The Economic Naturalist: In Search of Explanations for Everyday Enigmas [Hardcover]

Robert H. Frank (Author)

Book Description

Publication Date: May 21, 2007

Why do the keypads on drive-up cash machines have Braille dots? Why are round-trip fares from Orlando to Kansas City higher than those from Kansas City to Orlando? For decades, Robert Frank has been asking his economics students to pose and answer questions like these as a way of learning how economic principles operate in the real world--which they do everywhere, all the time.Once you learn to think like an economist, all kinds of puzzling observations start to make sense. Drive-up ATM keypads have Braille dots because it's cheaper to make the same machine for both drive-up and walk-up locations. Travelers from Kansas City to Orlando pay less because they are usually price-sensitive tourists with many choices of destination, whereas travelers originating from Orlando typically choose Kansas City for specific family or business reasons.The Economic Naturalist employs basic economic principles to answer scores of intriguing questions from everyday life, and, along the way, introduces key ideas such as the cost benefit principle, the "no cash left on the table" principle, and the law of one price. There is no more delightful and painless way of learning these fundamental principles.

Editorial Reviews

About the Author

Robert H. Frank is the Henrietta Johnson Louis Professor of Management and Professor of Economics at Cornell University’s Johnson Graduate School of Management. His “Economic Scene” column appears monthly in the New York Times. His previous books include The Winner-Take-All Society (with Philip Cook), Luxury Fever, and Principles of Economics (with Ben Bernanke). Frank’s many awards include the Apple Distinguished Teaching Award and the Leontief Prize for Advancing the Frontiers of Economic Thought. He lives in Ithaca, New York.

From The Washington Post

Reviewed by Steven Pearlstein

Long before there was Malcolm Gladwell (The Tipping Point), Steve Levitt (Freakonomics) and Tim Harford (Undercover Economist), Robert Frank had begun to critique the way his fellow economists thought about and taught "the dismal science."

In his wonderfully succinct and down-to-earth books, Frank explored the difference between absolute and relative goods, and how confusing the two got people into senseless economic "arms races." He wondered why consumers let their emotions get the better of their economic self-interest. And long before it was accepted wisdom, he explained rising income inequality in terms of the "superstars" that have begun to dominate any number of labor markets outside of sports and entertainment.

Frank, a longtime professor at Cornell University and its business school, is no slouch as an academic economist. His co-author in a widely used college textbook on microeconomics was none other than Princeton's Ben Bernanke, now chairman of the Federal Reserve Board. But at the same time, Frank has been complaining publicly for years that his profession was being hijacked by mathematical formalism that seemed determined to turn what had always been a social science, rooted in observation and experience, into a branch of the hard sciences. And there was no better proof of that, he wrote on more than a few occasions, than the dry and pre-professional way in which economics was taught to undergraduates.

In the end, however, it was not Frank but Gladwell, Levitt and Harford who finally earned fame and fortune by demonstrating how big was the appetite for an understanding of why things economic work the way they do. Perhaps hoping to ride the same wave, Frank has now written The Economic Naturalist, in which he offers answers to enigmas collected over the years by his Cornell students.

Many of the questions are quite clever. Why do drive-up ATM machines have Braille dots on the keypads? Why does it cost more to fly round-trip from Kansas City to Orlando than from Orlando to Kansas City? Why are people more likely to return cash to a store when given too much change than to return merchandise for which they were not charged? Why do fast food chains promise a free meal if the cashier doesn't offer a receipt, even though most customers don't want one?

You can imagine how such common-sense questions could form the starting points for just the kind of writing about business and economics that curious readers now crave. And sometimes, Frank's one- or two-page answers deliver on that promise.

One reason people are marrying later, for example, is that they are more mobile and more urban; consequently they don't face the problem of small-town teenagers who figure they'd better grab the best mates before they are all taken. And some waiters earn more than assistant chefs not because they contribute more value to the restaurant enterprise, but because the cooking job can be a stepping stone to more money and prestige while waiting tables leads nowhere.

I was particularly intrigued by Frank's explanation of why company managers, over time, lean toward giving more criticism than praise. According to Frank, managers who are highly critical of employees during their inevitable "slumps" kid themselves into believing that when employees' performances rise toward the average, as they usually do, it's all because of the tough love they received. On the other hand, they observe that the high-performing employees on whom they lavish so much praise inevitably wind up disappointing them as their performance reverts toward the mean.

Unfortunately, clever "enigmas" and short answers create a cumbersome and artificial organizing structure for dealing with fascinating issues such as the logic of price discrimination, the failure of collective action, and the relevance of markets to mating. The result is often repetitious and too often simplistic and unsatisfying.

We are told, for example, that sometimes goods are priced on the basis of what it costs to produce them (brown eggs) and sometimes on the basis of what people are willing to pay (sleeker, black colored Apple computers), but nowhere does Frank help us resolve this tension between demand and supply-side determination. Nor does he explain with any satisfaction why Broadway theaters have figured out how to sell last-minute tickets undercutting the prices they charge rich patrons, but airlines can't figure out a similar strategy for filling their empty seats.

Readers may question some of Frank's unsourced assertions, such as the old saw that retailers make 65 percent of their profit during the Christmas season. Washingtonians will also wince at his explanation for why it's illegal in many states to talk on a cell phone while driving but not to eat a Big Mac and fries. His (or his students') flaky hypothesis: It's all about the power of the fast-food lobby.

For all its faults, The Economic Naturalist will add momentum to the overdue campaign to take economics back from the mathematicians and root it in the everyday lives of consumers, workers, investors and entrepreneurs. 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.

Copyright 2007, The Washington Post. All Rights Reserved.

Product Details

• Hardcover: 240 pages
• Publisher: Basic Books; 1ST edition (May 21, 2007)
• Language: English
• ISBN-10: 046500217X
• ISBN-13: 978-0465002177
• Product Dimensions: 9.3 x 6.4 x 1 inches
• Shipping Weight: 12.8 ounces
• Average Customer Review: 3.5 out of 5 stars  See all reviews (43 customer reviews)
• Amazon Best Sellers Rank: #230,500 in Books (See Top 100 in Books)

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Most Helpful Customer Reviews

128 of 134 people found the following review helpful

3.0 out of 5 stars fascinating but July 6, 2007

By Jaime F. Guerrero

Format:Hardcover

A fun, easy read, but with some serious flaws. Written in a chatty question-and-answer format.

Notably, many of the answers Franks gives are incorrect, obviously thought up by himself without any research. For example, in the chapter on Product Design, he asks the question "why is milk sold in rectangular containers, while soft drinks are sold in round ones" he posits several business-economics answers about costly retailer shelf space, about how a round beverage container's shape might better accommodate a customers' hand, but never states the principle and overwhelming reason- that a container for anything under pressure should be spherical or cylindrical according to the laws of physics and math, for maximum economy of manufacture. A square soda can would require, I'm guessing, at least a half pound of aluminum to hold its square shape perfectly against the internal pressure of a typical soda. So it is about economics, but the economics of container design, not of the other forces as he guesses.

Anyway, this sort of guessing pops up periodically in his answers, and reduces the effectiveness of his arguments. I wish he had asked his colleagues in the engineering and science departments to proof his manuscript.

On the other hand, there is much good stuff here. One chapter, that of Arms Races and The Tragedy of the Commons, is excellent, introducing important phenomena that many people aren't aware of and that are severely damaging our society. He has written on these topics before in his prior books Luxury Fever and The Winner Take All Society.

Despite its flaws, still a fun read. Just don't take all his answers to be perfectly correct. It's more like a late night BS session with your buddies.

38 of 43 people found the following review helpful

4.0 out of 5 stars A fascinating collection of questions and answers June 4, 2007

By S. Park

Format:Hardcover

At first glance at the bookstore I thought the book would be a variation on the theme of recent popular economic books such as Freakonomics by Levitt and Dubner. I purchased the book anyhow and am now glad that I have done so.

The book indeed is like Freakonomics in that its purpose is to reveal the economic rational behind everyday matters. It is different from Freakonomics in that it follows a "top-down" approach: each of the book's chapters corresponds to a basic economic principle (for example supply and demand for a chapter, and signals and asymmetric information for another) that is explained via real world examples. So if one can say that the goal of Freakonomics was in reaching the bottom reason/motive of particular phenomena, it can also be said that the goal of The Economic Naturalist is to elicit fundamental economic principles through questions and answers. In this sense the book is more educational.

As noted earlier, the book is a sequence of questions and answers. An answer generally spans the length of a page. There is no central narrative as can be expected from a book adhering to such format. However I found the examples as a collective to be more value than the sum of each. That a single principle underlies various and seemingly disparate phenomena is what creates such value.

There were a few question-answer pairs that I felt either not informative or not convincing (an example question: "if attractive people are more intelligent than others, and if blondes are considered more attractive, why are there so many jokes about dumb blondes?"; corresponding answer: "if blondes are indeed perceived as being more attractive, then being blonde may create attractive opportunities that do not require heavy investments in education. The perception that blondes are less intelligent than others may thus stem less from any innate difference in their mental abilities than from the fact that they rationally choose to invest in less education."). Apart from such examples, which there were only few, the questions posed were fascinating, and the author's exposition clear.

The author points out that economic education is hindered by the usage of arcane nomenclature. He thus purposely steered away from using professional jargon, and in my opinion has been successful at this effort. However I wonder if the book would have been better if related nomenclature were described after the explanation of each underlying principle -- that would have provided a nice bridge to existing literature.

30 of 36 people found the following review helpful

2.0 out of 5 stars Disappointing September 15, 2007

By Mitch Baywatch

Format:Hardcover

I admire Frank's attempts to teach economics through narratives rather than graphs/charts, and credit him for his use of informal concepts like arms races and leaving money on the table. But in the process, he's also teaching his readers two unfortunate lessons: (1) everything can be explained economoically and (2) it doesn't matter if your theories are correct. With respect to the latter, he rivals evolutionary biologists in their favoring of speculative narrative over evidence. It's all "maybe the reason is this" and "it could be that." Examples:

-In explaining why 'we' leave tips for some services and not others, he ignores the lack of tipping in other countries. Perhaps Frank could conjure up some economic explanation here, but this isn't a book which ultimately care about answers. The stories are apparently enough.

-In an example involving taxicabs and rain, Frank's conclusion is that cabbies are acting against their financial interests. If this is permitted to happen -- and it should be -- then what are the ramifications for the rest of the book? Maybe you CAN leave money on the table. But Frank quickly remembers he's an economist and never again questions economic laws.

--He suggests that laws requiring children to attend kindergarten by a certain age are enacted to prevent parents from holding their kids back, giving them unfair advanatages of being the oldest/biggest/smartest kid in class. Really? I'd love to see this tested in the real world.

I don't even want to talk about the embarrassing final section on personal relationships ("why is coyness considered an attractive attribute?").