If you’ve got a trip to DC planned, you’ll soon have one more airport option. It’s probably not the pick for an easy ride downtown to visit the Washington Monument, but it might become your favorite if you’ve got business on the southwest side of the city, or you’re just tired of Dulles’s ballooning prices.

Last week, the airport formerly known as Manassas Regional earned the necessary FAA certifications required to put a jet bridge next to a runway. Washington Manassas Airport is a general-aviation field about 40 miles from downtown DC, currently home to flight schools and private planes. It’s in the middle of major renovations meant to get it ready for commercial service by the end of 2027.

Forty miles seems like a long drive after landing in a “DC airport,” but I was more intrigued by whether the metro area is even large enough to support another commercial airport alongside Dulles, Reagan National, and BWI. Assuming that it is, why is the next one sitting in the exurbs instead of somewhere closer to the city center?

That curiosity led me down a rabbit hole looking for the last time a major American city actually added a legitimate, additional airport to solve its capacity problem. It turns out it’s been a while.

A Brief History Lesson on New Airports

A lot of airports follow the same process as Washington Manassas by converting a general-aviation field into a commercial operation. Completely brand-new commercial airports, known as greenfield construction, are much rarer in the United States, and we’ll soon see why. Either path could reasonably count as “new,” so I set a couple of additional conditions to narrow the search.

The first was about the size of the metro area. Plenty of smaller cities have built new airports as they’ve grown, but they were never trying to solve a big-city capacity problem. Northwest Florida Beaches International opened in 2010 as genuinely new construction, but it immediately replaced Panama City’s previous airport. With a metro area of about 200,000 people, there was never a case for two airports anyway.

The second condition was that the new airport had to be large enough to actually relieve congestion at its metro’s existing airports. That rules out locations like McKinney National, 30 minutes north of Dallas, which will start accepting commercial service in November. The issue? It currently hosts one airline with five leisure routes. That’s more of a regional outpost, not an additional hub for the millions flying in and out of North Texas.

And if you thought I’d forgotten Denver International, which opened in 1995, think again. It’s unquestionably a major airport in a major metro, but it wasn’t built to serve as a second airport for the city. It replaced Stapleton, which had become boxed in by the city that grew around it. By the 1980s, there was no viable plan to expand its runways, so they built out into the plains. Stapleton closed the same day Denver opened.

From what I can tell, the last time a major metro genuinely added a new, major airport to relieve capacity was Dallas/Fort Worth International. Even that one barely makes the cut. By the early 1960s, Dallas’s Love Field was running out of runway and gate space. Federal regulators pushed Dallas and Fort Worth into a joint solution instead of letting each city solve its own problem. They wanted to see a shared airport that would replace both Love Field’s commercial service and Fort Worth’s existing airport.

DFW broke ground in 1969 and opened in 1974, and most airlines followed the plan to leave Love Field behind. But Southwest Airlines refused to leave. Once deregulation let it fly beyond Texas in 1978, Congress even went so far as to pass legislation restricting flights out of Love Field for the next 35 years, specifically to protect DFW from competition.

It turns out that Dallas barely made the cut only because Southwest refused to leave and survived a law written specifically to stop it. The law would eventually be repealed in 2014, but Love Field is easily a legitimate second airport for the city. Maybe the better read is how the most recent major metro that ended up with a genuine additional airport got there by accident. Since DFW broke ground, U.S. air travel has exploded. So, where are all the new airports?

Several of the country’s busiest airports were built nearly a century ago, and some are so constrained that even planned improvements wouldn’t fix their capacity issues. Of today’s 20 busiest U.S. airports, nine are projected to need more capacity than any currently planned runway or technology upgrade can provide.

But knowing that air travel has grown nearly 50 times since the 1950s and almost half the country’s busiest airports are already maxed out doesn’t explain why there hasn’t been a serious effort to fix it. That turns out to be less a data question than an economics one.

Building Beat Renovating, Until It Didn’t

This might look like a hunt for an answer to a trivia question, but there’s a real economics explanation underneath it. A constrained metro area has two ways to add airport capacity: build a new one, or expand the one it’s got. Economists call this decision-making at the extensive margin versus the intensive margin. It’s the same choice a company faces when it’s short on capacity and has to decide between opening a second location across town or just running the existing one harder. Running it harder is cheap and easy to reverse, but hits diminishing returns fast. A second facility costs a fortune up front, but can end up cheaper in the long run if demand keeps growing.

For the first half of the twentieth century, American cities mostly chose the extensive margin. Chicago Midway opened in 1927, but the city stood up an entirely new airport a dozen miles away when jets outgrew its short runways in the 1950s. By the early 1960s, O’Hare had taken over as the region’s primary hub, while Midway kept operating alongside it. Land was cheap, and nobody outside the immediate neighborhood had much legal standing to stop you. Chicago has been floating the idea of a third airport since the 1990s, but the proposed site has been controversial enough that it’s never broken ground. More on that in a second.

DC has its own version of this story sitting under our noses. Reagan National is wedged between the Potomac River and a full residential grid, with no room left to extend a runway. On top of the physical constraint, federal rules cap how many flights can use the airport each hour and how far nonstop flights can go. It’s essentially a push to grow Dulles instead. Sound familiar?

Seattle is living through a similar squeeze today, and its recent history shows just how hard “build new” has become even when the need is obvious. Seattle-Tacoma is in the middle of a $1-billion-plus expansion, and Paine Field up in Everett is separately expanding its own terminal. Even so, the region is still projected to fall short of demand by mid-century. Washington state spent two years searching for a third-airport site to close that gap, but every option it identified fell through.

Building new airports was fairly easy through the first half of the century. Then, seemingly overnight, cities switched to expansion instead. It turns out that the timing is almost too perfect to be a coincidence. Remember how DFW broke ground back in 1969? Well, the National Environmental Policy Act, which requires federal environmental review for major infrastructure, was signed on January 1, 1970. Since then, most U.S. airports have opted for expanded runways, bigger terminals, and brand-new concourses. Cities have rarely picked a new plot of land and started over.

The bigger pattern

That regulatory shift hasn’t been contained to airports. A pair of economists went looking for an explanation for why the cost of building one mile of interstate highway roughly tripled, in real dollars, between the 1960s and the 1980s. They ruled out the obvious suspects (labor, materials, and tougher terrain) and traced it instead to a rise in what they call “citizen voice”: more lawsuits, more mandatory environmental review, more people with legal standing to hold up a project they didn’t want in their backyard. The inflection point, once again, lands in the early 1970s, right where NEPA does.

That explanation makes Denver’s airport stop looking like a quirky outlier and start looking like a logical response. The city couldn’t expand Stapleton, but selecting a spot 25 miles from downtown meant far less friction to deal with. Building new usually means a fresh set of neighbors with legal rights to slow you down for years. However, you don’t have nearly as many neighbors to deal with whenever you buy up more land than the city boundaries of Boston, Miami, or San Francisco.

If this were simply how airport economics worked everywhere, you’d expect the same slowdown globally. Beijing opened an entirely new second major airport in 2019, while its original airport kept running right alongside it. Mexico City opened a brand-new third airport in 2022. Neither example means overriding local objections is a better way to run a country. The U.S. gives affected communities real legal standing to object for good reasons. Both examples are merely to rule out the idea that “build new” is off the table because of costs or logistics.

Final Thoughts

This brings us back to Manassas. Unlike Seattle or Reagan National, Northern Virginia doesn’t have the same geography problem forcing its hand. It has instead opted for the path of least resistance: a general-aviation field far enough from anyone influential to object, and close enough to the interstate to market itself as “DC” anyway.

I can share some personal experiences with how this might play out for travel, and it isn’t flattering. Several years ago, I booked a cheap flight to “Washington DC” for a conference, but I didn’t check how close the airport actually was. Shortly after the flight landed in Baltimore, I also learned how to board a train for the first time, which is not nearly as intuitive as you think if you’ve grown up with trains and subways your whole life. I clearly didn’t learn my lesson on checking airport locations because I made nearly the same mistake the next year when I booked a “cheap flight to Paris” that landed 50-plus miles from where my hotel was located. I got to figure out how their train system worked, but this time in French!

Baltimore is a real city that can support its own airport, but Beauvais can’t, and exists purely to catch tourist demand for Paris on the cheap. It’s built far outside the city and lets its name do the marketing. Sound familiar? It’s a good deal for the airport operator, but far from ideal for travelers standing in a terminal an hour from where they actually want to be. No offense, Manassas.

But this is all really circling back to the original question I was hoping to arrive at. America hasn’t lost the ability to build new airports, but it has decided over and over again since the 1970s that the cheapest place to build them is far away from people who might object, even if that isn’t an ideal location to serve a market. Denver bought 53 square miles to get permanent distance from just about everyone, while Manassas is betting that being 40 miles away is fine for travelers and won’t offend the 44,000 people who live there won’t object.

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This newsletter doesn’t have a capacity problem. I’ve got plenty of room for more readers, no NEPA review needed. If you liked this, forward it to someone who’d argue with you about it.

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• The population of Manassas, Virginia, is estimated to be 44,332 [U.S. Census Bureau]

• The North­west Flori­da Beach­es Inter­na­tion­al Air­port offi­cial­ly opened on May 23, 2010 as the first inter­na­tion­al air­port built in the Unit­ed States post-Sep­tem­ber 11 [Northwest Florida Beaches International Airport]

• Hartsfield–Jackson began with a five-year, rent-free lease on 287 acres that was an abandoned auto racetrack named The Atlanta Speedway [Hartsfield-Jackson Atlanta International Airport]

• College Park Airport in Maryland is the oldest continuously operated airport in the United States and the world, established in 1909 [National Park Service]

• Nearly 1-in-5 flights across America’s 10 largest carriers have been delayed so far in 2026 [Bureau of Transportation Statistics]

Hi y’all! Here are five stories from this week that contained some neat applications of economic principles or are related to teaching:

1. Dolly Parton streams spiked after her death, up 2,109% in the US and 1,280% globally [The Associated Press]

2. Bill Gates wants to see a robot tax and ‘Human Reserved’ jobs to mitigate harms from AI [TechCrunch]

3. Australia’s social media ban for teens is going, uh, pretty badly [Business Insider | Archive]

4. Nearly 1 in 3 workers think they could run the company better than their bosses [Inc]

5. America’s next grocery shock is brewing [Axios]

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A viral tweet accused readers of contradicting themselves if they believe more housing lowers prices, but don’t think more highway lanes will ease traffic. Turns out, it isn’t a contradiction. It comes down to one of economics’ more elegant (and underappreciated) ideas about how markets ration scarce goods. Read on to find out why one market has a fix baked in, and the other doesn’t.

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Every semester, I start class with a conversation about the power of prices as incentives. I run through a few favorite examples, like how paying students and teachers can improve learning or how a small fee on plastic bags can cut usage dramatically. I want my students to start thinking like economists, so I pair each example with a possible unintended consequence. Paying teachers based on student performance can tempt some to change answers for a bigger payout. A bag fee pushes some consumers toward buying the thicker, “reusable” plastic bags instead. Prices are great incentives, but they don’t always work the way policymakers design them.

I was preparing this year’s slides when I ran into a tweet that belonged in the same lecture, even though it wasn’t about either topic. It pointed out what looked like a genuine contradiction: how can someone believe that building more housing brings prices down, but also believe that adding more highway lanes won’t fix traffic? If supply works in one case, shouldn’t it also work in the other?

It fired up a lot of people online since it reads as a gotcha moment. The implication is that you should pick a lane. Either you believe in supply and demand, or you don’t. However, both beliefs are correct. There’s no contradiction here, just two markets that ration access in totally different ways.

How Housing Actually Works

Let’s start with housing, since it follows the supply and demand model neatly. Housing affordability in the United States is a major sore spot for Americans, and short of another major recession, there doesn’t seem to be any relief in sight. Theoretically, an increase in supply would lower prices and increase home ownership.

So what’s stopping that from happening? A lot actually. There are a lot of laws in place that quietly cap how much housing a city can build, even if demand is constantly increasing. Minimum lot sizes make it illegal to build anything smaller than a certain footprint. Parking minimums force developers to set aside space for cars instead of people. Zoning reserves entire neighborhoods for single-family homes only. Tack on permitting delays and expensive approval processes, and home buyers face consistently increasing prices.

In the housing market, price rations a scarce good. When prices rise, some people get priced out and relocate to more affordable options. When supply expands, prices soften, and more people can afford to stay or move in. The market adjusts on both sides of the story because the market price is constantly sending signals, and people respond by changing their behavior.

Over the past decade, Austin, Texas has been a pretty good real-world illustration. The city built aggressively, and rents actually fell despite strong demand. The pricing mechanism worked exactly as theorized.

Of course, not every city is ready for Austin-style sweeping reform. Smaller reforms can also help: legalizing accessory dwelling units or letting a single-family lot become a duplex or triplex. The details of how a city adds supply matter, but that’s not really the point of this article. The point is simply that when supply grows, prices respond.

Roads Are Different

That same price logic explains why so many homeowners show up in droves to fight zoning changes. Plenty of people see their homes as investments, and nobody wants to watch an investment shrink. Rising home prices are a reward for the people already inside the market as much as they ration access for people trying to get in.

Roads don’t offer that same reward, or that same punishment, because the price to drive on most highways is almost always zero. That’s the whole contradiction in the original post. Housing has a price mechanism, but highways don’t. A new home enters a market where price helps supply and demand meet. A new lane on the highway enters a market with no price at all, but there’s nothing to tell the drivers that capacity is scarce.

Economists have a name for that: induced demand. Drivers see a potential drop in travel time, which effectively decreases the cost of driving. As costs fall, more people enter the market. Instead of leaving early to dodge the traffic or avoiding that road altogether, they start driving again. The lane fills back up and the congestion returns.

The Fundamental Law of Road Congestion

A landmark paper examined highway construction across major U.S. metro areas and found that vehicle miles traveled increase in almost exact proportion to new lane-miles added. That means a 10% capacity increase produces roughly a 10% increase in driving. Any relief from new lanes tends to evaporate within three to five years. The finding has since been nicknamed the Fundamental Law of Road Congestion.

The highway fills back up with more cars through a few distinct channels. Existing residents who used to dodge the route or shift their schedule start driving it directly. New residents move to the area because the commute looks easier, which adds fresh demand on its own. Then, businesses relocate to take advantage of the perceived improvement in access, which brings freight trucks and employee traffic with them. Finally, people start running errands separately instead of bundling them into one trip. There’s no need to bundle it all together if an extra trip suddenly costs less time than it used to.

None of this is irrational behavior breaking our supply and demand model. In fact, the model is working exactly as it should. People and businesses see the new lane, and their demand for the road increases. Since there isn’t a price to slow that demand down, more people end up on the road. The unintended consequence ends up being the same congestion the lane was built to fix.

Final Thoughts

There’s actually only one assumption standing between these two markets: does a price exist to do the rationing? Housing has one, but most highways don’t. Some cities have taken up the call to give roads one anyway, through congestion pricing. The idea is to charge drivers more during peak hours and less during off-peak to mimic the same signal housing markets send on their own.

Stockholm, London, and Singapore have run versions of this for years. New York City kicked off its own Congestion Relief Zone tolling in Manhattan in January 2025. Despite sustained political and legal opposition, the program has stayed in effect, and the MTA has reported meaningfully fewer cars entering the zone. But putting a price on something people have always experienced as free is never just an economics problem.

“Build more” has become shorthand for a certain kind of optimism, popularized by Ezra Klein’s Abundance. The general premise is that a lot of society’s stuck problems are really supply problems in disguise, solvable if we’d just let ourselves build. Housing proves the case, but highways are the exception. An increase in supply only solves scarcity when there’s a price attached to ration it. Without one, more supply just invites more demand.

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This newsletter is also free, with no price rationing supply. But unlike a highway, we don’t have a capacity constraint. Share this one with a friend without worry of gridlock in your inbox next week. Consider it one of those rare cases where induced demand is exactly what we’re hoping for.

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• 58% of Americans say owning a home is a very or extremely important part of achieving the American Dream, including two-thirds of homeowners and half of renters [YouGov]

• Based on typical affordable housing development costs, one parking space per unit increases costs approximately 12.5%, and two parking spaces can increase costs by up to 25% [Urbanism Next - University of Oregon]

• The U.S. Interstate System is 46,876 miles long [US Department of Transportation]

• The widest section of highway in the U.S. is the Katy Freeway in Houston, Texas, which reaches up to 26 total lanes at its widest point [The New York Times]

• California requires highway expansion proposals to run through the UC Davis Induced Travel Calculator to estimate how much new driving a project would generate before it’s approved [California Department of Transportation]

Hi y’all! Here are five stories from this week that contained some neat applications of economic principles or are related to teaching:

1. As U.S.-Canada trade talks collapse, Carney says retaliatory tariffs will start after Labor Day [CNBC]

2. In a recent survey of US college students, 22% said they’ve changed their major or concentration because of job market worries [Axios]

3. Harvard Business School is charging $699 for an entrepreneurship bootcamp that includes AI avatars of its professors, which listen and give feedback to pitches [TechCrunch]

4. Universal Studios Hollywood built a “whisper quiet” ride to avoid angering nearby neighbors, but they didn’t fully account for the enthusiasm of the riders [The New York Times | Archive]

5. Several breakfast cereals are bringing back physical toys inside boxes in a bid to boost sales [Fast Company]

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NeeDoh squishies are the toy of the summer, but they’re almost impossible to find. Stores are rationing a product that isn’t even on the shelf. This week’s piece digs into why the company behind them won’t just raise the price to fix the shortage, and what a fixed-price toy craze can teach you about supply and demand. Read the full story to find out what’s really going on behind the empty shelf.

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I’ve heard about these viral NeeDoh squishies for the past few years, but I’ve never actually seen one in real life. I’ve seen the fidget spinners and pop-its that preceded them, but the squishy, dough-filled stress balls have somehow taken over American childhoods, backpacks, and TikTok.

So I went on a quest for a toy that’s been named a finalist for toy of the year. I’ve seen videos of parents hunting them the way Arnold Schwarzenegger hunted a Turboman action figure in Jingle All the Way, but I was really hoping for better luck. But every time I stopped by the store, all I found was an empty gap where bright neon colors were supposed to be. Would I ever see one of these things in real life?

Like most other viral fads over the past few years, there was a sign taped neatly above the gap limiting customers to a certain quantity per person. There’s a certain irony in placing a limit on something that never seems to be available in the first place.

I may not have gotten my hands on a squishy cube, but I did get to spend the weekend reading about a genuinely simple piece of economics hiding inside a very silly toy shortage.

Everyone suddenly wants a $5 blob of dough

NeeDoh is the official brand name of the squishy, dough-filled stress ball made by a Massachusetts company called Schylling. Yes, it’s that same toy you’ve seen mentioned in the news where children have been seriously burned after microwaving them. This toy may be incredibly popular right now, but it’s actually been around for almost a decade, and squishy toys in general have been around since the 1960s. The product hasn’t really changed over the past decade, but its popularity has taken off. People just suddenly can’t get enough of it.

There are few driving forces to explain what we’re seeing on the empty store shelves, which will inevitably happen again when the NeeDoh fad phases, and the next random object inexplicably takes over the internet.

TikTok turned squeezing foam into content. Every video that does well makes more people want the object, which leads to more videos, which makes even more people want it. That loop alone has turned a niche stress toy into a cultural moment. It helps that the target demographic is also unusually sensitive to peer influence, but what makes NeeDoh especially interesting is how far the demand spreads beyond that generation. Stressed-out adults are also keeping one on their desk, and that’s not exactly a small market either.

That combination is a textbook shift in demand. There are several factors that could affect the demand for a product, but not every surge comes from the same source. When college towns fill back up in the fall, Target sees a predictable spike in box fans, power strips, and everything else on those “dorm room essential” lists. When refund checks hit students’ bank accounts, it’s no surprise the TV aisle looks a little emptier than the week before. Those are demand shifts driven by population and income, but that doesn’t explain the surge for Squishies.

This is a fairly simple change in people’s tastes and preferences, thanks almost entirely to social media. In a smaller way, buyers’ expectations have likely shifted, too. Some shoppers are now racing to grab one at retail price before they’re stuck paying resale. If you’re curious, there are secondary markets where rare Squishmallows already go for hundreds of dollars above sticker.

Of course, this shift has shown up in the company’s sales numbers as well. Schylling says NeeDoh sales are running about six times higher than last year. That’s even after 2025 sales had already doubled 2024’s numbers! By mid-February of this year, the company had already sold through eight months of inventory it had planned to last much longer.

But that raises the obvious next question: if demand jumps and supply doesn’t budge, shouldn’t prices increase as economics would suggest? I was certainly wondering why NeeDohs were still listed at $5 when the shelves were all empty.

The shortage nobody’s fixing

Let’s pivot from a toy story to an economics story. When demand increases, and price doesn’t move to catch up, you get a textbook shortage: the quantity demanded is larger than the quantity supplied at the going price. Normally, prices increase to release the pressure on the market. As prices increase, buyers progressively opt out until the quantity demanded equals quantity supplied. The new equilibrium is one where shelves get restocked at a price everyone can live with. Instead, the company has opted for rationing as its method for allocating a scarce resource.

So why not just raise the price? There’s real money sitting on the table given how much demand is out there. CEO Paul Weingard has been fairly candid about not wanting it. He’s seen this genre of toy fizzle out before, most notably the fidget spinners going from everywhere to landfills in about a year. Part of what killed them was flooding the market and chasing every dollar of demand while it lasted. He also doesn’t want to be the guy who priced out the twelve-year-old with birthday money.

That leaves one other way to close a shortage without touching the price: make more of it. In economic terms, the company needs to shift the supply curve to the right instead.

I don’t normally hit you with a graph, let alone two in one article. Normally, an increase in supply would bring prices down from wherever they climbed after demand spiked. We’ll likely see that in the secondary market if Schylling ramps up production, but that’s not what will happen on toy store shelves since the sticker price never went up in the first place. This supply shift will instead do what the price increase would have: close the gap between what people want and what’s on the shelf.

Weingard has been open about protecting the brand, but he’s also said the company is genuinely trying to make more. It’s added a second shift at the distribution center, expanded its warehouse, and has people working nights and weekends to move product through the pipeline. What they can’t do is scale production the way a software company scales a server.

“We’re in constant production. But the reality is that there’s no magic wand. You can’t just say, ‘Hey, we want twice as much, or ten times as much’ and suddenly have factories produce more. Our products are injection-molded on the outside, so we are having to make new molds to be able to increase capacity. We’re moving as quickly as possible, but it’s still going to leave shelves empty for some time.”

NeeDoh toys are injection-molded, which means increasing capacity requires building new molds. That’s slow, expensive, physical work. By investing in new equipment, the company is introducing a supply shift. Capital investment like this shifts the whole supply curve rightward. Unfortunately for parents looking to get their hands on a replacement squishy for the one that burst in the microwave last week, it may take months to see results.

Final Thoughts

None of this is happening for the first time, either. If it sounds familiar to the adults reading over their kids’ shoulders, it should. Beanie Babies faced almost the same storyline back in the late 1990s. The company manufactured scarcity, a frenzied secondary market appeared, and people started buying bears on the bet they’d be worth more later. Then Ty flooded the market and killed the line outright, and the whole thing collapsed. Weingard’s caution about overproducing is likely built on the fact that he’s seen this movie end badly once already and would rather not star in the sequel.

Of course, it’s worth noting that we’re already seeing some pundits writing think pieces about how Gen Z can’t afford a house because of $5 squishies. It’ll likely become this generation’s avocado toast, and it’s just as unfair. No single small purchase explains a housing market, but it does at least acknowledge that we tend to underrate the cumulative cost of small, emotionally satisfying purchases, probably because each one feels too small to matter on its own.

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Unlike NeeDoh, this newsletter has no injection molds, no fixed capital, and no CEO nervously watching a demand curve. Forwarding it to a friend costs almost nothing and takes about four seconds. Feel free to help me increase the demand.

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• The packaging and slogan for NeeDohs were designed in just one day by Schylling’s product development team [The Toy Coach]

• The global stress-toy market is expected to grow to $7.95 billion in 2030 from $5.88 billion in 2025, partly because of the rising incidence of stress and anxiety among adults [The Business Research Company]

• For Americans who engage in self-care activities every day, the top reasons cited are for improving physical health (53%), managing stress (52%), and enhancing mental and emotional well-being (50%) [YouGov]

• Jack the Black Cat, of which only 500 were originally produced, is the most valuable regularly traded rare Squishmallow, now commanding $1,800 to $2,500 on the secondary market [Toynk]

• Launched in 1993, the original line of Beanie Babies became so popular that its parent company amassed a reported $6 billion fortune [ABC News]

Hi y’all! Here are five stories from this week that contained some neat applications of economic principles or are related to teaching:

1. NASCAR execs are keeping a close eye on the price of gas, but not because of the cars on track [Sportico]

2. Recruiters say parents are increasingly applying for jobs on behalf of their adult children [Kanebridge News | The Wall Street Journal]

3. Americans got their biggest raises in 40 years, but inflation took most of it [CBS News]

4. Credit card debt rises to $1.26 trillion, nearing an all time record [ABC News]

5. Fast casual salad chain Sweetgreen saw its stock drop 29% over the past month despite not having direct ties to the contaminated greens [Yahoo! Finance]

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A viral tweet complaining about the price of burritos has set off a political food fight, but none of the pundits weighing in actually explained where the price comes from. This week’s article breaks down the economics behind the outrage by looking at inflation-adjusted prices, minutes of labor, and the delivery-app markup hiding in plain sight. The numbers don’t say what you’d expect:

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What started as a common gripe about the cost of eating out for lunch turned part of the internet upside down. A spokesperson for Turning Point USA shared the complaint on his social media account, igniting an online debate about affordability. The original post has already been viewed more than 3 million times over the past two weeks.

Could this be Gen Z’s version of the millennial avocado toast debate? One political commentator told the unnamed student to eat at the dining hall with the meal plan he’d presumably already paid for. Another argued it’s just a sign of a generation that doesn’t know how to cook. A third chimed in with imperative advice to get a job and eat ramen instead.

Of course, none of them took the time to see if prices have really changed by that much or why the student may be seeing such a high price. All of them sidestepped the underlying point about affordability, which has been a persistent concern for Americans for several years now.

Let’s skip the fighting and look at the data together. Yes, burrito prices are up. But are they really that much more expensive than they were a few years ago? It turns out the answer depends entirely on how you measure “more expensive.”

How Do We Get to a $20 Burrito, Anyway?

Before we figure out how much burrito prices have changed, it’s worth debunking the number everyone’s actually mad about. Few burritos actually cost $20 unless you’re eating at a proper sit-down restaurant, loading up on premium toppings, or having it delivered. Paying for labor-intensive services will always cost more than cooking at home.

So where does the $20 figure actually come from? A walk-in burrito doesn’t get you there, but a delivered one can get you close.

I pulled up the Chipotle app and priced out a steak burrito from my nearest location. I chose steak on purpose since it’s the most expensive protein on the menu. I legitimately wanted to see if it would cost $20, but the after-tax total came to about $12.

I’d have to drive to get that burrito, but I could also order through a delivery app, Grubhub or DoorDash. That’s not uncommon, as it turns out that nearly 2 in 5 Gen Z and Millennials order from delivery apps at least once a week. I suspected this is where the $20 burrito can be found.

So what was the damage? Both apps landed around $23 before tipping the driver. DoorDash came in slightly cheaper, but only because it was running a no-delivery-fee promotion when I was pulling data. Tack that fee back on, and the two are effectively the same. Realistically, the final totals would run a few dollars higher because I don’t want to find out what happens to my food (assuming it shows up at all) if I skip out on the tip.

The delivery layer is how we can find our mysterious $20 burrito. For starters, restaurants raise delivery-app menu prices to offset platform commissions. You can already confirm this markup by looking at the actual item in question. Chipotle lists the steak burrito at $10.75 in-store versus $14 on the delivery apps.

And then there are the added fees. In casual conversations with my own students, most assume ordering through these apps adds only a few dollars in fees. They’re typically unaware that restaurants have already baked a markup into the delivery-menu price and then the platform tacks on two or three separate fees. It looks like our $20 burrito comes from a delivery platform charging $10 for a burrito and $10 for the privilege of not going to get it yourself.

I do have one caveat before we move to actual price history. This comparison only covers the burrito itself, without premium add-ons or sides. I went back and added guac and queso, but my total only came out to $15 if I picked it up in-store. I would need to add chips and a drink to get all the way $20, but then we’re talking about a full meal and not just a burrito.

Now that we know what’s actually driving the $20 figure, let’s look at whether the base price of the burrito itself has really changed all that much.

What Actually Happened to Burrito Prices

A Chipotle burrito runs about $10 in the store today. The underlying question is how much that’s actually changed over the past few years. Thankfully, there’s no shortage of old Chipotle menu photos floating around. Since a lot of the current angst traces back to the inflation spike of the past few years, I went looking for a menu board from 2022. Back then, a chicken burrito ran about $7.35:

Is that increase actually meaningful, or is it just what happens to every price in an economy with any inflation at all?

Every price has two versions: the nominal price, which is just the number on the receipt, and the real price, which adjusts that number for inflation. That $7.35 chicken burrito is the nominal 2022 price. Prices have gone up since then, but nominal prices almost always go up. That’s what a growing economy with any inflation looks like.

I’ll admit that adjusting for inflation can feel like we’re dodging the issue. It can feel like we’re conceding everything got more expensive and calling it math. That’s not quite what’s happening. Inflation isn’t one price rising in isolation, but rather it’s the value of a dollar shrinking across the board. Gas, rent, movie tickets, and burritos are all moving at roughly the same time, for related reasons. Looking at inflation-adjusted values lets us ask whether burritos got more expensive faster than everything else did.

This distinction really matters because it’s the same logic behind cost-of-living raises and calls for increasing the minimum wage. As prices go up, wages are supposed to go up as well. If they don’t, real income falls even while the paycheck number gets bigger. We’ll get to wages directly in the next section, but let’s just isolate the burrito from the rest of inflation.

One economist has done exactly that, tracking down old menu prices and adjusting them into today’s dollars. Once you do, the real price of a chicken burrito (in 2026 dollars) has been remarkably stable. It’s up less than 50 cents over the past four years.

Adjusting for inflation shows the burrito hasn’t really outpaced the rest of the economy, but inflation-adjusted dollars can feel abstract. Thankfully, there’s a more intuitive way to feel the same finding.

Using Time to Measure Inflation

It can be hard to get an intuitive sense of what a “2026 dollar” actually is. Fortunately, there’s another way to look at price changes that some people find more concrete: how long does the average worker have to work to afford the thing? This is called the “time price” of a good.

A Chipotle chicken burrito ran about $6.25 back in 2010, and average hourly earnings for a private-sector, nonsupervisory worker were about $19. That works out to roughly 20 minutes of work. Today, a Chipotle burrito costs $9.92 nationally, while the average hourly wage for that same group is $32.40. That’s about 18 minutes.

Nominal prices have gone up, but our wages have gone up faster. It now takes the average worker less time to earn a burrito than it did sixteen years ago. The student was right that the number on the receipt is bigger, but the number that measures affordability hasn’t actually gotten worse for the typical worker.

Who Is the Burrito Actually Expensive For?

That 18–20 minute finding is only true for the average worker. It’s worth complicating a bit further, in the interest of transparency. You might reasonably wonder whether the number is skewed upward by high earners, and whether the median would tell a different story. Those two measures are surprisingly similar, so that adjustment wouldn’t make much of a difference.

A better complaint about the calculation probably lives on the other end of the income distribution. A college student is unlikely to be earning the average or median wage while in school. What if they’re working a minimum-wage job to pay for their meals?

The federal minimum wage has been $7.25 an hour since 2009. In 2010, a minimum-wage worker would have spent about 52 minutes earning that $6.25 burrito. The same worker earning the federal minimum wage sixteen years later needs about 81 minutes for a $9.79 burrito. That’s more than 50% more time for the same meal.

Of course, the share of workers actually earning at or below the federal minimum has fallen substantially over that period, partly because state minimum wages have climbed while the federal floor stayed frozen. Fewer people are technically affected by that $7.25 number, but the ones who are have watched their burrito get meaningfully less affordable.

So is a burrito expensive? It depends entirely on what you earn, which is often a function of where you live. For the average worker, the burrito is exactly as affordable as it was in 2010. For a minimum-wage worker, it’s meaningfully less affordable. And for either worker, getting it delivered makes the numbers worse across the board.

Final Thoughts

None of this was ever really about burritos, or really about $20. It’s the same reason grocery prices keep coming up in conversations that have nothing to do with which groceries people are putting in their cart. Food is one of the only prices people see updated in real time, every week, with their own eyes.

So let’s be clear about what the data does and doesn’t say. If people are paying $20 for a burrito, they’re probably paying for convenience. Yes, a burrito assembled at home costs a fraction of the delivered price, but the original complaint was an admission that someone felt squeezed by higher prices. Dismissing that feeling doesn’t address the root problem. People who are genuinely struggling with affordability don’t feel heard by being told to toughen up. If anything, it probably confirms their suspicion that nobody in charge is listening.

The most honest complication of all this is that if you’ve read this far and none of it matches your own experience, you might be exactly right. The “average worker” is a statistical construct, not an actual person. If your wages have outpaced inflation, you may not understand what all the fuss is about. But for every worker whose earnings have outpaced prices, there’s someone else watching prices rise faster than their paycheck. The data above describes the average, not either one of them specifically.

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If you’ve made it this far, do me a favor: go price out a burrito and reply with the numbers. While you’re at it, share this with anyone you see complaining about the price of fast food. It may not change their opinions about the prices, but it will let them know they aren’t alone.

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• “Food away from home” has increased 24.2% since the start of 2022 [U.S. Bureau of Labor Statistics via FRED]

• There are 4,064 Chipotle restaurants in the United States as of June 16, 2026 [ScrapeHero]

• The median usual weekly nominal earnings for workers age 20 to 24 who are employed full time is $831 per week [U.S. Bureau of Labor Statistics]

• With the passage of the Fair Labor Standards Act of 1938 (FLSA), the U.S. minimum wage was initially set at $0.25 per hour for covered workers [Department of Labor]

• Five Southern states (Louisiana, Mississippi, Alabama, Tennessee, and South Carolina) have no minimum wage laws, but three states (Georgia, Oklahoma, and Wyoming) have state minimum wage rates that are lower than the federal rate [UC Davis Center for Poverty and Inequality Research]

Hi y’all! Here are five stories from this week that contained some neat applications of economic principles or are related to teaching:

1. Most Aussie teens still on social media 3 months after under-16 ban began, study finds [The Strait Times]

2. Something very odd is going on in the market for used electric vehicles [CNBC]

3. To comfortably afford a home at the US median price, Americans need to earn around $110,000 per year [USA Today]

4. Auto insurers didn’t pay out on 45% of auto liability and medical claims they resolved last year [The Wall Street Journal]

5. From backpacks to food, consumer goods are getting worse [The Guardian]

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Budget phones and mid-range laptops are quietly disappearing from shelves, but it’s not because of inflation, tariffs, or the usual supply chain culprits. A memory chip shortage tied to the AI boom is reshaping who gets priced out of basic technology. Read the full breakdown to see exactly how a $75 phone lost a bidding war it never knew it was in.

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Go try to find a smartphone for under $100 on Samsung’s website. You won’t. Head over to Best Buy, and you’ll find only two or three options in that price range. A few years ago, that shelf had a lot more on it. The cheapest tier of the market is the one shrinking fastest, and it’s not hard to see why. For these low-end smartphones, the bill of materials cost has increased 20% to 30% since the beginning of the year.

Laptops tell a similar story. You can still find a few for around $300, but good luck getting real work done on one. Manufacturers are putting so little RAM into budget machines that basic multitasking becomes a chore. Even Apple’s MacBook Neo, a laptop built specifically to hold a low price point, is having to get creative just to stay under $600. What’s left is a thin, underpowered bottom and a healthy top end for anyone who can pay for it.

What’s happening in these markets to cause such change?

Your first guess might be inflation, but that’s probably not it. Smartphones and laptops were exempted from last year’s “Liberation Day” tariffs. Your second guess might be a lingering supply chain crisis, the kind with backed-up ports and container ships stuck in canals from a few years back. But that’s not it either. There’s a simpler explanation sitting in plain sight.

Blame the Inputs, Not the Economy

While our focus has been on the output side of the market, every output starts as a stack of inputs. We actually teased one of those inputs at the start: the bill of materials, the actual cost of the parts inside the device. When that number changes, the sticker price eventually follows.

The input driving everything at the moment is memory, DRAM for active processing and NAND flash for storage. Only three companies make the overwhelming majority of the world’s supply: Samsung, SK Hynix, and Micron. Before you jump to collusion or price fixing to explain the results, it turns out a very large buyer has been in the room with them over the past year.

The same DRAM and NAND that goes into a laptop is what data centers need to run AI models. Last October, OpenAI signed agreements with two of the big three manufacturers to secure memory for a $500 billion infrastructure buildout. That single deal set off an industry-wide scramble to lock down memory contracts, and suddenly the buyer is much more visible.

AI data centers are on track to consume something like 70% of the world’s memory output, up from roughly 20–30% just a few years ago. Every wafer that becomes part of an AI accelerator is a wafer that doesn’t become RAM in your next laptop.

The Economics of a Scarce Wafer

This new supply crunch is actually a resource allocation problem in its purest form. Chipmakers can only produce so many wafers each quarter. Factories are running close to capacity, and building a new one takes years, not months. As a result, a fixed, limited supply has to be divided among competing uses, and something has to decide who gets it. In a market economy, that something is price. Whoever’s willing to pay more gets the wafer.

Of course, phone and laptop makers haven’t stopped needing chips. They still have contracts to fill and products to ship. But the industry is competing for those scarce resources against an industry with some very deep pockets. As a result, they end up buying less of the higher-priced wafers, and we’re seeing the results on the shelves in the form of fewer products at higher prices.

That’s the resource allocation problem resolving itself in real time: a fixed supply flowing toward whoever values it most, as measured by willingness to pay. The bill-of-materials increase from the start of this piece is what that reallocation looks like from the outside.

Allocatively Efficient, Not Exactly Fair

Go back to the chipmaker for a second. They are more or less obligated to their products to the highest bidder. A publicly traded company has a duty to its shareholders to make the most of its output, and right now, the most profitable use of a limited number of wafers is to sell them to AI data centers.

But “whoever values them most” is doing a lot of work in that idea. It doesn’t mean whoever needs them most. Rather, it means whoever has the biggest budget. Big tech companies have already poured over $1 trillion into the global AI infrastructure, even as people increasingly fight to keep them out of their backyards.

And yet the demand for AI services and the data centers built to serve them keeps growing, perhaps more quickly than a lot of people would like. While excitement has morphed into concern for many people, a growing share are interacting with AI several times each day. Our desire to get quick information from a chatbot, whether that’s a new recipe using ingredients in our pantry or a question about a suspicious mole on our leg, has resulted in a surge in demand for memory chips that are no longer being allocated toward affordable cell phones and laptops.

And this is the part that can feel uncomfortable for some people. None of this requires bad intentions anywhere in the chain of reasoning. Allocative efficiency is proof that the system is working. It just optimizes for one thing, willingness to pay, and treats every other kind of value as invisible.

Final Thoughts

For those of you relying on Moore’s Law as a source of optimism, you may need to brace yourself. For decades, the industry ran on an assumption that next year’s electronics would reliably be faster, smaller, and cheaper. That’s no longer a safe bet. Even Tim Cook has publicly admitted Apple can no longer fully shield customers from rising component costs, something the company has spent years managing to avoid saying out loud.

Unfortunately for those in the market for a new phone or laptop, it may be several years before a fix arrives. Micron’s planned New York facility won’t be fully operational until the 2040s, which means relief isn’t arriving quickly even if AI demand eventually cools.

To be clear, none of this is an argument against markets. They’re still remarkably good at moving resources toward their highest-value use, but it’s instead a reminder that “highest value” and “most needed” aren’t always the same thing.

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• Microsoft raised the price of its Surface Laptop models by $500 [The Verge]

• The DRAM market is highly concentrated, with three companies accounting for 90% of the total revenue [The Motley Fool]

• On June 25, seventeen plaintiffs sued Samsung, SK Hynix, and Micron in federal court in California, accusing the three under the Sherman Act of coordinating to restrict supply and inflate prices [PCMag]

• Global estimates of spending on data centers could reach $7 trillion by 2030 [McKinsey & Company]

• 83% of Americans agree with a statement from the pope’s encyclical about AI on AI’s lack of ability to know what love, work, friendship, or responsibility mean [YouGov]

Hi y’all! Here are five stories from this week that contained some neat applications of economic principles or are related to teaching:

1. Whey protein is in growing demand, partly linked to rising use of weight-loss drugs [The Guardian]

2. Americans are split about whether AI is currently able to think better or worse than the average person [YouGov]

3. College students are testing at the level of 10-year-olds [Futurism]

4. The Fed left interest rates unchanged, but three officials believe a rate hike is needed to address the fact that inflation has been above the Fed’s 2% target for five years [CNBC]

5. Find out how close you look like the average American [Atoms vs. Bits]

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Back-to-school shopping always feels expensive, but this year the receipts back it up. Some items are running at more than double the pace of headline inflation, while only a few things actually got cheaper. This week’s article breaks down exactly which parts of your basket are driving the sticker shock, using both government price data and independent retail tracking.

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You’ve been dreading it all summer. Your cart is stuffed with notecards, three-ring binders, a backpack, and a new pair of sneakers. It’s a basket in the most literal sense, but it also turns out to be an economic one. As the summer slips away, you’ve found yourself staring down the cashier as the total keeps climbing. You can’t help but wonder: was it all this expensive last year, too?

Spoiler: it was not.

Prices for a typical back-to-school basket have climbed a lot faster than prices for pretty much everything over the past year, and we have two different sources to back that up. Government price data and independent retail tracking measure things in completely different ways, but they’ve landed on the same answer.

Even though your back-to-school basket will likely end up more expensive this year, it doesn’t mean every single item will cost you more. Before we get into specifics, take a guess: of everything in a typical back-to-school basket, which one do you think has increased in price the most over the past year?

The Itemized Receipt

The overall inflation rate in the United States is currently running around 3.5%. That number is built from a much larger basket that covers everything from energy to shelter to medical care. It’s meant to represent what the average American household buys every month. Your back-to-school basket is very different than the average. It’s small, seasonal, and heavily influenced by what grade your kid is going into. Swap the government’s basket for yours, and many of its items are running hotter than 3.5% over the past year.

Let’s start with one of the biggest purchases before the start of each new school year: clothes and shoes. Once you see the data, it’s no surprise that the majority of shoppers say they’re specifically worried about clothing and footwear costs this year. Footwear for both girls and boys is up 4.7% since last year, while girls’ apparel is up 5.8%. But boys’ apparel? It’s only up 0.8%. It’s the same back-to-school season, but parents are facing sharply different increases depending on which department they’re standing in.

The BLS also tracks tuition and childcare, which can be an even larger expense for some families this time of year. Prices have increased across the board, but not quite as quickly as the overall inflation rate. Day care and preschool are up 3.5%, while elementary and high school tuition and fees are up 3%. If your kids have already graduated high school, technical and vocational school tuition is up 1.8%, and college tuition and fees are up 1.8% as well.

Those are broad categories based on official government data, but even those categories are themselves baskets that average together everything inside them. Zoom into individual groups, and the picture gets a lot more interesting.

Let’s start in the morning as you pack a sandwich for your kid’s lunch. Bread is a notch above the headline inflation rate, but that represents a mini-basket of several types of loaves sold around the country. Using retail transaction data, The Century Foundation found that a single loaf of sandwich bread is up 21.8% over the past year! That’s nearly six times the CPI’s broader bread category.

The rest of the lunch box tells a similar story. Overall grocery inflation isn’t running especially high this year, but you wouldn’t know it from the individual items filling a kid’s lunchbox: animal crackers are up 15.7%, sliced ham and turkey are each up at least 12%, and applesauce packets are up 6.9%.

A similar pattern holds for many of the items on your child’s school supply list. A tally of the 21 most common school supply items found prices up 7.7% on average over the past year. That’s several percentage points more than the overall inflation rate. Some items are up a whole lot more: lunch boxes are up 27%, notebooks and notebook paper up around 20%, scissors up 14%, crayons and colored pencils up 5 to 7%.

Some Things Didn’t Move, and Others Went Down

To be fair, not everything in the basket got more expensive. The BLS reports calculators are down 12.7% and college textbooks are down a slim 0.7%. Retail tracking data found pocket folders and sticky notes ringing up for the same price as last year, and a pound of grapes is almost the same price as last year.

I don’t have any good explanation for why pocket folders, sticky notes, and grapes are essentially unchanged from a year ago. It’s a useful reminder that “everything is getting more expensive” isn’t a law of nature. Basket averages hide flat prices right alongside rising ones, but there’s no reason to be surprised when some prices don’t budge from one year to the next.

The deflation in calculators and college textbooks has a potentially interesting story. Open educational resources like Desmos and OpenStax have continued to work their way into classrooms, reducing demand for the expensive alternatives. This isn’t much help if you bought a calculator last year. If you are in the market for one, it helps that the used market is strong, too. A lot of us still have our old TI-84 in a junk drawer somewhere, even though we graduated several years (decades?) ago.

Two Forces, Same Direction

We’ve looked at what got more expensive and by how much, but it’s worth also considering the why. There isn’t a single narrative to explain it all, but economists generally look at two broad factors to explain rising prices.

The first is cost-push inflation: prices increase because it costs more to make the thing in the first place. Manufacturing costs for key back-to-school items have increased by an average of 24% over the past five years. This past year has also been especially tough as tariffs and rising oil prices have driven their own cost increase. That material, labor, and shipping all feed into a higher price before a backpack or a box of crayons ever reaches a shelf.

The second is demand-pull inflation: prices rise because a lot of people want to buy the same thing at the same time. Back-to-school shopping is about as concentrated as demand gets. There’s a lot of buying happening in a fairly short window, every summer. A lot of families start shopping early, but at a certain point it’s hard to wait much longer for price drops. That doesn’t mean people aren’t trying, though. Nearly half of shoppers say they plan to only buy the essentials for the start of the school year and replenish supplies as needed.

Final Thoughts

Back-to-school shopping is a relatively small slice of what any household spends in a given year. Groceries, rent, and healthcare all dwarf it. But small doesn’t mean insignificant. It’s the second-largest shopping event for most people, behind only the winter holidays. It’s Christmas in July, just with green notebooks instead of red bows.

But like any major shopping season, the bill doesn’t stop at the register. School districts across states including Arizona, Ohio, Florida, and New Jersey are cutting bus routes and rethinking transportation altogether as fuel, maintenance, and driver costs climb. For some families, the back-to-school basket now includes figuring out how their kids actually get to school in the first place.

It’s tempting to look at your back-to-school basket running this far above headline inflation and conclude the math is broken somewhere. It isn’t. Your personal inflation rate always depends on what you’re actually buying, and this month, you’ve been buying a very specific, very back-to-school-shaped basket.

That mismatch creates a real, practical problem for anyone still holding out for lower prices. When most of the items in your cart are jumping up all at once, it’s hard to tell whether any single price jump reflects genuine scarcity or just the broader drift of inflation carrying every item upward together. That distinction matters a lot for all the shoppers deliberately holding out for a better deal. Waiting is a reasonable bet when prices are stable, but it’s a riskier one when they’re still climbing. The wait itself may end up costing more than it would have saved.

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There’s one other thing that hasn’t increased in price over the past year: subscribing to this newsletter. If someone in your life is taking an economics course this fall, or if your friends are trying to make sense of their back-to-school receipts, forward this to them and encourage them to sign up. There’s been no inflation on the subscription price for this one.

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• Families are spending an average of $863 per K-12 student and $1,437 per college student on back-to-school shopping this year [National Retail Federation]

• 54% of shoppers say they’re concerned about affording everything they need this season [Yahoo! Shopping]

• The second week of September is the most common week for school picture day nationally [Lifetouch]

• Nearly half of Crayola’s annual sales happen between July 4th and Labor Day, when its flagship factory produces 13 million crayons a day [Bloomberg]

• Newell Brands, the maker of Sharpie, Paper Mate, Expo, and Elmer’s, paid $174 million in tariff costs last year and expects $130 million more in 2026 [Atlanta Business Chronicle]

Hi y’all! Here are five stories from this week that contained some neat applications of economic principles or are related to teaching:

1. The Miami metropolitan area has finally become pricier to live in than greater New York [Bloomberg]

2. France becomes the first country in the European Union to adopt a social media ban for users under 15 [AP News]

3. Computer science enrollment fell for the first time in roughly two decades due to the rise of AI [Business Insider]

4. Nearly a quarter of US workers say they’re staying in unwanted jobs so they can keep their health insurance [NPR]

5. A new poll has found that 4 in 10 Americans are buying or eating less produce because of the parasitic outbreak linked to iceberg lettuce in nine states. [CBS News]

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It takes three separate government licenses just to legally cut hair in New York City. Mayor Mamdani wants to fix that. This week’s piece uses the “anti-fade” barbershop maze to dig into the real economics of occupational licensing: when it protects consumers, when it just protects incumbents, and why bad rules can survive for decades even when everyone agrees they’re bad.

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Somewhere in New York City, a young barber is looking to open their own shop. They’ve been cutting hair for years for family and friends, slowly building their client list one fade at a time. They’re ready to be their own boss.

There’s just one problem. To legally run a barbershop in New York City, that entrepreneur needs three separate approvals: a license to work as a barber, a license for the shop itself, and one more from the city on top of both. Three different pieces of paperwork, three different fees, and three different timelines.

Mayor Zohran Mamdani has dubbed this the “anti-fade” problem. Last week, as part of a package of more than 50 changes aimed at making it easier to operate a small business in the city, he proposed streamlining the licenses barbers need just to do their job.

At some point in our history, someone decided that cutting hair required three layers of government sign-off. It’s a small example, but it’s a stand-in for something much bigger that touches everything from hairstyling to home health aides. It’s also a lot more common than most people realize.

What Counts as an Occupational License?

An occupational license makes it illegal for a person to work in a given profession until they meet minimum requirements set by the government. This is typically some combination of fees, education, training hours, and exams. It may sometimes be more vague and include a minimum age or “good moral character.” It’s essentially a license for a person’s right to do a particular job, not a business’s right to operate.

That distinction matters, because not everything in our barber’s stack of paperwork is actually an occupational license. The license to cut hair is, but the license to run the shop as a business is a different kind of rule entirely. It attaches to the location and the business, not to the person behind the chair.

Several dozen professions are licensed this way in all 50 states. Physicians, dentists, barbers, and cosmetologists among them. Many more, like massage therapists and funeral directors, are licensed in most states but not all.

The Case for Licensing

The commonly stated objective of occupational licensing is to limit harm to consumers from poor-quality service. In the case of surgeons and electricians, that objective is a lot easier to defend. This rationale is based on combatting information asymmetry: the seller knows things about the quality of what they’re selling that the buyer can’t easily find out in advance. You only find out after, and results could be costly.

Licensing solves this problem by putting a floor under quality before you ever hire someone. A license confirms that someone else has checked their credentials. It isn’t a guarantee of quality, but it’s supposed to decrease the size of your gamble. The same logic gets applied far beyond doctors and electricians, and can stretch a lot further than “you might get hurt.” A haircut is a good place to test how far.

The Cost of Licensing

Licensing has quietly become a much bigger part of the economy than most people realize. In the 1950s, roughly 5% of U.S. workers needed a government license to do their job. Today, estimates put that figure around 25%. Barbers are one small piece of a very large trend.

The basic mechanism is just a supply and demand story. A license requirement makes it harder to become a barber, which shrinks the number of people qualified to cut hair. Fewer barbers means each one can charge more for their labor. If you’re a licensed barber, you’re going to see this as a real benefit of licensing.

But the customers are paying for that benefit. Fewer providers and higher wages get passed straight through to the price of a haircut. Research on licensed occupations broadly finds licensing raises consumer prices by somewhere in the range of 3 to 13%, depending on the profession. You may think that premium is the result of better quality, but the evidence on quality is a lot murkier than the evidence on price.

Of course, once prices are higher, some people who would have bought the service simply can’t afford to anymore. Those license fees also prevent some businesses from opening at all. These costs don’t show up cleanly in economic data since there’s no tracking for “the haircut that didn’t happen” or “the barbershop that never opened.”

How Does a Useless Permit Survive for Decades?

If the costs of licensing are real and the benefits mostly accrue to a small group, why does it take decades to undo a rule like this? Public choice economics has a name for the pattern: concentrated benefits, dispersed costs.

Let’s revisit the barbershop again. Right now, cutting hair in New York City legally requires three separate approvals, and clearing all three is exactly what makes each existing barber’s business a little safer from new competition. Fewer people can afford the time and money to get through all three, so the ones who already have all three face less competition otherwise. That’s a concentrated benefit. The people receiving it know exactly what they’d lose if the rules loosened.

But the costs of this process are spread across the city. Everyone pays slightly higher prices for a haircut, and there are slightly fewer barbershops than the neighborhood could otherwise support. No single group feels that cost sharply enough to show up at a City Council hearing about it. It’s a few extra dollars here and there, which makes the costs diffuse and easy to ignore.

And it’s that imbalance that explains the staying power of these permits. Once an occupation gets licensed, it tends to stay that way. It also helps explain why Mamdani’s reform is just a proposal at this point. Undoing an embedded rule takes real coordination, and the people who benefit from the status quo aren’t likely to just disappear following a speech.

Final Thoughts

Licensing may be appropriate for occupations where health and safety are seriously on the line, but a lot of the restrictions on licensed work look more like friction that has outlived its purpose. A bad haircut is a minor inconvenience, but an untrained surgeon is not. It’s worth asking, case by case, which one you’re actually looking at.

We’ll likely never live in a society where licenses cease to exist, so it’s worth figuring out what thresholds we want to preserve and which ones are just exclusionary. One idea could be to extend the “two-out, one-in” rule for occupational licensing. Every time a state adds a new licensing requirement, it has to remove two existing ones elsewhere. It wouldn’t tell you which requirements are the good ones and which are just friction, but it would force the question to actually get asked instead of letting rules pile up by default.

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The next time a friend tells you they’re headed out for a haircut, send them this to read while they wait. They’ll walk out with a fresh cut and a lot more to think about why the price seems so high, and their options seemed so limited.

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• All 50 states plus Washington, D.C. require a license to work as a cosmetologist, but the requirements vary from 233 days in New York to 963 days in Massachusetts [Institute for Justice]

• Occupational licensing restrictions may cost the economy up to 2.85 million jobs nationwide with an annual cost to consumers of $203 billion. [The Hamilton Project]

• An occupation was licensed in any given year from 1950 to 2020 remained licensed 99.9% of the time in the next year [Federal Reserve Bank of Minneapolis]

• The states with the highest occupational licensing burden in 2025 were Oregon, Tennessee, Texas, Kentucky, and Florida [Archbridge Institute]

• Shifting an occupation from unlicensed to licensed reduces employment in that occupation by 29% [CATO Institute]

Hi y’all! Here are five stories from this week that contained some neat applications of economic principles or are related to teaching:

1. Has capitalism gotten a bum rap? [The Wall Street Journal]

2. Americans estimate they’ll need $1.2 million to retire comfortably, but only 30% think they’ll hit the mark before retiring [CNBC]

3. One artist is selling cubes of trash from the street outside of Taylor Swift and Travis Kelce’s wedding [Fast Company]

4. Compact disc sales are up 16% in the first half of the year [Vice]

5. A $400 pink pineapple exists, but it’s illegal to buy, sell, or even grow it in the country that produces it [The Hustle YouTube]

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The World Cup is over, but don’t let anyone tell you it was an economic success. Reports that it generated billions in economic activity are overstated and undersupported. You can learn more about the economic impact of mega events from our post a few weeks back:

Grocery unit sales fell last month as prices climbed, but the data reveals something more nuanced. Using survey data from Bain & Company and LendingTree, take a walk through the grocery store to learn why the same price increase can be a shrug for one product and a dealbreaker for another. Four factors are driving how you respond to price changes. Have you experienced them all?

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You’re standing in the cereal aisle, and you’re doing math you don’t remember doing on previous shopping trips. The name-brand box of your favorite cereal is $4.29. The store brand is shelved right beside it and only costs $2.29. You wouldn’t have thought twice about grabbing your favorite box last year, but today is different. You put the store brand version in your cart and head to the back of the store to pick up your milk. You’re buying the same amount as last time, even though it’s up 6.6% since this time last year.

You may not realize it in the moment because you’re worried about your final total at checkout. Still, you just performed two completely different economic behaviors in the span of a few minutes. Recent headlines have found that grocery unit sales around the nation dropped 1.8% last month compared to a year ago, all while grocery prices have climbed 2-3%. On the whole, that shouldn’t be too surprising since we know demand curves slope downward.

People are spending more and getting less, but the story is more nuanced. If we look closer at the data, the cuts aren’t landing evenly. Grocery spending overall is bending, but it hasn’t broken. Here’s what the latest data reveals, one aisle at a time.

What the Data Actually Shows

You’re not the only one doing this math in the grocery aisle. Bain & Company’s U.S. Consumer Pulse Wave survey found that 80% of Americans are still trying to spend less overall, and 28% say they’re actively cutting back specifically on groceries. What matters for our story today is how those particular shoppers are cutting back. Among that group, 56% are trading down to cheaper brands, 49% are just buying fewer items, and 44% are leaning harder on coupons and promotions.

If we go back to 2019, a grocery trip that used to ring up around $300 now runs closer to $400. Grocery prices roughly 33% higher than they were in 2019. But not every price hike gets treated the same by shoppers. Some get shrugged off, some trigger a full brand switch, and some just mean an item quietly disappears from the cart altogether. Here’s why.

Why Some Prices Sting More Than Others

Economists have a word for these reactions: elasticity. At its core, it’s just a measure of a consumer’s sensitivity to a price change. When demand is elastic, a price increase sends shoppers running for alternatives. When it’s inelastic, people pay up and barely change their behavior at all.

Let me add a technical caveat real quick. Economists usually talk about elasticity whenever the price of one item or group of items moves, and everything else in a shopper’s life stays exactly the same. That’s not really what’s been happening the past few years, since prices are increasing across the board. If you haven’t gotten a raise in the past year, that distinction probably feels pretty academic. A price increase is a price increase, regardless of whether it’s actually an example of how an economist would measure a “pure” elasticity scenario. It’s worth noting that CEOs and business leaders have been talking about consumers’ reaction to inflation in exactly these terms anyway.

So we’re going to use the term the way it actually shows up in a shopper’s life to answer our simple question. When the price goes up, do you keep buying it anyway, or do you change what’s in your cart? It turns out the answer depends on a handful of factors that quietly decide how elastic any given purchase turns out to be.

How Narrow You Draw the Line

The first factor is how you define what you’re even measuring. Broad categories like “groceries” as a whole are pretty inelastic. Everyone has to eat, so when prices go up, there isn’t much we can do about the total amount of food we buy. Our grocery budgets just absorb the hit instead.

But narrow the frame to “cookies,” and people suddenly have more room to make changes. Cookies aren’t a necessity, so a category-wide price increase means some shoppers just buy fewer of them and others grab a bag of chips instead. If we narrow the framing all the way down to a single product, the reaction gets stronger. Raise the price of Oreos, and shoppers can still switch to chips, but they can also switch to any other brand on that aisle.

This factor is likely what’s driving the shoppers who are trading down to cheaper brands. They aren’t making wholesale changes in their weekly diet, but they are making one swap at a time. The narrower the category, the easier it is to find something else to purchase.

Necessities vs. Everything Else

The second factor is what type of item you’re actually looking at. Some parts of the cart look completely untouched from last year: milk, eggs, bread, butter. Other aisles are getting cut left and right: name-brand cereal, premium frozen meals, specialty drinks, the good cookies. This is the difference between necessities and luxuries.

Few people negotiate with milk and eggs, but a lot more people negotiate with cereal and cookies. Remember when egg prices spiked a few years back? People kept buying them anyway, because breakfast doesn’t really have a substitute for eggs for a lot of families. That’s an inelastic demand. The more elastic response happens with luxury items, which explains why people are skipping the “splurge” items to save money for their necessities.

Why It Took This Long

The third factor is time. In the short run, demand for food is almost perfectly inelastic. You need groceries to make tonight’s dinner regardless of what things cost at checkout. There’s no backup plan for the first time you feel a price spike. You just shake your head in the parking lot, staring at the receipt, wondering what happened.

But give people some time, and they start to adapt. They set up a budget, buy in bulk, or give the store-brand pasta sauce a try and discover it’s actually fine. It’s a slow build, and it’s probably why one of the more striking parts of Bain’s data is showing up only now: after two or three years of elevated grocery prices, unit sales are just starting to decline. The long-run response is finally catching up to years of steady price increases.

The Same Price Tag, Two Different Budgets

The last factor addresses how much room a price increase has to work with in your budget. For a household where groceries eat up 6-8% of the monthly budget, a price increase may not change any decisions. But for a household where groceries make up 30-35% of the budget, that same increase is a much bigger issue. The larger the share of a budget something takes up, the more sensitive people become to its price.

Take meat, for example, which makes up 22-26% of a typical grocery budget. Any price changes in that category have a much larger impact, which explains why rising beef prices have stung so much lately. This factor also helps explain the rise in coupon-clipping and brand-switching more broadly. As price increases work their way up the income ladder, more households start feeling the squeeze, and more households start adopting the same cutting-back habits.

Final Thoughts

Most people affected by food prices have realized that relief probably isn’t coming soon, so they’ve started finding even more ways to cut back. Even the people who look like they have it all together are running some version of the same calculations you are. That’s likely what’s behind the rise of social media cooks showing you how to feed a family for $5 or $10 using dollar-store ingredients.

Of course, we never really touched on the policy side of this story, but it’s worth knowing it exists. Over the past few years, some politicians have pushed for price caps on groceries, while others have floated the idea of city-owned grocery stores to compete on price directly. Whether either approach would actually work (and whether it’s the government’s role to try) is a genuinely contested question. Unsurprisingly, people’s views on it tend to split predictably along party lines. Alas, that’s a conversation for another day.

I can’t help you find a better deal on your favorite cereal or tell you how to stretch this week’s budget. But I can let you know you’re not alone. The math you’re doing in that aisle is the same math showing up in survey after survey, cart after cart, all over the country right now. The next time you’re in the checkout line, you’ll at least know why the box in your cart isn’t the one you would have grabbed a year ago. It’s elasticity, working in real time, and you’re not doing this math by yourself.

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• Household spending on food at home averaged $6,224 in 2024, compared with $3,945 spent on food away from home (restaurant meals, delivery, and takeout combined) [Bureau of Labor Statistics]

• About 66% of Americans now describe grocery costs as unaffordable, up sharply from 45% in February [The Washington Post]

• About 34% of high-income households say they shop several times a week, compared with 25% of middle- and lower-income households [YouGov]

• 19% of Gen Zers, 18% of millennials, 17% of parents of young kids, and 22% of low-income households (under $30,000) say affording food has become very difficult, compared with just 5% of baby boomers [Lending Tree]

Hi y’all! Here are five stories from this week that contained some neat applications of economic principles or are related to teaching:

1. Presenting A.I. agents as digital employees may make human workers worse at spotting errors and more likely to offload accountability [MIT Technology Review]

2. Americans’ reading habits have declined across age groups, gender, and education levels [The Atlantic]

3. A.I. labs are hiring philosophy majors [The New York Times | Archive]

4. Why staying in isn’t the cost-saver it used to be [CNBC]

5. Why recruiters can’t find workers and new grads can’t find jobs (it’s not AI) [The Washington Post | Archiver]

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A quarter of Americans believe they could score a penalty kick against a professional goalkeeper. This week’s piece uses that surprisingly common belief to unpack overconfidence bias, one of the most replicated findings in behavioral economics, and traces it from soccer surveys all the way to individual stock traders and sports bettors. Read the full story to see why the same instinct that makes people so sure they’d nail the shot is quietly costing investors and bettors real money.

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The final whistle blows, and your heart sinks a little as you realize the game will be decided by penalty kicks. You’ve just watched two hours of a back-and-forth match come down to a handful of well-placed shots.

The kicker spots the ball, twelve yards from a professional goalkeeper who has spent their entire adult life doing exactly one job. Last week, we talked about where a kicker should aim if they only had one shot and wanted to maximize their odds of scoring.

Today’s question is simpler: do you think you’d score in that situation?

Of course, we could have flipped the question and asked about the other side of the kick. If we put you in the net as the goalkeeper, could you stop a penalty kick against a professional striker? The numbers come back similarly bold on both sides. A lot of people, watching from their couches, are convinced they’d be fine out there.

A recent survey found that roughly 1 in 4 Americans believe they could score a penalty kick against a professional goalkeeper. It stood out because penalty kicks are uniquely high-pressure moments in sports with intense individual scrutiny and a high-stakes outcome. And yet a lot of people don’t seem fazed by any of that.

We’ll see how our own reader poll stacks up against that. For now, here are the results of that survey:

But I’m different…

I told myself I wouldn’t write another soccer story, but it was hard to pass on these findings. That was a representative survey of U.S. adults. We’re talking about people with no special training in the sport and who have likely never done anything in front of 80,000 people. And still, they’re sure they could do it.

Of course, this isn’t really a story about soccer. It’s a story about economics.

This hubris can be found in a variety of scenarios. Nearly half of all men say that in an emergency, they could land a commercial airplane with an air traffic controller talking them through it on the radio. A notable share of people say they could win a fight against a gorilla. And a majority of people say they could perform CPR on an adult whose heart has stopped, even though only one in six actually know the recommended technique for bystander CPR is chest compressions alone, no rescue breaths.

Notice how wide the contexts are? We’ve got airplane cockpits, wildlife enclosures, cardiac emergencies, and penalty kicks. The stakes are wildly different, yet a suspicious number of people believe they’d clear a hard, objective bar even without knowing what the bar actually requires.

There’s a name for this in behavioral economics: overconfidence bias. It’s the tendency to overestimate our own abilities, our odds of success, and our control over outcomes. It’s one of the most replicated findings in all of behavioral economics, tested across education, dating, investing, health, parenting, you name it. It holds up nearly everywhere researchers look.

Okay, so what?

These are fun surveys, but they’re also all things most of us will never actually be tested on. You’re probably never taking a World Cup penalty kick or landing a commercial plane, and you’re (hopefully) not fighting a gorilla. So why should any of this matter to you?

Stop looking at the examples and start looking at the behavior underneath them. The specific scenario isn’t the point. It’s the belief that you could handle something hard, with no real basis for thinking so. That reflex doesn’t stay contained to hypothetical emergencies you’ll never face. It shows up in decisions you’re actually making, with actual money, right now.

Take investors. Overconfident traders are convinced their read on a stock is sharper than everyone else’s, so they trade more often than cautious ones do. That seems reasonable enough since people who are right more often should act more often. Except the data runs the other way. Studies find that the more actively individual investors trade, the worse their returns tend to be.

Or look at the explosion of sports betting and prediction markets, especially among young men. Over half of American men ages 18 to 49 now have an active sportsbook account, and bettors overwhelmingly say they believe they can make money doing it. And yet only 3 in 10 say they’ve actually come out ahead. The participants in these markets skew younger, more educated, and male. It’s the same group that tends to be more overconfident in plenty of other contexts, too.

There’s nothing inherently wrong with believing in yourself. The issue is that we’re misjudging ourselves in ways that can actually cost us financially (or physically in a fight against a gorilla). These findings aren’t just random noise with some people guessing high and some guessing low until it all washes out. It’s a systematic bias, and one that entire industries are built to profit from.

Final Thoughts

If you didn’t already know it, you now have a name for the flicker of confidence you felt when you read the opening of this article. The real question was never really “would you score?” It’s why you think you would.

That flicker is the same one sitting inside the investor placing one more trade, and the bettor certain this is the pick that finally pays off. It’s not stupidity or even arrogance. It’s something closer to a factory setting in the human mind, running in the background while you’re watching the penalty-kick shootout or logging into your brokerage account.

We could write an entire separate article on prediction markets alone given how fast they’re growing, but that’s a story of its own that we’ll come back to another day. For now, the takeaway is simpler than that. The next time you feel completely sure about something, it might be worth pausing for half a second to ask what that certainty could cost you.

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• Players in the 2026 World Cup have converted just 32 of 49 penalties (65.3%) so far, the lowest since 1966 [Yahoo! Sports]

• 90% of U.S. adults express confidence in their ability to detect and prevent financial scams, yet more than 27% report falling victim at some point [Citi Group]

• 12% of Americans between 18 and 24 years old said they have placed a prediction-market wager, an identical finding for those who were between 25 and 34 years old [Politico]

• In a survey of over 1,200 bettors, nearly a quarter believe they win 75% of the time, even though the break-even threshold in sports betting is around 52.4% [Sports Betting Report]

• Today, 47% of men under 30 say legal sports betting is a bad thing for society, up from 22% who said this in 2022 [Pew Research Center]

Hi y’all! Here are five stories from this week that contained some neat applications of economic principles or are related to teaching:

1. Foreign demand for American government debt is becoming much less reliable [The Economist | Archive]

2. New Jersey became the latest state to pass a law banning surveillance pricing, joining Maryland and Connecticut [Gizmodo]

3. 250 years of the U.S. economy [NPR’s Marketplace]

4. OpenAI is in early discussions to give the US government a share of the company as part of an effort to soften increasing political pressure on the AI industry [CNBC]

5. Google loses fight over record $4.7 billion EU antitrust fine [Reuters]

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We broke down the economics of Love Island last summer, but there’s a brand new cast in the villa and the same forces are at play. This reality show turns out to be a surprisingly fun illustration of matching theory, the economic framework that explains how markets pair buyers with sellers, students with schools, and yes, contestants with partners.

Matt Freese is the USMNT’s starting goalkeeper at the 2026 World Cup, but he’s also a Harvard economics grad who once wrote a research paper on penalty kicks that he refuses to share with the world. His silence turns out to be a surprisingly perfect entry point into game theory, mixed strategies, and why professional kickers keep avoiding the one shot that statistically works best. Read on to find out what the data says, and why nobody can fully perfect the twelve yards between the spot and the goal.

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Growing up, Matt Freese wanted to be a professional athlete. He’d played obsessively since childhood and was good enough to earn a scholarship to play Division 1 soccer. He could have played college soccer just about anywhere, but he picked Harvard. It was the kind of thing that makes a family proud.

But after just a few semesters in Cambridge, his dream opportunity arrived when a professional team came calling. Plenty of people drop out of college, and the reasons vary from chasing a dream to realizing school isn’t the right fit. This was squarely the former. He did what a lot of people would do in his shoes and left campus to take the chance.

Most people who leave school for a job let the degree go quietly after that. But Matt Freese is a little different. He made good use of the free time afforded to professional soccer players by auditing graduate-level sports business classes and cold-emailing professors to see if he could sit in on class. It didn’t take long for him to realize he wanted his degree, so he decided to finish it by taking classes online between practices. In 2022, he graduated from Harvard with a degree in economics.

Somewhere along the way, he wrote a research paper on a rare but consequential moment inside his sport: the penalty kick. He studied the statistical signatures of what a player is about to do before he’s even fully decided to do it himself. That’s all we really know about it, because he hasn’t shared the results with anyone. Asked about it directly, his answer has stayed the same. He’ll talk about it when he’s done playing.

If you don’t know by now, Matt Freese is currently the starting goalkeeper for the United States at the 2026 World Cup. His training in Philadelphia and New York helped build him physically, but what he learned in his economics classrooms has prepared him mentally for the moment that could decide his team’s World Cup.

Twelve Yards, Two Minds

Goalkeepers aren’t the only people obsessed with penalty kicks. Kickers, coaches, and now a small industry of sports scientists all study the same twelve yards, for good reason: a penalty is about as close to a guaranteed goal as soccer gets. Roughly four out of five penalties go in. Once the whistle blows, the math favors the kicker so heavily that the goalkeeper’s job barely resembles goalkeeping at all.

That’s why so many goalkeepers keep a cheat sheet with them, either taped to the inside of their sleeve or, more famously, printed on a water bottle. The notes often highlight each kicker’s preferred foot and which side he tends to favor. If you’re curious, Matt Freese doesn’t bother. After saving three penalties in a shootout, he was asked about his notes. “I had no cheat sheet, nothing like that,” he said. “I had all 20 guys on their roster memorized.” Admittedly, this is a very Harvard-econ-grad way to prepare for a soccer game.

There’s a real puzzle underneath all this preparation, one that would exist whether or not anyone had a cheat sheet at all. The kicker wants to pick the spot the goalkeeper won’t reach. The goalkeeper wants to dive toward the spot the kicker is about to pick. Neither can decide in isolation, because the right answer for each one depends entirely on what the other does.

Suppose you’re a kicker who’s excellent at going low to your right. Should you stick with it for your next kick? If the goalkeeper knows your tendency, he can anticipate the shot and turn your shot into an easy save. But the goalkeeper faces a mirrored version of the same problem. If he commits to diving one way every time, kickers can adjust their shot to the other side and score more frequently.

This back-and-forth decision-making, where one player depends entirely on what the other is doing, is what economists study as game theory. It turns out that penalty kicks are one of the cleanest real-world examples of strategic interdependence there is. Neither player can safely repeat the same choice over and over, which means neither has a dominant strategy. So the only sound approach for both kicker and keeper is a mixed strategy that involves deliberately varying your choices so no pattern ever forms for the other side to exploit.

But players are only human. They have biases and tendencies like anyone else, which is exactly why a goalkeeper would want a water bottle’s worth of them or a Harvard research paper’s worth memorized in his head. But this raises an interesting question about what happens when the kicker walking up to the line has no tendencies on record at all?

The Players With No Patterns

Over the past week, Freese has almost certainly been adding data points to the paper nobody’s allowed to read. The World Cup’s knockout rounds have produced a run of shootouts, and it’s hard to imagine him watching them as just a fan. He’s likely clocking foot plants and run-ups the way a scout studies film. But one of last week’s shootouts probably taught him something about the limits of that work.

Germany was eliminated by Paraguay in a shootout last week. Tied 3-3 in sudden death, four German players in turn declined to take the deciding kick. It finally fell to Jonathan Tah, a center-back who had never taken a competitive penalty in his career. He struck it over the crossbar, and Paraguay won on the next kick, taken by another center-back with little to no penalty pedigree of his own. Across several shootouts last week, more than a few shooters stepped up with career penalty logs that were either empty or nearly empty.

If you only watch soccer once every four years, you’d be forgiven for assuming this is unusual. It isn’t, and there’s a simple reason inexperienced shooters keep ending up on the spot in the sport’s biggest moments. In-game penalties only need one or two trusted takers, but a shootout needs at least five. But teams rarely get to build up shootout experience in the first place because shootouts themselves are rare. They only happen in knockout matches, which are a small fraction of the games any team plays in a year.

Think about what that means for a goalkeeper like Freese. Every scouting report and tendency chart he builds for a typical opponent would have been useless against Tah because there was nothing there to study. The Paraguayan goalkeeper didn’t need to worry too much since Tah’s kick sailed well over the bar. But if you only get one shot at a penalty in your life, where should he have actually aimed it?

The Boring Shot Nobody Takes

Of course, Matt Freese isn’t the only person who’s turned penalty kicks into a research subject. Steven Levitt and devoted the opening chapter of their book Think Like a Freak to exactly this question: where should you actually aim?

After analyzing data on hundreds of professional penalty kicks, a team of researchers found something almost insultingly simple. Goalkeepers dive left 57% of the time and right 41% of the time, which leaves them standing in the center on just 2% of kicks. That means a shot driven straight down the middle is about seven percentage points more likely to score than one aimed at a corner. It’s not all that dissimilar to the famous Panenka chip shot popularized by Antonín Panenka’s shot in the 1976 European Championship final.

So why doesn’t everyone do it? Only 17% of penalties are ever aimed at the center. According to Levitt and Dubner, the answer is about shame, not strategy. A kicker who goes for the corner and gets stopped can blame a great save. A kicker who strikes it down the middle and watches the keeper catch it without diving looks like he didn’t even try.

Tah’s shot missed so badly the announcers kept piling on, but at least he looked like he was trying to beat the keeper outright. A kicker who aims for the middle and gets it saved doesn’t get that cover. He just looks like he wasn’t playing to win.

Final Thoughts

Knowing all this, don’t expect a wave of players to start driving penalties down the middle. If kickers started aiming center more often, goalkeepers would adjust, and the boring shot would stop being a genius shot. The advantage only exists because almost nobody exploits it.

There are other penalty-kick debates economists haven’t settled, either. Pundits will tell you, with total confidence, that a team should always choose to kick first in a shootout, because the pressure of constantly playing catch-up supposedly rattles the team kicking second. Some of the largest studies ever done on this, covering well over a thousand shootouts, back that up. Other studies just as large find no advantage at all.

And then there’s the matter of what a penalty is actually worth. Last week, Neymar scored a penalty in the tenth minute of stoppage time against Norway. On paper, it was identical to any other penalty. But Norway led 2-0, and Neymar’s kick only brought the score to 2-1 in a match Brazil had already lost. A penalty like that carries almost none of the psychological weight of one that could actually change the outcome, and it’s worth wondering how much that changes the contest playing out on the spot.

Which brings us back to Matt Freese and the paper he still isn’t sharing. He may know more about penalty kicks than almost anyone alive. Standing on his line at his first World Cup, he may be about to find out that sometimes, that still isn’t enough.

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Know someone who still thinks aiming for the corner is obviously smarter? Send them this and let them argue with Freese’s economics degree.

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• Across the U.S., there are over 40.4 million people who have completed some college but have not earned a credential [Inside Higher Ed]

• Freese’s father is a neurosurgeon who pioneered gene therapy research, and his mother holds an MBA in healthcare management [US Soccer]

• A record five games at the 2022 World Cup in Qatar were settled by penalty kicks, including the final when Argentina beat France [ABC News]

• Germany had won six consecutive shootouts in all competitions before this World Cup, with their only previous defeat occurring in 1976 following Antonín Panenka’s legendary spot-kick in the semi-final of the European Championship [The Guardian]

• Penalty kicks, where a goal immediately secured victory, were successful 89.1% of the time, but dropped to 60.4% when a miss meant immediate elimination [Wired]

Hi y’all! Here are five stories from this week that contained some neat applications of economic principles or are related to teaching:

1. Hacky sacks are back, but its increased popularity is causing a shortage [NPR]

2. 45% of Americans say they’re not taking a summer vacation this year, mostly due to high costs [NPR]

3. Microsoft increased the price of Xbox consoles, citing rising costs for memory and storage components [CNBC]

4. Investors around the world are dumping tech in what may be a sign that traders have become skittish about the long-term profitability of AI and chipmakers [CNN Business]

5. A small town in Wisconsin is offering young professionals a cash stipend along with comped local experiences and memberships to encourage them to settle down there [USA Today]

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Last week, I finally made it to a World Cup match, but I also came home with an economics lesson I wasn’t expecting. If you’ve ever stood up at a concert or game because everyone in front of you did, you already understand negative externalities. Check it out if you missed it.

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