Why Do Retirees Buy Such Big Houses, and Other Riddles From The Economic Naturalist

The Cornell economics professor Robert Frank (not to be confused with the excellent Wall Street Journal writer Robert Frank, or the great photographer Robert Frank) begins a semester by asking his students to ask and answer a real-world economics question in 500 words or less. He has now compiled these essays in a book called The Economic Naturalist. It is a great deal of fun, and interesting. Below are some excerpts, including the illustrations by Mick Stevens. If you’re wondering what Frank’s students get out of the book — besides, presumably, a good grade — you should know that Frank credits each student and is donating half the book’s royalties to the John S. Knight Institute for Writing in the Disciplines at Cornell.

Why do people buy bigger houses when they retire and their children are gone?

A plausible conjecture is that a large house close to grown children’s homes may lure the grandchildren to visit more often. With divorce and remarriage more common than in decades past, many children today have six or more grandparents, if the parents of stepparents are included. The demand for visits with grandchildren has thus increased, but the supply of visits has not. So grandparents may hope to increase their share of available visits by building a spacious house that is conveniently located.

Why do fast food places promise a free meal if you aren’t given a receipt at the time of purchase?

To deter theft, owners of restaurants and other retail establishments require cashiers to reconcile the total amount of cash collected during their shift with the total volume of sales rung up at their register … One way cashiers can circumvent this control is by neglecting to ring up a proportion of their transactions … Thus if a cashier failed to ring up a customer’s $20 meal, he or she could pocket the $20 without creating an accounting discrepancy … By offering a complimentary meal to anyone who fails to receive a receipt, owners provide an economic incentive for customers to monitor cashiers for free.

Why does milk come in rectangular containers, while soft drinks come in round cans?

One possibility is that because soft drinks are often consumed directly from the container, the extra cost of storing cylindrical containers is justified because they fit more comfortably in the hand … But even if most people drank milk straight from the carton, the cost-benefit principle suggests that it would be unlikely to be sold in cylindrical containers … Most soft drinks in supermarkets are stored in open shelves, which are cheap to buy and have no operating costs. Milk is exclusively stored in refrigerated cabinets, which are both expensive to purchase and costly to operate.

Why does Apple charge $150 more for black laptops than for equally-configured white ones?

Apple’s pricing decision was no doubt influenced by its experience after introducing a black version of its popular iPod in the fall of 2005. Although it was priced the same as the company’s traditional white iPod and technically identical to it, demand for black units quickly depleted the company’s inventories, even as white ones remained in stock. Because the black version was new, it stood out, causing many more buyers to order it … By the time it introduced its new MacBook models in the spring of 2006…it charged more for the black machines simply because it could.

Why are gas tanks built into different sides of cars?

In the United States and other countries in which motorists drive on the right side of the road, it is easier to turn right than to turn left … A majority of drivers will thus buy gas at stations they can enter by turning right. Suppose gas tanks were always on the driver’s side … During crowded hours, all spots on the right sides of pumps would be filled even while most spots on the left…remained empty.

Why do female models earn so much more than male models?

To answer this question, we must first ask what fashion models accomplish for the clothing producers who hire them. Simply put, their job is to make the manufacturer’s apparel look as good as possible to prospective buyers … Female models receive premium pay because women’s fashion is a vastly bigger business than men’s fashion.


tgoesh

the soft drink vs milk container is more of an engineering question than an economic one.

if they ever start selling carbonated milk, it will come in round containers also.

egretman

I have thought deeply about the "problem" of the number of oversized homes being built in America today. I have concluded that baby boomers are subconciously thinking about a time in the future when they die and Hispanics will take over America's housing supply. Since, Hispanics have larger intact families. They will need and enjoy the extra space.

And since Hispanics are largely building these homes today, it can be said that they are just really building their own homes of the future.

Which seems fair.

furiousball

my parents recently retired and "downsized" from a 5 BR, 3 BA house to a 5 BR, 3 BA house with a pool, hot tub, and koi pond in the backyard. I better study up on maintenance on pools, hot tubs, and koi ponds soon me thinks

davez

Also round cans are easier to dispense from vending machines because they roll.

jeremymiles

Gas pumps have hoses, and these hoses are long enough to reach to the other side of your car when you want to pump gas.

frankenduf

I find the apple laptop answer, "because they can", profound in the context of 'free market' pricing and whether there should be regulation

discordian

"Why do people buy bigger houses when they retire and their children are gone?"

How old is this question and from what part of the country is the asker from?
This surely isn't the case in New Jersey where adult townhouse developments are going up in every town.

tim in tampa

I think the "retirees buy big houses" story is a myth. I don't think it's worth answering because I have yet to observe it in action. Every retiree I know has sold their old house and purchased a much smaller-and easier to clean-house (or two of them, one in a summer/winter destination).

G.V.Varma

The case of retired people building big houses has only limited applicatin in India (among the rich and the upper middle class).In majority cases they face big financial crunch at the time of retirement-because of paying for medical expenses, higher education of children, marriage and dowry expenses of the daughters etc.Old people stay with one of their sons or daughters and will get the company of the grand children.Because of the onslaught of the western culture, times are changing now.

meomaxy

BINGO for tgoesh! The cylindrical shape of soda cans is not for hand confort. The sides of a rectangular container of carbonated soda would either bulge out or have to be made too strong and stiff to be cost-effective. The cylindrical shape resists bulging with much less material.

I believe soda cans are mentioned the excellent book "The Evolution of Useful Things" by Henry Petroski. Or, if he were titling his book today, he could have called it "Freakengineering". Also, there is more than you ever thought there was to know about milk in Harold McGee's "On Food and Cooking".

Soda cans and bottles are a marvels of engineering. Over time, they have managed to use less and less raw material to make each one while still being able to contain a pressurized beverage without bulging or rupturing. If you think about a cylinder, the top and the bottom are both flat, and not as efficient at resisting bulging as the cylindrical part. Now you can understand why soda cans all taper a bit at the top (a smaller flat area resists bulging better than a large flat area) and why the bottoms are built bulging inwards (takes much less force to bulge a flat area outward than it takes to turn an inward bulge into and outward bulge).

In some ways, soda containers can be made LESS strong than milk containers because the pressurized soda helps support the walls of the container. That's why that 2 liter soda bottle collapses if you hold it wrong while pouring but holds firm before you opened it. Ever see somebody crush a beer can after finishing it? Ever try that which an unopened beer?

Milk is not usually sold in transparent containers because light exposure changes the flavor of milk (and beer too, by the way).

The milk container is rectangular because there is no good reason not to make it rectangular for all the efficiency reasons cited.

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gevil

The thing with cilindrical containers has one more viable answer: paper is cheaper than aluminium, and a boxed container requires more surface per volume.
The cilinder is more efficient. But the milk can afford the less efficient container.

meomaxy

Why does Apple charge $150 more for black laptops than for equally-configured white ones?

The way the answer is phrased sounds like it's Apple taking unfair advantage of the consumer.

Put it this way. With everything involved in manufacturing an iPod, it would have to be easier and cheaper to just make one color. Two colors means two separate assembly procedures. Two types of stock for each external part that has to be stocked, ordered, etc. More uncertainty as to how many of each type has to be made to match demand, etc.

If you were Apple, you might be justified in thinking that with all the extra headaches involved with making more than one color, that if the consumer doesn't really care then why bother? If they offer black laptops for $150 more and people buy them, then it's worth their while to have two colors. If no purchaser cares enough to pay the premium, then great for Apple too! They can go back to making one color knowing that nobody really minded enough to make a difference.

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adorita

I have an opinion for the gas tank question. I drive a BMW made in Germany, in which motorists also drive on the right side of the road. The gas tank is however on the passenger side.

In Hong Kong where I grew up, drivers never get out of the car to fill up. All gas stations are full service, the attendants would even ask if you want something from the store and they'd bring them to you. In the highly populated city, tax as high as 100% is applied in order to limit number of vehicles on the road. Cars become status symbols. Car owners are expected to be rich and to be served well. Having the gas tank on the passenger's side makes the driver feel more comfortable when waiting for the fill up.

In north America, car culture is more grounded due to the massive scale of suburbia. Most people use cars as main transportation. Most of the cars on the road contains only 1 person - the driver. Filling up gas is mostly done by the driver and thus more convenient to place the tank on the driver's side.

So I suspect that luxury cars makers are more likely to design the gas tank on the opposite of the driver's side.

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Mark F

I believe the boring answer to the gas tank question is the tank is on the opposite side of the car than the muffler/tailpipe.

gradys_kitchen

Anyone who has ever owned a white Mac laptop and experienced the pleasure of ceaselessly scrubbing fingerprints from the keyboard might find the more expensive black laptop worth the investment especially if on the corporate dime.

Mack

@14 -

I used to travel a lot on business, and drove a lot of rentals. Among the 'gotcha' moments with any new rental are: the headlight switch, the window controls, and which side is the filler on?

I developed a 'rule of guess' that the fuel gauge was on the same side of the dash as the filler was on the car. Served me well for years, at least a 90% hit rate.

But it seems to be more random now. The upside is that lots of rentals now place an arrow on the gas gauge pointing to the filler side...

armchairpunter

A few guesses as to retiree house size, if, in fact, it is a meaningful phenomenon:

(1) It would seem likely that the younger generation would be hitting its peak earning years as the older generation retires. A large house is a loud signal that the retiring generation is not ready to cede its perch in the power structure.

(2) A retiree, in departing the arena in which he or she made his name, leaves behind a lot of the day-to-day indicia of success. The large house is a trophy to remind others of the retiree's achievements, an attempt to prove the retiree went out on top, a "capitalization" of the regular flow of recognition previously enjoyed.

(3) A retiree may feel further removed from the more complex workings of the market, and, logically or illogically, less trustful of the sphere of intangibles. The large house may represent a more palpable store of value, something the retire can see and touch.

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Mack

The way the answer is phrased sounds like it's Apple taking unfair advantage of the consumer

Right. If someone doesn't like the price, they're free to not buy, or to buy white. The market will efficiently inform Apple of changes in demand, and they can respond in any of the ways that will reintroduce equilibrium.

Anyone who confuses 'what the market will bear' with 'unfair advantage' needs a short refresher in micro.

dreck

These questions are great examples of the ability of economic thinking to speculate about questions affectively with information only from casual observation and the information in the question. True, some questions like the milk/soda one require more information to answer, but then, the author did come up with an original answer because of his or her lack of information (about engineering). And who knows, shelf space may have played a small part in determining the shapes of containers...

Kirilius

"Why Do Retirees Buy Such Big Houses?"
Because they can! Or because that's what they wanted their entire life. It is ironic that most people are able to afford things that they dreamed of their whole lives when they don't need them anymore or they are not fit for it (big house, travel the world)...

"Why does Apple charge $150 more for black laptops than for equally-configured white ones?"
Because they can! Because there is a demand for black devices. I have experienced the same thing with my camera. I bought a black one although it was slightly (not that outrageously) more expensive than the same model in silver. The reason is that old silver cameras look as "old", while black don't. Same with other white/silver devices - scratches and stains are more visible.