Tag Archives: incentives

Movies that understand economics #8: Million Dollar Baby

Million Dollar Baby

Characters who take risks.

No it’s not the title that has anything to do with economics. While all of Clint Eastwood’s films have a strain of conservatism running through them, this tale of a father-daughter relationship in boxing understands two key concepts in economics: Risk and Incentive.

The issues of risk comes into play with Eastwood’s character Frankie Dunn shows both the sides of risk. Early in the film he is afraid to take risks. He holds back fighters from title fights, fearing that they might get hurt, that they aren’t ready, that if something goes wrong they will lose their one chance for success. Because of this refusal to take risks he loses one fighter after another for his whole career. And he had failure time and time again. Economics tells us that real economic growth only comes from taking risks…anything else will just lead to hundreds of year of stagnation. Of course while growth and success can only be accomplished by risk…the film also shows that risk, comes, with, well, risk. In this case tragedy when Frankie’s fighter Maggie Fitzgerald Hillary Swank is paralyzed and ultimately dies.

Frankie Dunn: It wasn’t fault. I was wrong to say that.
Eddie Scrap-Iron Dupris: You damn right. I found you a fighter. You made her the best fighter she could be.
Frankie: I killed her.
Eddie: Don’t say that. Maggie walked through that door with nothing buts guts. No chance in the world of being what she needed to be. It was because of you that she was fighting the championship of the world. You did that. People die everyday, Frankie – mopping floors, washing dishes and you know what their last thought is? I never got my shot. Because of you Maggie got her shot. If she dies today you know what her last thought would be? I think I did all right.

But the movie makes it quite clear that risk and the tragedy that may come of it, are better than stagnation.

How does it really drive this point home? Through a look at Maggie’s family. The embodiment of welfare trash.

Maggie: Not anymore. It’s all yours, Mama. For you and Mardell and the kids.
Earline (Mother): Mary M., you bought this for me?
Maggie: Yeah, all yours, free and clear. Darling….
Mardell (Sister): There’s no fridge. No stove neither.
Maggie: They’ll be here before you move in.
Earline: How much money did this cost you?
Maggie: Never mind that.
Earline: You shouldn’t have done this.
Maggie: You need a decent place.
Earline: You shouldn’t have done it. You should’ve asked me first. Government’s gonna find out about this, they’re gonna stop my welfare.
Maggie: Mama, no, they ain’t.
Earline: They are. You’re fine, you’re workin…but I can’t live without my welfare.
Maggie: Mama, I’ll send you money.
Earline: What about my medicine? Medicaid gonna cut me off. How am I supposed to get my medicine?
Maggie: I’ll send you more money.
Mardell: I hope you don’t expect J.D. to move in with us. He’s getting out, you know.
Why didn’t you just give me the money. Why’d you have to buy me a house?
Maggie: I didn’t have to Momma, but it’s yours. You want the money, sell it.
[…]
Earline: Find a man Mary M. Live proper. People hear about what you’re doin’ and they laugh. Hurts me to tell you, but they laugh at you. [Laughs]

Her family has no aspirations, has no drive, no goals, no virtue, and no redeeming characteristics. I would like to say they are merely a bad caricature of welfare dependency…sadly they are a far too accurate depiction of a far too common truth. When you have no incentive to do better because welfare and Medicaid and a dozen other programs can get you up to the income of about $45,000 a year, why would you even bother starting minimum wage job only on the hope (the risk, if you will) that through hard work, personal sacrifice, and long hours you’ll get something better. When people have no incentive to do better (and no one is going to pay you $45,000 out the door) it’s only human nature to not want to work that hard.

Even then, it is only that Maggie has a different incentive other than money that drives her to push herself, self respect and happiness. It is the incentives for these things that push her, making her not an exception to the idea that incentives are what drive people, but rather stark proof of this economic fact.

Maggie: Momma, you take Mardell and JD and get home ‘fore I tell that lawyer there that you were so worried about your welfare you never signed those house papers like you were supposed to. So anytime I feel like it I can sell that house from under your fat, lazy, hillbilly ass. And if you ever come back, that’s exactly what I’ll do.

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Movies that understand economics # 2 The Terminal

The Terminal

 

 

The Terminal.  Given the writers, director, or lead actor, it’s quite frankly a miracle that this movie understands even that money is used to buy things let alone the numerous economic principles it does seem to get.  I’m chalking this up to one of those monkeys at typewriters moments.

 

But one of the clearest moments that this movie demonstrates economics is with the concepts of incentives, opportunity costs and comparative advantage.  Yes I know your brain is probably already trying to run away…but stay with me for a second.  In the film Victor Narvoski is held in the terminal of JFK airport because of a snafu in regulations.  He has no money, but can’t leave. But he finds that there is a system in the airport whereby returning a cart for luggage to the dispensers where they originated will give a quarter for each cart.  The quarters are offered as incentives to perform this mildly annoying task (the same reason your salary is an incentive to do all the parts of your job, even the parts you don’t like).  However, to most of us, a quarter isn’t a big incentive, thus we have no reason to waste our time putting the thing back for just a quarter (this is opportunity cost, the idea we can use resources only once, in this case, time, and we will probably get more satisfaction out of reading, or sleeping or just resting than we will out of a quarter).  However, Victor has a huge incentive to get quarters, because quarters mean food.  Also, because he doesn’t have anything else to do, whereas most people in an airport do, he has a comparative advantage over them, he can spend time getting lots of carts and returning them, whereas other people do not.  Incentives drive everything, if you don’t have the incentive to do something, it won’t get done…which is probably why Welfare shouldn’t offer about 45,000K a year in benefits…because if you do offer that much in benefits no one has any incentive to work if they can’t make more than that.

One of the things that The Terminal implicitly understands is the incredibly harmful nature of government, bureaucrats and arbitrary rules. The movie literally begins with a group of Chinese immigrants with fake passports being captured (why were they running…probably because China is a despotic hellhole, what will happen when they’re sent back?  Well if they’re lucky, death. Real refugees are seldom so lucky from a nation that has actually crucified people in the last century.)  This is what governments do, they hurt people. (Let’s not even talk about how ICE’s primary function seems to be keeping refugees and qualified workers out of the country while ensuring that welfare seeking illegals and cartels can get through.)  Of course this whole movie is about one power hungry bureaucrat making a man’s life a living hell…because they can.  And if you think such a mentality just exists in movies, ask the millions of people who are now without health insurance because one brainless bureaucrat believes she doesn’t work for the American people. What does this have to do with economics?  Everything.  Governments are needed for  economies to maintain a civil and criminal court system; to catch, prosecute, and incarcerate criminals who violate the rights of others; to maintain contract laws; to ensure a bare minimum of regulation to ensure a functioning economy…but when bare minimum use of power needed to make the system work ceases to be the goal, and it switches to power for the sake of power (which is what every petty bureaucrat wants) then economies cease to work.  Case in point back to the quarters for carts things…the idiot in charge of the system would rather pay someone (at New York City union rates, which is probably more than anyone who reads this earns) rather then let a man earn money for food.

 

The film is filled with examples or stories of people’s lives being ruined by bureaucrats. And it should be noted the general sense of fear that everyone has towards them.  (Luckily there is also a scene that explains exactly what you should do to all bureaucrats.)
And this whole situation is caused by the fact that no one anywhere in this bureaucracy was willing to use common sense for an unusual situation.

 

One final point I would like to make about economics shown here is the seeming nature of chaos in an economy.  Most people look at economics, at the flow of money, of stocks, of property, goods and investments…and see chaos.  It’s much like the terminal of an airport.  It seems like pure chaos.  But the fact is everyone in that airport is going somewhere with a plan, a departure time, and a destination.  It has the appearance of chaos but there is a very well defined order, it’s just that the normal limits of the human mind can’t see it.  The same is true of economies…lots of people see economies and see only chaos and disorder and believe since it is so disordered there needs to be more control to make it run better.  Let me ask has DHS and the TSA made an airport better?  The same is true of economies—just because you can’t see the order doesn’t mean it is not there, and your attempting to control chaos that doesn’t exist will always, always, always backfire.

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