Most economists have fond memories of applied labor classes where the professor would teach the following detective puzzle. If a 45 year old in calendar year 2008 buys a Prius, what have we learned about the relative importance of birth cohort effects, calendar year effects versus age effects in determining car demand?

The answer to the riddle revolves around the following exciting arithmetic.

In 2008, a person who is 45 years old was born in 1963. So there are 3 different factors potentially driving behavior;

1. Being 45 years old (the age effect)
2. Having been born in 1963 (the birth cohort effect)
3. Living in 2008 (the calendar year effect) ---

The trouble is the identity that 2008 - 45 = 1963.
so at a point in time you can't tease out all 3 effects' impact.

This is frustrating because one can tell plausible stories of the role of all 3 in determining important consumer behavior. Now that this boring lecture is over, please read my recent media quote to see a funny example in the real world.

Greens and the Summer of Love