful of products too.
- The price of champagne drops right around New Year’s. The price of cantuna goes down during Lent. And avocados, they get discounted right around Cinco D’Amayo.
- Turkeys are a hyper-seasonal food, not all stores carry whole turkeys year-round.
- Seasonal demand drives supermarkets to sell turkeys during Thanksgiving.
- More stores selling turkeys creates competition and drives down prices.
- The number of stores selling turkeys increases by 16% during the holidays.
The Value of Home Production
- Making Thanksgiving side dishes is a form of home production not included in GDP.
- Economists use time diaries to estimate the amount of home production people do.
- Economists estimate the market value of home production by looking at average wages for similar jobs.
- Home production is a huge part of the economy and quantifying it is key to understanding the real state of the economy.
- Quantifying home production would add trillions of dollars to the US economy, increasing GDP by about 20-25%.
- Including home production in GDP paints a more accurate picture of the economy, especially during a recession.
The Challenges of Seating Arrangements
- Seating arrangement for Thanksgiving dinner guests is a tough challenge related to a whole field of economics called matching theory.
- Matching theory is a field of economics that deals with challenges like seating arrangements for Thanksgiving dinner guests and matching medical students to residency programs.
- To make an optimal seating arrangement, economists consider either optimizing for overall happiness or optimizing for stability.
- Optimizing for stability tends to feel more fair as it ensures that no pair or group of people could make themselves better off by trading seats with each other.
- Economists haven’t yet figured out an algorithm to reliably produce stable table arrangements, so brute force is used to simulate every possible seating arrangement.
- The computer program calculated every person’s utility by looking at who was sitting on their left and right and how that matched their preferences, and then checked to see if anyone might be happier if they could switch seats with someone else at the table.
- Planet Money Thanksgiving seating arrangement tested for stability.
- Computer program calculated every person’s utility based on preferences.
- No possible trades would make anyone happier with their seat.
- Achieved a stable seating arrangement for Thanksgiving feast.
Summary
Thanksgiving Turkey Economics
Thanksgiving is not just a time for feasting, but also a time to explore the economics behind the holiday. Turkeys, a staple of Thanksgiving meals, are always on sale during the holiday, despite their wholesale price increasing. This phenomenon, known as counter-cyclical pricing, occurs because the demand for turkeys spikes during Thanksgiving, leading to increased competition among stores and ultimately lower prices for consumers. Seasonal demand and increased competition drive down prices, making turkeys more affordable for Thanksgiving feasts.
The Value of Home Production
While preparing Thanksgiving side dishes may not be included in the GDP, it is a significant part of home production. Economists estimate the market value of home production by analyzing average wages for similar jobs. Quantifying home production, including Thanksgiving meal preparations, would significantly increase the US economy’s GDP by around 20-25%. Recognizing the value of home production provides a more accurate understanding of the economy, particularly during times of recession.
The Challenges of Seating Arrangements
Seating arrangements for Thanksgiving dinners pose a unique challenge, which falls under the field of economics called matching theory. Economists strive to create optimal seating arrangements by either optimizing for overall happiness or stability. While optimizing for stability may seem fair, ensuring no pair or group of people could make themselves better off by trading seats, finding a reliable algorithm for stable table arrangements remains a challenge. By simulating every possible seating arrangement and calculating each person’s utility based on preferences, Planet Money achieved a stable seating arrangement for their Thanksgiving feast.
Conclusion
The “A very Planet Money Thanksgiving” episode sheds light on the economics behind Thanksgiving, from turkey pricing and seasonal demand to the value of home production and the challenges of seating arrangements. It highlights how economic principles influence various aspects of the holiday and provides a fresh perspective on the Thanksgiving tradition. So, as you gather around the table this Thanksgiving, take a moment to appreciate the hidden economics behind the feast.
