 What would 2020 even be without an eerily quiet, socially-distanced holiday shopping season to match the bizarre nature of the rest of the year? But while we might not have gotten the standard Black Friday mobs at physical stores around the country, we did still get that one hot item that tons of people are trying to get their hands on. The gaming console. Both Sony and Microsoft released the newest models for their PlayStation and Xbox platforms, of course, demand is far outstripping supply. This has led to a substantial resale market for both consoles, with resellers profiting almost $60 million collectively since the PS5 and Xbox Series X came out. Now, I don't know about you, but watching this turn of events reminded me of the 1996 Arnold Schwarzenegger gem Jingle All the Way. I thought it would be fun to talk about that movie on our last episode of the year. So put on your ugliest Christmas sweater, hit that subscribe button, ring the notification bell, and let's get into some practical economics on this festive short edition of Out of Frame. Jingle All the Way is set up as a fairly typical example of a Christmas-themed family comedy. The 90s were full of them, from Home Alone and The Santa Clause to A Muppet Christmas Carol and The Nightmare Before Christmas. You know, the classics. Jingle All the Way features a fairly predictable plot with Arnold Schwarzenegger as Howard Langston, a successful businessman, but terrible husband and father. His young son Jamie is constantly let down by a dad who prioritizes his mattress company over family. It's not that Howard is malicious or deliberately being hurtful, but he just doesn't put his son's needs and desires ahead of his business. So he's always late leaving the office, late getting to his son's school, and late getting home to explain himself. And now, it's Christmas Eve. The good news is that for once, Jamie is willing to forgive his dad's failings in exchange for the promise of receiving a specific, highly in-demand action figure as a gift the next morning. The bad news, on the other hand? You got the doll, right? The doll? Yeah, I'm that Turbo Man doll. I asked you to pick one up two weeks ago. Oh, that doll, of course. Howard, you didn't. Please tell me that you did not forget that doll. He did. Howard completely forgot to buy his son the Christmas present. So now he has to engage in a series of wacky hijinks all over town in an effort to acquire this extremely scarce action figure at the last minute. And of course, learn a valuable lesson about the importance of family. With automatic calendar reminders and free two-day shipping with or without gift wrapping, the premise of Jingle All the Way gives us a glimpse of the past that we should all stop and appreciate. But even with all of the modern conveniences we enjoy today, we still live in the real world where scarcity exists and isn't going away. And that brings us back to PS5s and Xboxes. Whenever a new major gaming console is released, there's usually a huge surge in demand for it. People are naturally inclined to want the new exciting thing and the jaw dropping increases to overall levels of prosperity over the last century and a half have allowed us not only the spare money, but also the spare time to indulge in the kind of entertainment that game consoles can provide. Even with the economic slump from COVID lockdowns, PS5s and Xbox Series Xs have been smashing sales records. I guess that's what happens when we're all stuck inside. But supply hasn't kept up with demand and pretty much all the major retailers have been selling out as soon as they're in stock. For desperate gamers and parents, the only sellers with consoles available at any price are resellers or scalpers. These scalpers have invested the time and effort to get a hold of PlayStation and Xboxes, either during pre-sales or by camping out at traditional retail sites to pick them up at list price. And it's important to note here that authorized retailers aren't really allowed to change their prices for game consoles to adjust for changes in demand. This kind of price fixing is actually touted as a consumer protecting anti-monopoly measure. And while retailers are technically free to flout the rules, if they're caught by manufacturers, they could find their authorized retailer status revoked and lose their access to wholesale pricing. This is why you tend to see extremely consistent prices for consoles and games, regardless of what retailer you buy them from. But it's also why these products can be so hard to find. That's where scalpers come in. Just like resellers for things like tickets for concerts and sporting events, people who scalp other kinds of goods go through the trouble and expense of getting a scarce item at the regular list price on the assumption that they will be able to find last minute buyers willing to pay more at a later time. If they're right, then when the item sells out in stores but demand is still high, they can turn around and resell the item for whatever price the market will bear. In economics, this is essentially a form of arbitrage, which simply put is when someone is able to quickly buy something at one price and then resell it for a higher price by exploiting relative differences in demand from one market to another. And now, I'm going to say something that you're probably going to hate. There's nothing wrong with this. Scalpers don't claim to be authorized retailers and they don't get the product directly from the manufacturer at wholesale prices. So there's no fraud involved. They're also not forcing anyone to pay higher prices and most of their buyers wouldn't even be able to get the thing they want at all without their help. It just wouldn't be available. There's another idea in economics made famous by Milton Friedman that's super important here too. There's no such thing as a free lunch. In Jingle All the Way, when Howard puts off purchasing his son's Christmas present until Christmas Eve, he's displaying what we would call low time preference. It just wasn't important enough to him to make time for that shopping trip when it would have been cheaper and easier. That was a bad choice, but bad choices have consequences. If a popular toy or gaming console is hard to find and in limited supply, then waiting to the last minute to try to get it at a low price usually isn't going to work out very well. If Howard wanted to get the toy before Christmas Eve, he'd have had to leave his business and go wait in line like everyone else. In other words, he'd have had to pay more in time in order to pay less in money. But he didn't wanna do that. The weird thing is, in spite of being a successful business owner, he also wasn't willing to just go find a reseller and offer that guy a bunch of cash, which incidentally would have given him more time with his family on Christmas Eve, so that might have been a better idea. Instead, he spent the whole night engaged in ridiculous shenanigans paying in time and money. Obviously, this is the entire premise of the movie and without it, there wouldn't really be any story and it wouldn't be very funny. But it's still a good example to consider. As unpopular as this is, scalpers actually serve an important function, and could have solved Howard's problem. But everybody despises them anyway. In some states, ticket scalping is flat out illegal and there's a movement to make it against the law to resell game consoles. One argument people make is that since we already have laws against price gouging, we should have the same kinds of laws against scalping. But man, you're not gonna like this. Laws against price gouging are a bad idea too. Without the ability to adjust prices according to availability and demand, goods and services won't be available at any price, much less the correct one. This is why we frequently see shortages of food, water, medicine and construction supplies in natural disasters that last for days or weeks, even though those things are all available in other parts of the world. If prices were allowed to go up, entrepreneurs would have a strong incentive to bring those goods from markets where they command a lower price to markets where they are most urgently needed. But price controls shut down those signals and desperate people just suffer instead. But back to scalpers and PS5s, if you wanted to pay the retail price for your new console, you probably could have, only you'd have had to put in the time. Either waiting in line or finding ways to automate the process like some resellers do. On the other hand, you could just pay more money to one of those guys if you absolutely must have that console now. Or you could just wait until the demand dies down and get it for a lower price later, like I plan to do. Regardless, no one is forcing you to buy a particular game console or action figure this holiday season. If you're unsatisfied with the availability or price point of a certain item, you don't have to buy it. If no one was willing to pay two or three times retail price for game consoles, no one would be selling them for that much. But people are, so people do. This is the reality for any economy. You're going to have to come to terms with trade-offs, either paying in money, like with game consoles, or in time and effort, like in Jingle All the Way. But as long as you're willing to pay and don't expect to get something for nothing, the goods you want will be available somewhere. And that seems like a real Christmas miracle to me. Hey everybody, thanks for watching this episode of Out of Frame. We've all had an insane year and I'm personally really thankful that I've been able to continue doing what I do, making videos like this for you to watch and hopefully enjoy. For everyone out there who subscribes to the show and especially those who support us on Patreon, I just want to say thank you and let you know how much it means to me that you like what we do. If I could ask you guys for one thing this Christmas, it would be this. In the next few weeks, go out of your way to meet some new people that you think you disagree with and see if you can find some common ground. The world needs a lot more of that right now and I think you'll be surprised by what you find when you do that. But for everyone, I hope you all get the chance to reconnect with the people you care about that maybe you haven't gotten to see in a while and have a wonderful holiday. I'll see you next year.