"Jacuzzi U.? A Battle of Perks to Lure Students"
by Greg Winter

Source:  The New York Times, Sunday, October 5, 2003.
http://select.nytimes.com/search/restricted/article?res=F40D11F939580C768CDDA90994DB404482

             What does it mean to say that scarcity is the central fact of economics?  This article is a great illustration of the assertion that human wants are relatively limitless.  Colleges are offering students fancier and fancier amenities in order to attract enrollment.  Today's college recreation centers include some pretty luxurious items: golf simulators, climbing walls, massages and pedicures, water slides, and, as the title suggests, Jacuzzis.  One college administrator compares the investments in such attractions to an arms race.  No one wants to be caught having less than their competitors.  While some students may complain about rising tuition, the article suggests that most students do not view these items as excessive.  In fact, the opening paragraph implies that the possibilities for additional amenities may be never-ending.

             Economists use the term "insatiable" to describe our seemingly limitless desire for more and more stuff.  Sometimes it seems that this is just part of human nature.  But the article provides some interesting clues about how demands escalate.  Students who tour other campuses and make comparisons between facilities pressure college administrators to "keep up with the Joneses."  But the innovations—today's frills that become tomorrow's necessities—come from the feeling that colleges need to "wow" prospective students and alumni donors.  The architects therefore need to "wow" the college trustees in order get the contract; this means they try to come up with a new amenity that other colleges do not have.  The prospective students may not have considered the possibility of having a climbing wall or a coral reef until they tour a campus that has one.  The demand for "frills" sometimes gets stimulated by those who supply them. 

             John Kenneth Galbraith, whose book The Affluent Society is mentioned on page 24, coined a term for this process.  He called it the "dependence effect," meaning that our seemingly insatiable demand for more and more goods and services was partly dependent upon the availability and promotion of these same goods and services by the businesses who want to sell them to us.  Galbraith blamed advertising for creating more and more wants in consumers.  While advertisers stimulate our demand for more and more private goods and services, other social needs—such as ending poverty, improving schools, and fixing roads—are being neglected.  The irony of the so-called affluent society, according to Galbraith, is an abundance of stuff but a deterioration of our investment in schools and other institutions of community life. 

• When you selected your college or university, did facilities such as Student Centers affect your decision?  What else (location, academic reputation, cost, etc.) impacted your decision? 
• Which of the amenities mentioned in the article would you consider "necessities?"  Which are "luxuries?"  Do any of the amenities seem completely unnecessary and "over the top"?
• Are human wants necessarily limitless?  Do we ever have enough "stuff?"
• Can wants be created by advertising and other marketing techniques?  Have you ever seen an ad for a new product and thought "I've got to have that!"—suddenly craving something new that you never thought of owning before? 

"When Talk of Guns and Butter Includes Lives Lost" by Louis Uchitelle

Source:  The New York Times, January 15, 2006.
http://select.nytimes.com/search/restricted/article?res=F00C17F83C5B0C768DDDA80894DE404482

             The trade-offs between alternative uses of society's resources have been summarized with the phrase "guns versus butter" for several decades.  The phrase dates back to the Vietnam era.  President Lyndon Johnson pursued an ambitious social policy agenda, including his "War on Poverty."  This effort to bring the good life to more Americans was symbolized by "butter."  His simultaneous escalation of the Vietnam War was symbolized by "guns."  By attempting to push economic production beyond the outer boundary of the Production Possibilities Curve, Johnson is accused by economists of stretching the U.S. economy (and not just the federal budget) past capacity.  Competing for scarce resources led to price increases and therefore inflation.  The habit of putting "guns" and "butter" on the two axes of the PPC (as seen in chapter 2 of your text) stuck long after Johnson left office and the war ended. 

             Now that the United States is once again in the midst of a controversial war, economists are once again evaluating the direct costs and opportunity costs of war.  Estimating all of these costs is difficult.  One particularly challenging question is whether one can put a monetary value on the cost of the lost lives of soldiers.  While we may profess that all lives are priceless, we actually behave in ways that contradict this.  Economic decisions are made all the time that reduce the availability of heath care, food, or shelter, or increase risk of injury or death.  Economists argue that these decisions necessarily factor in costs and benefits and therefore implicitly place a monetary value on human life.  The problem is to find an explicit method of valuing life that mirrors the implicit decisions made by economic actors. 

             Traditionally, such costs were assigned as opportunity costs—specifically the lifetime wages the person would have earned that were foregone due to an early death.  This same technique is used in calculating damages in lawsuits.  But this process seems to underestimate how much we value our lives.  This article describes an alternative technique, based on the monetary value people seem to put on their own lives.  That is, the authors of the study looked at how much more workers earn in hazardous occupations compared with similar jobs without such risks.  This provides an estimate of the monetary value of "risk of death." 

             The costs of the current war are then calculated to include not just the price of "guns" and other direct costs, but also less tangible costs. 

• What are some of the opportunity costs of the war mentioned in the article?
• What are some of the benefits of the war mentioned in the article?  What are the problems with estimating the value of these benefits?  Can you think of any benefits?
• Can the economic costs and benefits of war be objectively calculated?  Should they be?
• The article says that research on the dollar value of lost lives has been sparked by "the tobacco issue."  What are they referring to?  Can you findany news articles on this topic?