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.


jyindc

Regarding the retirees and their houses. I think they buy such big houses for one major reason: they don't go to work, which means they'll be spending a lot more time at home.

If you know you're going to spend more time at home and not at the office, you want a house that is comfortable, that you can entertain in, and that has all the space for you to do the things you always said you were going to do when you retire: a pool table, a hobby room, a swimming pool, rooms for the grandkids, extra land for all that gardening you want to do, etc.

In addition, I know a major consideration for houses that retirees buy is that all this new space is one level. Climbing stairs everyday when you're old can be a pain. One-level houses often look bigger because they need more land and have wide profiles from the street.

discordian

None one has touched the model question yet?

Assuming the question is regarding fashion models:
I'm thinking, sexuality aside, women tend to admire the female form more than men admire the male form. Therefore not only is the women's clothing market larger, but for women there's a larger audience admiring the view.

"pin up" models would be a whole other story.

shchappie

re: models' pay disparity

from: Newmodels.com/height the real reason:

According to the US Center for Health Statistics, only about 3 ½% of all young women are within an inch of 5'10” in height. [5'9"-6' required for fashion modeling] The average weight for those women is about 145-150 pounds – some 30+ pounds more than the “normal” fashion model. If you add in factors like facial beauty, body proportions and all the other things that qualify a girl to apply as a “fashion model” the competition is a very small part of the population.

For men the situation is very different. It's still hard to make it if you aren't the preferred six-footer (up to 6'2", but no more than 6'1" preferred), but the numbers tell a different story. Over 25% of all young men are within an inch of being six feet tall. The average weight for young men of that height is 175-180 pounds – not very different from what the fashion community wants.

Read more...

aflounder

RE: Round milk bottles. I live in Los Angeles and one of our local markets now does sell milk in round plastic containers (sold by Alta Dena, owned by Dean Foods, revenues $10b). At first, it was only the chocolate milk, but now the whole milk is also sold in transparent cylindrical (tapered at the top) pint-size plastic bottles, appealing to me because it can be closed air tight with the screw cap versus the folding boxtops which can't.

adorita

In addition to my comment on #13. I also notice that my friend's Honda CRV's back door opens from the left and swings right. When he picked me up at the airport, it was hard to load up my luggage. We had to go around the door and into the traffic to load up.
Turns out it's because it was designed in Japan where people drives on the left side of the road. So it make sense to design for loading up on the left.
When car makers redesign the interior to fit the N. American standards, minor details are neglected to reduce production cost. So gas tank would be designed according to the filling up habits of the primary target customers and the countries of the market.

smili

Re #22. the model pay disparity. When I last went to the mall about a year and a half ago (yep I'm male) I noticed that 90% of the clothing stores were for women while simultaneously questioning why I wanted to go to the mall in the first place.

My guess is guy models don't influence the male shopper much, but not so for women.

robertplamondon

All of this is an interesting exercise in sophistry and creative writing, but does Professor Frank also include some economics? You know, rejecting the non-falsifiable theories and testing the falsifiable ones. Otherwise, it's just an English course.

Chewxy

I think the one in the case of Apple is just that Apple is testing their customer for price sensitivity. Same goes with Dell (who offered to customize the color of my laptop for so much more)

The more price sensitive the customers are, the less they can con make money from the customers in the future.

prosa

Prior to the 1970's or thereabouts, most cars had their fuel filler caps in the rear - often behind the license plate.

Chewxy

then again, if it were a black macbook pro... I wouldn't be so price sensitive either.

rbhatia

Milk out of a can would be weird. On Southwest Airlines, they offered Deja Blue Non-Carbonated Water in Aluminum Cans and some consumers would find that weird. Why can't you buy water out of a can at the grocery store..why is it bottled?

Apple knows that people will buy the black laptop ONLY because it is more expensive. It is almost like Grey Goose despite the fact there is little difference in quality between vodka significantly cheaper.

sculptor

Metal is more expensive than cardboard and objects with a round cross section use the least amount of container material per volume.

suitedaces

The real life questions and answers are fascinating. Kudos to the professor who put together all the essays into book form. We don't normally spend enough time questioning all the things around us. Case in point is the milk (orange juice) vs soft drink containers, when the square containers saves a lot more space.

edelrc

Indeed, the gas tank mouth is at the opposite side of the where the muffler is. I presume to avoid spilled gas to run close to a hot muffler.

But the question remains, what are car companies taking into factor when designing these things? A purely a random decision??

On NPR´s CarTalk it was suggested that in Germany was a concern that people in highways that got without gas had to fill it from gas cans while cars passing by their side… therefore suggesting that German cars prefer to put the gas mouth in the opposite side of the driver's for highway safety. I do like the students prospect though.

WholeMealOfFood

Re: 27

First, I'll disclose that I have served as a teaching assistant to Professor Frank.

I think #27 is a reasonable question, so I'll shed some light on it. This is an assignment that Professor Frank gives in intro econ classes. The purpose of the assignment is to help students internalize the principles of economics because he believes that traditional econ classes do a poor job of this: http://www.robert-h-frank.com/PDFs/ES.9.1.05.pdf

lermit

Are you a tutor or an economist? That'd would answer your square feet ambitions, of course.

.lermit (delusional extraterrestrial)

deckard1982

What if it is a grandparents ego thing? The generation retiring may be rather successful in their careers and a spirit of oneupmanship may be following people in their retirements.

gOdzi11a

Some of these answers are weak. Quarter-pint and half-pint containers of milk waste far more space than the rounded cans of soda. I imagine it is easier to fold the packaging of a milk container than it would be to fold sheet of aluminum. Large tetra-paks of juice are box-shaped while bottles of juice are round, even though the former is more likely to be sold from the cheap shelves while the bottles are in the fridge. It depends on the packaging materials.

As for the retirees' home, I doubt the grandchildren are the key factor. My hunch is that entertaining guests is a far more important activity for retirees than if you spend your evenings winding down from work. I would bet these retirees are also more likely have a built-in bar, wine cellar and a jacuzzi, despite never having either when they worked.

td

Just read a galley copy: ugh. It ain't no Freakonomics. Great idea but poor execution. Shoulda been a Levitt/Dubner production.

econ2econ

I took a look at this book at the bookstore, and was surprised at how thin it was. I also flipped through some more pages, and decided to put it back in favor of "More Sex is Safer Sex." It did appear to be nothing more than an Econ 101 Q&A. Which I realize it was, but he could have really drilled into some of the topics. Part of the reason I liked Freakonomics so much was because it delved into some of the methodology. "Naturalist" didn't seem to do that. Which is fine for introducing laymen to economic principals, but too simple for someone who has a background in it. Unfortunately it was on the bottom shelf of the econ section and Barnes and Noble, where most laymen would not likely browse. I hope "Sex" turns out to be a good read, though.