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Tattoos for Tacos
Sometimes a story comes across my newsfeed that is a very obvious example of an economics concept that I teach, and it’s too good to not share with all of you. The concept itself isn’t buried in the story and there isn’t a hidden policy consideration that’s important to consider. It’s not a particularly rare concept that doesn’t get talked about, but instead, it’s really just a fun example of a basic principle that’s covered at the beginning of every economics course taught around the world.
Incentives matter, a lot. Sometimes incentives work just as planned and other times they create bad outcomes we couldn’t foresee in the beginning. The story that came across my feed is a good example of the former and doesn’t appear to have any of the latter. We were taught incentives (and taught things with incentives) from an early age and we’re usually good at coming up with good incentives that motivate us. Not waking up early enough? Try setting your alarm clock across the room instead of by the bed. This will incentivize you to get out of bed in order to turn off the alarm clock, which is the same action you need to jump-start your day bright and early.
An incentive is a bullet, a lever, a key: an often tiny object with astonishing power to change a situation. (Dubner & Levitt, Freakonomics, pg. 16)
Organizations use incentives all the time, both for public and private benefits. Krispy Kreme was one of the first national corporations to offer incentives for vaccinations by offering free donuts to anyone who showed their vaccine cards. Other major companies quickly jumped on board, including Target, Safeway, and Major League Baseball. At one point last year, Budweiser offered the entire country a free beer if 70% of the country had received at least their first shot by July 4th. I could only imagine some of the unintended consequences if that incentive had been met!
Speaking of beer, Portland State University’s head football coach wanted to find a way to get more fans into the stadium for their home opener earlier this year. They played on a Saturday when the other two major teams in Oregon (University of Oregon and Oregon State) were also playing at home. That’s some stiff competition, especially considering Oregon had just upset the #3 team on the road. PSU’s head coach went the beer route as well and offered to pay the entire tab for fans at a beer garden insider the stadium if they mentioned the incentive. Fans not only got their Coors Lights paid for, but they also saw the team win its home opener.
I wanted to keep the food theme going to introduce the story that came across my feed last week. This incentive plan wasn’t even a NEW story about incentives. The San Francisco Chronicle posted an update on an incentive scheme from 1998! What started as a funny marketing idea turned out to be one of the most famous incentives of the year. The owners of Casa Sanchez offered patrons a lifetime of free lunches if they got a tattoo of the store’s logo somewhere on their body. Their logo was of a young boy riding a corncob-themed rocket ship and lovingly named “Jimmy the Cornman.”
At the time of the initial interview, back in 1999, the owners of the store estimated they could be responsible for millions of dollars worth of food if they paid out an $8 burrito every day for 50 years to the 40 people who had already gotten tattoos. In order to help limit the potential damage, they capped the number of qualified entrants at 50 people. In subsequent interviews over the years, the owners have mentioned many of the winners have moved away and a lot of the remaining people only come by infrequently. A heartwarming part of the story is that many of the winners have become close with the owners over the years.
While the damage could have been much larger, people aren’t really going to eat Mexican food every day for lunch, no matter how good the burritos taste. Incentives like the “tattoo for tacos” offer may work to get people to eat a burrito, but they aren’t good enough to overpower the law of diminishing returns. Taco Bell may find this out over the next few months as they test out a new taco subscription service that allows people to get 1 taco per day for $5 to $10 per month. If you’re eating at Taco Bell five to ten times per month, this may be a good deal, but it’s unlikely to be a good deal for your health.
In the first three months after announcing the “Vaccines for Donuts” campaign, Krispy Kreme gave away over 1.5 million donuts [CNBC]
Only 64.4% of Americans have received at least one dose of the COVID-19 vaccine [Mayo Clinic]
The Portland State football coach’s tab was $14,448 [Bruce Barnum]
In order to qualify for the promotion, the tattoo had to be at least 4 square inches [Wall Street Journal]
Week #38 is finished and I’ve checked in a total of 56 books for the year. This past week I read a book that covered a brief biography of Mister Rogers and how certain principles from his show are still important today. I really enjoyed this approach because I don’t really enjoy 300-page biographies that cover a lot of extra details about people’s lives. This was concise enough that I was able to look more into particular parts I was interested in.
The next closest book to the finish line is on the economic concepts found in super hero storylines!