Behind every pint of beer is a surprisingly complex story about choices, local identity, supply chains, and a maze of regulations. This week, we sit down with Trey Malone of Purdue University to unpack the economics of beer. We talk about everything from tap lists and terroir to hop farmers, regulations, and what it really means to “buy local.”

In this episode, we discuss:

* How Trey’s research career evolved to include beer economics

* The explosion of product variety in grocery stores and how beer exemplifies that

* Why too many choices on a tap list can lower beer sales

* How local identity and terroir shape demand for craft beer, hops, and cider.

* What 110,000 regulatory restrictions reveal about entrepreneurship in the beer industry.

* And a whole lot more!

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After three years hosting a show titled “Economics Happy Hour”, we figured it was finally time to discuss the economics of beer. We thought it best to bring on an expert, Trey Malone, the Boehlje Endowed Chair for Managerial Economics in Agribusiness at Purdue University. Our drink line-up for this episode was eclectic: Jadrian with a Maine Blueberry sour, Matt with a Dogfishhead 90 Minute IPA, and Trey with a nostalgic Stroh’s.

Trey shared some of the background to his journey into economics and eventually research interest in the economics of the beer industry, which grew out of broader questions about food marketing and product diversity. When he was born, grocery stores carried around 8,000 unique products, but that number is around 50,000 today. Beer, in particular, went from being dominated by a small number of similar-tasting brands to a vibrant, diverse craft beer landscape. That shift made it a great case study for exploring consumer preferences and market evolution.

One of his key research findings when studying beer was that more choices aren’t always better for businesses. In a field experiment featuring a partnership with a local brewery, he was able to find that doubling the number of beers on tap actually reduced the likelihood that customers ordered one, a classic case of choice overload. However, adding a small signal on the beer (like highlighting its rating or awards) restored demand by lowering search costs.

Trey also talked about how supply chains and local identity shape consumer preferences. In Michigan, hop growers leaned into the concept of terroir and crafted narratives around their unique Chinook hops to build demand, even in markets outside the state. His research on cider showed that “local” doesn’t always mean geographic proximity. Instead, it’s tied to community identity. For example, many Detroit consumers prefer cider from Michigan’s Upper Peninsula—hundreds of miles away—over cider from Windsor, Ontario, just across the river.

On the production side, Trey’s work also explores regulation in the beer industry. Using machine learning, he and his collaborators identified over 110,000 regulatory restrictions across the beer supply chain. While that sounds like a lot of red tape, the research finds that clear and consistent rules often help entrepreneurs more than vague or inconsistent policies.

It turns out that beer is more than just a beverage. It’s a powerful case study for understanding how incentives, identity, and business decisions intersect across the economy.

This week’s pop culture references:

Jadrian yielded his time to Trey to hear more about his teaching-related scholarship. Trey shared two recent papers published in Applied Economics Teaching Resources. One explores how podcasts can be used for extension and outreach, especially in agricultural colleges, to build connections beyond the classroom. The other applies the Ignatian Pedagogical Paradigm (IPP) to create a day-long event focused on Black, Indigenous, and People of Color (BIPOC) farm ownership, developed within a college of agriculture at a midsouth university.

Matt shared a quick analysis he did on how much Cheers character Norm Peterson likely spent on beer during his run on the show. It was a fun, light look at fictional bar tabs and a clever nod to this week’s beer theme.

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College football is big business. While universities often talk about tradition, rivalries, and student spirit, the finances tell a story of massive contracts, enormous buyouts, and constant leadership churn. This week, Matt and Jadrian explore the economics behind college football coach buyouts and ask why schools pay millions to people who they consider bad at their job. We explore what these buyouts say about incentives, risk, and market competition in college sports.

In this episode, we discuss:

* Why coach buyouts are structured the way they are and what they signal.

* How risk, reputation, and recruiting drive buyout decisions.

* The role of agents in inflating buyouts and securing job security.

* How schools balance donor pressure, fan expectations, and contract costs.

* And a whole lot more!

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Both our universities are in the midst of course registration, which means students are simultaneously stressed about their current classes and determining the classes they’ll take next semester. That stress has spilled over to Jadrian and Matt, which meant it was a good time to sit down, have a drink, and talk about economics. Jadrian was able to enjoy a Shiner Light from the great state of Texas (but purchased in North Carolina), while Matt opted for a non-alcoholic Bud Zero.

This week’s episode looked at the structure and rationale of college football coach buyouts thanks to a recent article published in The Wall Street Journal. For those who haven’t heard, a lot of major college football programs are on the hook for multi-million dollar buyouts of their head football coaches—a payment owed if their employer fires them before their contract ends. Schools like Penn State, Louisiana State, and Florida all owe their most recent coaches more than $100 million combined in buyouts. But why?

These high-profile buyouts aren’t just about poor performance. Sometimes, schools are willing to pay tens of millions to remove a coach simply because they’re not meeting expectations fast enough. Of course, they’re also there to disincentivize coaches from leaving for a better job. Buyouts, then, serve both as a penalty for early termination and a retention incentive.

Schools can’t perfectly predict how a coach will perform, but large contracts and buyouts can signal confidence or act as a commitment device. It’s also worth considering the financial discipline of athletic departments and athletic directors, and whether these clauses represent a principal-agent problem or a winner’s curse.

This week’s pop culture references:

Neither Matt nor Jadrian had a pop culture tie-in this week, but Matt shared a classroom experiment related to the episode’s theme. In his game theory course, students bid on a jar of pennies worth $6.01. Most bids come in well below that. One student, however, bid just over $8 and won, perfectly illustrating the winner’s curse discussed earlier in the episode.

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We break down the 2025 Economics Nobel Prize, which was awarded to Joel Mokyr, Philippe Aghion, and Peter Howitt for their “having explained innovation-driven economic growth.” We discuss why these contributions matter and reflect on the broader importance of understanding long-term economic growth. Along the way, we also share our own reactions and what stood out about this year’s selection.

In this episode, we discuss:

* The 2025 Nobel Prize in Economics and how it was split among three researchers

* Joel Mokyr’s work on the conditions needed for technological progress

* Philippe Aghion and Peter Howitt’s model of creative destruction

* The idea of the “hockey stick of growth” and what triggered the Industrial Revolution

* Why understanding long-run growth matters in today’s economy

* And a whole lot more!

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Some show notes:

It’s that time of semester where the the to-do lists seem to grow faster than our patience. But it also means that it’s Nobel Prize Week! To celebrate, Jadrian went with a non-alcoholic cucumber-watermelon refresher since he was in the office. Matt, on the other hand, was able to crack open a New Trail Conifer Cosmos Hazy IPA.

This week’s episode centered on the 2025 Nobel Prize in Economic Sciences, awarded to Joel Mokyr, Philippe Aghion, and Peter Howitt for their research on innovation-driven growth. Mokyr received half the prize for explaining the prerequisites for sustained technological progress, while Aghion and Howitt shared the other half for their work on creative destruction.

Mokyr’s work has been grounded in economic history, and highlights the importance of institutional and social foundations in sustaining technological progress. Aghion and Howitt’s model builds on Schumpeter’s idea of creative destruction, where innovation continuously disrupts old technologies and drives growth forward.

There has been a great metaphor that often gets tossed around to describe modern growth: the “hockey stick” of economic growth. For centuries, global income remained largely flat until the Industrial Revolution, when technological advancement caused a steep rise in prosperity. Mokyr, Aghion, and Howitt’s work focused on the theoretical models that explained the dramatic turning point in history.

It’s hard to overstate how vital these ideas are. Understanding growth may be the single most important question in economics.

Both of us were familiar with the stories surrounding the hockey stick of growth, but neither of us were familiar with the three individuals who were selected. In no way is that a knock on the winners, but rather a highlight of the many subjects that economists study. Because there are so many topics to pick from, many economists tend to specialize in their frield. That makes it challenging to keep up with major work outside your own fields.

This week’s pop culture references:

Matt pointed out the lack of economic growth in Game of Thrones, noting that overhead shots of King’s Landing look nearly identical to those shown 200 years earlier in House of the Dragon. It’s a fun example of what it looks like when an economy doesn’t experience technological progress or creative destruction. It’s just the same buildings and no evidence of any hockey sticks.

Jadrian grabbed a funny scene from Talladega Nights where Ricky Bobby claims that with modern medicine, he might live to be 245 years old. It’s a humorous take on how the technological progress studied by this year’s Nobel Laureates shapes expectations about the future.

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Let’s dive into a surprisingly tricky topic to teach: tax incidence. In this episode, we explore why this seemingly simple concept trips up so many students, how elasticity shapes “who pays,” and what strategies actually help the idea stick. It’s a candid mid-semester check-in that’s full of travel stories, fall-break frustrations, and creative teaching analogies.

In this episode, we discuss:

* Why tax incidence is frustrating to teach compared to other topics.

* How elasticity determines the division of tax burdens between buyers and sellers.

* Whether professors should “nudge” better study habits or let students learn through consequences.

* And a whole lot more!

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Some show notes:

October marks the midpoint of the semester for each of us, which is a good enough reason to share a drink. Jadrian went with a “topless” Pride Cream Ale, which is really only possible thanks to a nifty gadget that removes the can lid. Matt stuck with a classic Brooklyn Brewery Pale Ale.

Our main topic for this episode focused on challenging topics to teach, and for Jadrian, that would be the elusive concept of tax incidence. It seems like every year, students misinterpret how taxes affect buyers and sellers, even though Jadrian has tried different techniques for teaching that concept. Many assume that a 50-cent tax applied to an item costing $1 results in a new price of $1.50, which means they’re missing the concept of tax burdens affecting both sellers and buyers.

This is such a great time to be teaching tax incidence because we’re seeing this play out in the news with tariffs on imports. The big question when tariffs were announced focused on who would be paying the tariffs, foreign countries or American consumers. Economists are usually quick to point on tax incidence in that consumers would likely pay a portion of the tariff through higher prices.

This was also a good chance to talk about the limits of what we can do as instructors. If it takes hours of revisions to get the class 1% better on a particular topic, perhaps there are better uses of our time? That led us into a brief conversation on instructional paternalism and how much oversight professors should place on shaping student behavior around deadlines and pacing. That, however, may become a future episode.

This week’s pop culture references:

Jadrian jumped in quickly to block Matt from reusing one of his favorite clips. Jadrian’s contribution is from J. Cole, in which he sings about the frustration many people feel about paying taxes without having a real say in how they’re spent.

Matt went with two Broadway hits from Lin-Manuel Miranda. In the Heights has a great song where characters recognize that their lottery winnings would be reduced because of taxes. And then in Hamilton, the characters talk about the resistance to British taxation.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit econhappyhour.substack.com

We explore what the looming demographic cliff means for colleges and universities. As the number of high school graduates begins to shrink, institutions are grappling with how to adapt, especially smaller and regional schools. We discuss which types of schools are most vulnerable and why elite and flagship universities may be somewhat insulated from the effects. We also look at the structural and financial implications this demographic shift brings to the future of higher ed.

In this episode, we discuss:

* What the demographic cliff is and where it came from

* Why the decline in high school graduates is hitting some schools harder than others

* How large research universities are expanding while smaller schools struggle

* The uneven distribution of enrollment pressure across higher education

* Mergers, closures, and financial strategies schools are using to survive

* Long-term risks for access and affordability in college education

* And a whole lot more!

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Some show notes:

It’s still early in the term, but Matt and Jadrian have been hard at work with the latest batch of students. There’s some controversy at Susquehanna, so it’s a perfect time for a drink. Matt went with a One to One Hazy IPA from Hitchhiker Brewing featuring Mosaic and Simcoe hops, while Jadrian opted for a lighter Watermelon Ranch Water hard seltzer from Karbach Brewing in Houston.

This week’s episode centers on the demographic cliff: an anticipated drop in the number of college-age students due to declining birth rates after the Great Recession. Why does this matter? Although high school graduation rates haven’t dropped, the number of graduates will fall by as much as 12–15% over just a few years. That creates significant pressure on colleges that rely on a steady pipeline of new students for financial sustainability.

While we often talk about the enrollment cliff as affecting higher education as a whole, this shift won’t impact all colleges equally. Large research universities and highly-ranked liberal arts colleges are more insulated, often continuing to grow or maintain enrollment. Smaller private schools, regional public universities, and lesser-known liberal arts colleges are already seeing financial strain, leading to campus closures and mergers. Examples like the creation of PennWest and branch campus closures at Penn State illustrate how some schools are consolidating to survive.

This is more than a numbers game. The drop in prospective students also means fiercer competition, with many institutions increasing aid offers to fill seats. This forces schools to discount tuition more heavily, squeezing budgets even further. And while some schools expand dorms and programs to attract top-tier students, others face hard questions about long-term viability.

We round out our discussion with concerns about what this means for educational access, especially for students in rural areas or from low-income backgrounds. If regional colleges disappear, students may lose the ability to attend college close to home, risking broader educational and social implications.

This week’s pop culture references:

This isn’t really a pop culture–friendly topic, but we had a few moments worth noting. Matt went with a classic quote from Animal House with Brother Bluto’s deadpan line: “Seven years of college down the drain.” It’s a fitting clip for an episode focused on the future (and fragility) of college as an institution.

This was a reading-heavy segment, fueled by our own curiosity about the future of higher ed. Matt has been diving into Let Colleges Fail, a provocative book that compares the failure rate of colleges to public companies and argues that society might benefit if more struggling schools were allowed to close.

Jadrian recently picked up Hacking College, which focuses on how universities can better prepare students for life after graduation. It looks at structural and practical changes that could make higher ed more relevant and responsive to student needs.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit econhappyhour.substack.com

Let’s dive into the unexpected legacy of Boris Yeltsin’s 1989 visit to a Houston grocery store. We explore how that moment shaped the Russian leader’s perspective on economic systems and why it's a favorite teaching example in economics classes. It’s a great introduction to consumer choice, abundance, and market economies, thanks to Yeltsin’s astonishment captured on film.

In this episode, we discuss:

* The story of Boris Yeltsin’s 1989 grocery store visit in Houston.

* How the trip challenged his view of command economies.

* How to use this story in an economics class to explain different economic systems.

* The symbolism and impact of everyday abundance in American supermarkets.

* And a whole lot more!

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Some show notes:

It’s the first week of classes, which means it’s time to introduce foundational economic ideas to a new group of students. Before diving into the main topic, we share some alcohol-free drinks. Jadrian is recording from the office, so he went with a Diet Coke. Matt is gearing up for a trivia night, which means he went with a Bud Zero.

Jadrian’s favorite story to tell in principles of economics is a summary of Boris Yeltsin’s impromptu stop at a Randall’s grocery store during a diplomatic visit to Houston in 1989. What was meant to be a simple public-relations stop became a moment of genuine shock for the Russian leader, who was stunned by the variety and availability of consumer goods, particularly frozen pudding pops.

His visit turned out to be more than just a funny anecdote. It became a moment that highlighted the difference between market-based and command economies. Yeltsin’s visible awe (and later disbelief) showcased how removed the Soviet Union's system was from the consumer abundance present in the U.S. During his visit, he initially believed the store was staged and later insisted on stopping at a second one just to confirm it was real.

Yeltsin shared with his entourage that “there would be a revolution” if Soviet citizens saw the conditions of American supermarkets. While the entire Houston Chronicle story is a great read, the photos of Yeltsin marveling at freezers and checkout scanners are the best part.

Before logging off, we also explored the broader context of American agriculture and global influence, based on a great Freakonomics podcast summarizing how the U.S. government used subsidized food exports to economically undercut the Soviet Union.

Americans have been blessed with a domestic food system with an overwhelming variety, but it’s often something most Americans take for granted. Perhaps when you celebrate Boris Yeltsin Supermarket Day on September 16, you’ll stop to marvel at the variety that is available every day thanks to our market-based system.

This week’s pop culture references:

Alongside the Yeltsin story in class, Jadrian shares a scene from Moscow on the Hudson, a film starring Robin Williams that explores immigration and cultural adjustment. One memorable scene ties directly to this episode’s theme: Williams’s character visits a grocery store to buy coffee and is overwhelmed by the lack of lines and the sheer variety of choices. It was a moment that mirrors Yeltsin’s own experience in Houston.

Matt’s contribution comes from an early scene in The Hunger Games, where Katniss is given a simple piece of bread. Her reaction of genuine excitement reflects the level of scarcity that exists in their command economy. Even basic goods aren’t always available. It's a quick but powerful illustration of economic systems in action.

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We sit down with Tom Flesher and Noah Trudeau to talk about their JET SET session on using escape rooms to teach economics and statistics. Escape rooms are built around core economics concepts like opportunity cost and trade-offs. But Noah and Tom have taken it a step further and infused class-specific content into the clues that students need to solve to escape. Noah’s experience is based on a digital escape room he has used as a final exam review, while Tom describes how he has incorporated in-person, puzzle-based activities into his day-to-day classes. Together, they highlight how gamification can make economics more interactive and memorable for learners of all ages.

In this episode, we discuss:

* How escape rooms can model core economic concepts like opportunity cost and resource allocation.

* The difference between digital and in-person escape room formats in teaching.

* Using escape rooms as a comprehensive review for exams.

* The role of gamification in economics education for both traditional and non-traditional students.

* Benefits of fostering creativity, collaboration, and problem-solving through classroom games.

* And a whole lot more!

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Some show notes:

JET SET 2025 was packed this year, and we were only able to grab one interview while bouncing between sessions. Today’s episode may also be an Economics Happy Hour first: all four guests drank the same beer. We found a spot at Jack Patrick's Bar & Grill and each enjoyed Urban Chestnut’s Zwickle, a kellerbier that was perfect for the hot, humid St. Louis weather.

While there were a lot of great sessions at JET SET 2025, the one that stood out to us most was a session led by two of our friends, Tom Flesher (Suffolk County Community College) and Noah Trudeau (Troy University). The two of them were presenting on using escape rooms to teach economics. While Noah’s work focuses on a digital escape room experience, Tom’s approach uses in-person, hands-on puzzles to create immersive learning environments.

They first break down the basic structure of an escape room: teams race against the clock to solve interconnected puzzles. For educators, this is an easy connection to the core principles that are covered in early classes. Concepts like opportunity cost, trade-offs, and resource optimization are embedded in every decision students make during these activities. The problem-solving element of an escape room also mirrors the analytical and creative thinking economists need in real-world applications.

Noah shared his experience with a digital escape room project that he designed as a final exam review for a statistics course. He modeled his game partly on tabletop role-playing games, but the activity places students in a scenario where they solve problems drawn from the semester’s material. The format of his game encourages students to recall earlier lessons, collaborate, and engage actively to “get out” of the review session. Students found it a more memorable review than a traditional review of topics.

Tom shares his experience with gamification in a community college context, noting that there will always be people who dismiss it as “just playing games,” but he saw that this approach really resonated with diverse learners, including non-traditional students. He shared how game-based activities would spark “lightbulb moments,” where concepts click for students who might have struggled in more conventional lecture settings.

They wouldn’t give away what would happen in their session to protect the integrity of the game, but be on the lookout for a future paper from Tom and Noah about how they’re implementing escape rooms in the classroom. If you’re on the fence about gamifying your classroom (even if it isn’t escape rooms), Noah and Tom also shared some of the benefits they receive as professors who get easily burned out teaching the same topic multiple times each day.

This week’s pop culture references:

Since there were four voices on the episode, Matt and Jadrian stepped back from pop culture picks this week. Noah shared a favorite scene from Moneyball that he uses in his statistics class. In it, Billy Beane explains the idea of replacing Jason Giambi “in the aggregate.” He and his analytics guru talk about how to use statistics to think about substitutes when a single star player can’t be replaced directly.

Tom brought two examples from The Simpsons. The first was a spoof on a PBS donation campaign where Betty White calls out free riders, those who watch but don’t donate. She considers them “a common thief” who makes her furious.

Tom also shared his favorite clip from The Simpsons that he uses to kick off his macroeconomics course. In it, Homer reminds us (and himself) that money can be exchanged for goods and services.

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We dive into the sudden firing of the Bureau of Labor Statistics Commissioner following large downward revisions to the most recent jobs data. Everything is still pretty new, but we get a chance to talk about the scale of the revisions, the normalcy of such adjustments, and the potential implications of politicizing economic data. It's a first reaction to a surprising move with potentially big economic and institutional stakes.

In this episode, we discuss:

* The scale and context of recent BLS jobs data revisions

* Why revisions are a normal and expected part of labor statistics

* Concerns raised by firing a data-focused civil servant over routine changes

* The institutional risks of undermining trust in economic data

* How policymakers and markets rely on accurate, stable data reporting

* And a whole lot more!

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Some show notes:

Our friend Brian O’Roark made the mistake of texting us about the unexpected firing following the jobs report, which meant he got invited to chat with us. Brian kicked things off with a watermelon vodka cocktail called Brave New Swirl, inspired by the Tequila Mockingbird book. Jadrian opted for a non-alcoholic Electro Lime Circa de Cerveza, and Matt cracked open a Lift Off IPA from Daredevil Brewing Co., a gift from superfan Tim Dye.

If you’ve missed the news over the past week, the BLS released its July jobs report on Friday, which included a downward revision of more than 250,000 jobs for May and June. It was one of the largest revisions outside of COVID since 1979. Hours later, President Trump dismissed the BLS Commissioner.

We took some time to talk about why revisions happen in the first place. The BLS relies on surveys from over 600,000 workplaces, many of which respond late or not at all. As more data comes in, earlier estimates are adjusted, making revisions common and expected. Our surprise wasn’t based on the revision itself, but the political response. Firing someone over a data adjustment has struck many economists as dangerous, as it undermines the statistical integrity of key economic institutions.

There is a lot of institutional expertise at agencies like the BLS. Even though the Commissioner was removed, much of the technical staff remains. This will likely limit the immediate risks to data quality. But the move raises concerns about future interference. Would staff feel pressure to avoid “bad news”? Could upcoming data releases be skewed or politicized?

Of course, there are some historical parallels to be drawn, mainly from Eastern Europe and China, where statisticians faced pressure to produce politically favorable numbers. While the U.S. isn’t there, it’s worth noting that credibility and trust are slow to build and easy to lose.

The firing also reignited longer-standing debates about how we define and report key economic indicators. Measures like unemployment and inflation rely on intentionally rigid definitions so that economists can make comparisons over time. For instance, inflation calculations don’t just track the price of a product; they adjust for changes in size, ingredients, and quality to make fair comparisons across decades.

Even when updates to these definitions are made transparently, they often spark confusion or accusations of manipulation. A recent example came during the pandemic when the Fed revised the definitions of M1 and M2 to reflect modern banking habits. Although nothing new was being “printed,” the change caused spikes in the data that fueled misinterpretation online. Our friend Dr. Abdullah Al Bahrani wrote about it for his newsletter when it was happening:

All of this also raises big questions about where policy goes from here. The Fed has been under pressure to cut interest rates, and weak labor market data would support that move. But if Trump is dismissing the jobs numbers as wrong while insisting the economy is booming, then the rationale for rate cuts disappears. Brian noted that Trump seems to want both a roaring economy and low interest rates, an inflationary combination if taken too far. And if last week’s events set a precedent, should the BEA Commissioner be worried if GDP slows after recent tariff moves? Let us know if there’s another angle we should have considered. Are we onto something, or way off base?

This week’s pop culture references:

Brian shared a scene from National Lampoon’s Christmas Vacation where Clark is shocked to learn that Cousin Eddie hasn’t bought any presents. The conversation turns to Eddie’s long-term unemployment. We learn that it isn’t because jobs are unavailable, but because he’s holding out for a management role. Brian likes to use the clip to illustrate frictional unemployment in action.

Jadrian brought up one of his favorite classroom examples: drug-sniffing dogs forced into early retirement after states legalized marijuana. Since their specialized skills are no longer useful, it’s a fun case of structural unemployment.

Matt discussed a scene from Game of Thrones where Tyrion finally gets access to the kingdom’s financial records and is appalled by what he finds. It’s a light way to introduce the concept of public budgeting and the value of transparency.

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This week, we dive into the economics behind rewards programs and credit card perks. We explore how loyalty schemes influence consumer behavior and how companies use them strategically. The episode covers travel points, airline upgrades, hotel loyalty tiers, and their broader economic implications. We also consider who really foots the bill for all those “free” perks.

In this episode, we discuss:

* Why companies offer points, perks, and loyalty rewards, and how they profit from it

* The trade-offs consumers make to stay loyal to specific brands or services

* How status tiers shape travel habits

* The hidden costs of rewards programs and who ends up paying for them

* Whether reward cards truly benefit most people, or just the most organized few

* And a whole lot more!

Catch up on some old episodes:

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Some show notes:

Jadrian is close to cleaning out his beer shelf, but the remnants aren’t lining up with the season. A shelf full of porters is a lot harder to drink in the middle of a hot summer. Jadrian had a Pay It Forward Cocoa Porter from West Sixth Brewing (Lexington, KY), a leftover from a past JET SET. Matt is recovering from a migraine and opted for something close to water: a Bud Zero.

This week’s conversation came courtesy of a Bloomberg story about a CEO who used 1.83 million Amex points to pay off an unexpected $11,000 tariff bill. We aren’t talking about tariffs, but rather a wider conversation about the purpose and strategy behind credit card rewards and loyalty programs.

We each share our own experiences, whether that involves the way we track multiple reward accounts in a spreadsheet or weighing the value of lounge access, upgrades, and travel perks. Both of us are loyal card-carrying members of popular loyalty programs offered by Delta Airlines and Marriott hotels, which means we must have some good reasons for paying the annual fee.

But do the perks (like companion passes, free nights, or waived baggage fees) outweigh the cost? We seem to think so, but then it left us wondering who is really paying for all these benefits we cash in on?

In a classic case of “nothing is free,” it’s important to remember that businesses pass along credit card fees in the form of higher prices for everyone, often including those who pay in cash. That creates a subtle redistribution of resources where people who optimize rewards programs are subsidized by those who don’t. It’s worth noting that companies are also incredibly profitable with their rewards programs. For example, Delta received billions from Amex for its co-branded cards last year.

One big takeaway: airline and hotel rewards cards might make sense for frequent travelers, but that’s a small slice of the population. After a long stretch focusing on airline perks, we stopped to consider how often people even fly. According to Gallup, only about 15–20% of Americans take more than three flights per year. Most Americans don’t ever fly during the year.

We wrap up our conversation discussing how rewards programs have evolved. In recent years, companies like Delta and Carnival Cruises have shifted their loyalty structures to reward spending on co-branded credit cards rather than prioritizing brand loyalty alone. It’s a subtle but important shift, one that favors high-spending customers and raises the bar for earning perks through behavior like repeat flying or cruising.

These programs have become so gamified that they often blur the line between savvy planning and status chasing. For some, that chase is part of the appeal. Take JetBlue’s recent 25th anniversary promotion: fly to 25 different cities before the end of the year, and you’ll earn Mosaic status for the next 25 years. It’s a clever marketing strategy, but also a reminder of how far people are willing to go when there’s a shiny perk on the line.

This week’s pop culture references:

Matt talked about the 2009 movie Up in the Air, where George Clooney's character obsessively pursues airline miles and elite travel status. In one scene with Anna Kendrick, they discuss the perks of frequent travel and how to maximize them.

Jadrian took a different angle, highlighting a more common loyalty program. In this Seinfeld episode, Elaine is determined to complete her punch card to earn a free sub even though she doesn’t like the subs she’s eating. When she loses the card, she’s crushed. Jerry offers a valuable economics lesson, reminding her about sunk costs. Those bad subs are already gone, so is the “free” one really worth it?

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Dive into the economic concepts that have helped with the recent explosion of sports betting in the United States. Explore how sportsbooks set odds, the role of information in creating an edge, and why betting markets share some similarities with prediction markets. We briefly unpack the effects of the 2018 repeal of PASPA and discuss how technology has transformed gambling behavior. This week’s conversation highlights both the fun and complexity of modern sports betting.

In this episode, we discuss:

* How sports betting odds are set and why sportsbooks aim to balance bets.

* Why some bettors can gain an edge and how information affects outcomes.

* The economics behind parlays, money lines, and house margins.

* How the 2018 Supreme Court ruling changed the legal landscape.

* And a whole lot more!

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Some show notes:

We recorded this week’s episode right before Game 7 of the NBA Finals and right after recording our episode on Bobby Bonilla Day. We decided to stick with the sports theme, but our drinks have changed. Eric opted for a glass of water to combat the heatwave sweeping across most of the U.S. at the time, while Jadrian went with Best Day Brewing’s Sea Salt and Lime non-alcoholic cerveza. Matt snagged a Gorb Hazy IPA from Oliphant Brewing on his recent trip to Minnesota.

Over the past few years, the amount of ad space dedicated to gambling sites has increased dramatically. That’s due in part to the repeal of PASPA in 2018, which made it easier for states to legalize sports gambling. We brought on our friend Eric Dunaway from Wabash College to help provide some insight into how the sports gambling industry ballooned from underground operations and Nevada-only betting to nationwide, app-based access that includes bets as small as a dollar.

Sports gambling is different from traditional gambling in a variety of ways, but perhaps the most interesting to economists is that the outcome of the game is not based on probabilities like traditional casino games. Because of how often blackjack hands are played or roulette wheels are spun, it’s a lot easier to estimate the expected win probability for any given bet. That’s not possible with sports games because we only ever see one observation. As a result, sportsbooks are more interested in “setting lines” rather than trying to predict the outcome of a game.

Eavesdrop on some sports gamblers, and there’s no doubt you’ll hear them reference a money line: the initial distinction between favorites and underdogs. Even one of the simplest bets is structured in a way that ensures a profit for the casinos by baking in a “vig” regardless of the outcome. While house edges are fixed in games like roulette, sports betting allows for subjective analysis and the potential for informed bettors to gain an edge.

The second half of this week’s episode focused on the behavioral economics aspects of sports gambling, including how fans may bet emotionally on their teams and the ways sportsbooks use boosts and promotions to attract money. Sportsbooks rely on more than just math; they also leverage psychology. Many apps use flashy celebration graphics and real-time win tracking to create a sense of excitement, while quietly downplaying losses. These design choices can make betting feel more like a game than a financial risk.

Perhaps more concerning, sportsbooks are now partnering with some universities to present gambling as a way to support college athletics. While framed as sponsorship, we’re not entirely sure it’s appropriate to normalize betting among young adults with blurred lines between supporting your school and engaging in risky financial behavior. Perhaps the one plus side of the rapid growth in sports gambling is that we have a lot of young people passionate about statistics. Let’s hope that passion extends to more responsible financial decisions.

This week’s pop culture references:

In Back to the Future Part II, the antagonist steals the Time Machine and delivers a sports almanac to his younger self in 1955. With decades of future game outcomes in hand, he builds a gambling empire by always betting with perfect information. The scene ties directly into this episode’s theme: if you know more than the market, even slightly, you can win big.

In Casino, Robert De Niro plays a handicapper who works for the mob, helping them set accurate betting lines on sports events before eventually taking over a casino. His role shows how valuable expert analysis and insider knowledge can be when money is on the line.

Matt highlights Nate Silver’s new book, On the Edge, where Silver reflects on his own attempt to become a professional NBA gambler. Despite his strong background in statistics and data, he admits he struggled to profit consistently. It’s a good reminder that even the smartest bettors often fall short against efficient markets and razor-thin margins.

Matt also brings up an episode from Season 4 of The Wire, where a retired police officer becomes a teacher and uses gambling examples to teach math. By tapping into something his students care about, he gets them to engage with probability and numbers. For better or worse, sports betting is making statistics exciting for a new generation.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit econhappyhour.substack.com