The second season of the richest source of economics and business ideas in the popular media started last week. The show is Deadwood, HBO's fictional telling of the early history of the town in South Dakota.
I'm not sure if it was me or not, but this episode was weaker in economic content than most last season. Of course, it was also clear that they were setting the scene in many ways for this season - Deadwood is now less of a seat-of-the-pants outpost, and now more of a going concern. Anyway, here's what I spotted.
Swearengen reveals a Luddite streak with his displeasure at the coming of the telegraph. This is classic though - he benefits from asymmetric information. The less information in or out of town, the better for his business.
Swearengen is also quite concered about the larger presence of territorial government in Deadwood. He smells rent seeking in the offing. Interestingly, the territory has hedged their bets by dividing Deadwood between three jurisdictions.
Both Swearengen and Tolliver are worried about the impending opening of another brothel - they're a long way from it, but market forces are driving them towards zero profits. Tolliver hedges his position by demanding an equity stake in the new operation. There's an argument to be made there that arbitrage suggests that the size of his stake is matched by his expected loss in business.
There is also a theme here about specialization and costs. The low fixed cost placer deposit works of the first season are being replaced by more industrial operations. Successful claims, in particular Alma Garrett's "9 Above Discovery", are plowing their profits back into covering fixed costs needed to develop larger operations. Doing so also allows her to apparently buy-out Ellsworth, who had worked the neighboring placer deposits, but now managers her operations.
Sorry that it took over a week to get this posted - I was on the road for 3 days last week, and then had to deal with midterms. TV wasn't on my radar screen.
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