George Will on the Democratic Party's economic problem

Review of The Economic Naturalist

I received Robert H. Frank's The Economic Naturalist: In Search of Explanations for Everyday Enigmas as a gift. Tyler Cowen liked it. Steven Pearlstein of the Washington Post gave it a mixed review:

The result is often repetitious and too often simplistic and unsatisfying. . . . It is pleasant enough to read, but it breaks little new ground and winds up being more clever at asking questions than at answering them.

While I, too, spent a pleasant couple of hours with the book, I have, like Pearlstein, some complaints.

However, I completely support what Professor Frank is trying to do. He wants students taking introductory economics to begin applying economics as soon as possible. He assigns his students to write short essays that are "to use a principle, or principles, discussed in the course to pose and answer an interesting question about some pattern of events or behavior that you personally have observed." About 90 such questions-and-answers that his students proposed are the core of the book. (Another couple dozen or so derive from Professor Frank's research and the research of other professional economists.)

This is a very worthwhile objective. And Professor Frank states, ". . . their answers to the questions should be viewed as intelligent hypotheses suitable for further refinement and testing. They are not meant to be the final word." So, the questions-and-answers also have benefit of stimulating further discussion and further hypothesizing.

But a problem with teaching through these assignments is that finding good questions and answers is quite difficult. Many of the students' questions or answers, or both, won't be very good. Given that the 90 in the book probably represent the best responses of several Cornell classes' worth of assignments, four problems with using these assignments in the classroom are apparent.

1. The "pattern of events or behavior" the student tries to explain may simply be, as a factual matter, wrong, or at least not general. Here are three examples.

"Why are people more likely to return cash to a store when given too much change by a cashier than to retrun a piece of merchandise for which they were not charged?" This question was prompted by "an informal survey". The survey is not cited, so I would guess it was based on a survey, probably small, of the student's acquaintances. I simply don't believe this result holds generally.

"Why does Cornell have a reputation for a high suicide rate among students when its actual rate is well below the national average for university students?" How do we know that Cornell has this "reputation"?

Why do "almost new" cars sell for so much less than brand-new ones? John Lott's recent book Freedomnomics argues that this is not true, and he presents supporting data.

2. Some of the puzzles presented in the questions are not that puzzling. One example: why might a bar charge customers for water but give peanuts away for free? Even students with weak reasoning powers and no economics background should be able to answer this. Another example: why have U.S. men done so poorly in international soccer competition?

3. A few of the questions are not really answered by economics. The answer to why an accident in the northbound lane of the highway often slows traffic in the soundbound lane has much more to do with physics than economics. Three questions whose answers are essentially "regression to the mean" are interesting, but ones I wouldn't want to spend time on in an introductory economics class. (These questions are based on famous work by Kahneman and Tversky and since Kahneman has won the Nobel Prize in Economics, it can be argued that these questions should be considered economics. Maybe, but I think the opportunity cost in the introductory course, or even the intermediate course, is too high.)

4. Some of the answers seem incomplete or questionable. Even though Professor Frank says this is to be expected, I think problems with the answers would confuse, even irritate, many students.

Why do baseball managers wear uniforms? Several answers are proposed but none satisfy me. One proposed answer is ". . . it is not uncommon even for players to be noticeably overweight. An out-of-shape manager in a baseball uniform would thus have been less conspicuous than an out-of-shape coach in a basketball uniform." Maybe "less" so, but 1) this doesn't explain why baseball managers simply don't wear ordinary clothes like coaches in other sports, and 2) Professor Frank himself notes earlier that ". . . the answer does not seem to be that baseball uniforms flatter the male form in late middle age."

Why do many budget hotel chains offer Internet access for "free", while many luxury hotel chains charge extra for access? Professor Frank concedes that "if enough guests begin complaining about the practice, the fact that the marginal cost of providing Internet access is zero suggests that some luxury hotel chains may start including access in their room rates." So market competition only lowers price if the customers "complain"?! (To be fair, this is not an easy question. Even Steven Landsburg, normally a great solver of economics puzzles, offered--I believe--an unsatisfactory answer. I don't have a great answer, either, but it may have to do with luxury hotels trying to appear less expensive on Priceline (UPDATE: new link; thanks, Bob) and other Net search engines.)

"Why are the least productive workers in a work group within a firm typically paid more than the value of what they produce, while the most productive workers are paid less?" (Presumably there is research to support this claim, but unfortunately it's not cited.) Frank's answer is that people with high "local rank" receive prestige and respect and will thus accept pay below the value of their marginal product. Frank continues that those with low local rank must therefore be compensated for their lack of respect and prestige and so receive pay above their value of marginal product. I don't buy this. For one thing, I wonder whether this is just Lazear's "underpay younger workers and overpay older workers" story in a different form. (The book discusses that theory in response to a different question.)

So, I'll stick to my practice of simply including as many interesting examples as I can in lecture. And I'll probably add some or all of the following six questions, questions I liked and whose answers I am mostly satisfied with. (But I won't reveal the answers here; if you're curious, buy the book.)

How come a light comes on when you open the refrigerator door but one doesn’t when you open the freezer?

Why is milk sold in rectangular containers while soda is sold in cylindrical ones?

Why can you rent a $20,000 car for $40/day but renting a $500 tuxedo costs $90/day?

Why do dry cleaners charge more for women’s blouses and shirts than for men’s shirts?

Why would a fast food restaurant offer customers a free meal if the cashier doesn’t give them a receipt with purchase?

Why are seatbelts required by law in cars—and all states but NH have laws requiring they be worn—but not in school buses (except NY, NJ, FL, and CA)?