Life's Little Questions
Why are there Braille dots on the keys of drive-through ATMs? and
why don't the Japanese have many swear words? We found the man who
can answer those questions -and others like them -
economically.
Illustration by Carey Sookocheff
FORGET THE PIE CHARTS. When Robert H.
Frank, an economics professor at
Cornell University's Johnson
Graduate
School of Management, wants beginning economics students
to help themselves to a heap of understanding of the subject's
principles, he sends them off to conjure up a question that,
eventually, they'll have to answer using economic principles.
Though there are, to a certain degree, limits, Frank makes it clear
that many of life's most confusing questions - like the ones asking
why retailers start the holiday season when summer's winding down
and why there is disparity in pricing between black and white
MacBooks - can be solved with economics.
Thankfully, Frank doesn't just leave the questions in his desk
drawer after dispensing grades; he delivers them in some truly
entertaining books. Yes,
Virginia, economics can be entertaining.
With Frank's latest book,
The Economic Naturalist:
In Search of Explanations for Everyday Enigmas, on your side
(or on your bedside table), you won't need an
Idiot's or a
Dummies guide to
get a grip on economic principles. And (shocker!) you'll even have
fun along the way. Walking you through a world of odd questions,
Frank provides all the economics you'll ever need to get through
daily life. Plus, aside from a fun illustration on the front cover,
there's nary a pie chart in sight. We asked Frank to answer some of
the questions we've had on our minds - along with some of his
favorites from over the years.
Why did kamikaze pilots wear helmets? "You
can offer some cost benefit explanation," says Frank. "Maybe
there's going to be turbulence on the way to the target, and [the
helmet] will help him get there if he's protected. Maybe the target
won't be there, and he'll have to come back - you'll want to keep
him alive for another mission. I think more persuasive is that
kamikaze pilots are first and foremost pilots, and pilots wear
helmets. That's part of their identity as pilots. There are some
interesting studies about the economics of personal identity." If,
adds Frank, people can't function in the world without a
"consistent, coherent personal identity … then that's part of
economics too."
Another of your students asked why there is
Braille on the keys of drive-through ATMs. So the
manufacturer only has to produce one type of key. "The short,
sensible answer is that it's cheaper to do it that way," he says.
Sounds reasonable. Now, brand extensions are all
the rage at the supermarket these days. Doesn't it dilute loyalty
to the core brand when a company introduces the same product in 15
different flavors or scents? How many kinds of Tide does the world
really need? "In a world where everyone is different," says
Frank, "it would be nice for everyone to get what she wanted. It's
just an extension of that. It doesn't really cost much to add this
extra variety. In the cases you're talking about, it's essentially
the cost of printing new labels."
So what question has surprised you the most over
the years? Anything pop to mind? " 'Why does Japanese have
virtually no swear words, while Korean is chockablock with swear
words?' The answer was that the samurai culture of
Japan made it
dangerous to run the risk of insulting someone, so people were
cautious about how they spoke in Japan," says Frank. "There was
never a similar tradition in Korea."
How is that a question of economics? "It's
the cost-benefit principle. I'd like to insult this guy, and in
Korea, I can, but in Japan, it might be really costly if I do," he
says.
One thing that seems, well, crazy, is when hotels
charge different rates for the same kind of room. Aren't they in
danger of annoying their customers? "If you can figure out
ways to charge people different prices, that enables you to offer a
better deal for everyone. There's the example in the book of Apple
laptop computers on sale for different prices in black and white.
You might get offended if you bought the black one and realized it
was the same as the white one and that you paid a premium for it.
But if you reflect on the fact that the company is able to expand
its market, the cost of producing extra machines is very small. So
the fact that they're able to expand the market means they can set
a lower price for both machines. If they do it with what I'm
calling the hurdle method, they put a hurdle in your path and tell
you that if you want the cheaper price, all you have to do is jump
over a hurdle - like buy the color you don't like, wait a year and
buy the paperback, or ask about the special price [when you make a
hotel reservation]. As long as [those choices are] available to
people, you can't really complain that they charged you a higher
price," says Frank. "[You] could have gotten the lower price; [you]
chose not to."
Baseball players who are named rookie of the year often endure what’s known as the sophomore slump. Why aren’t they quite as good the next year? “Somebody who gets rookie of the year almost invariably has had an unusually good season,” he says. “People have good years and bad years. After an unusually good season, it’s likely you’ll have a more nearly normal one the next time.”
Why do people spend more when they’re splitting the check? “It makes it seem essentially free to order a more expensive item,” says Frank.
Okay, here’s one that’s probably on everybody’s mind right now: Why do retailers kick off the holiday sales — and music — so early? “There are a lot of sales to be had of that stuff if you’re on the shelves before [other retailers]. So if everyone else puts them on sale November 1, and you go mid- October, you’re going to get the two-week window, where you’re the only one who has them,” he says. “Once you do that, it’s going to be compellingly in their interest to follow suit, and it … keeps slipping back.”