Russ Roberts

Robert Frank on Economics Education and the Economic Naturalist

EconTalk Episode with Robert Frank
Hosted by Russ Roberts
PRINT
McCraw on Schumpeter, Innovati... Ayres on Super Crunchers and t...

Author Robert Frank of Cornell University talks about economic education and his recent book, The Economic Naturalist. Frank argues that the traditional way of teaching economics via graphs and equations often fails to make any impression on students. In this conversation with host Russ Roberts, Frank outlines an alternative approach from his new book, where students find interesting questions and enigmas from everyday life. They then try to explain them using the economic way of thinking. Frank and Roberts discuss a number of the enigmas and speculate on the future of economics and education. The topics discussed include tuxedos vs. wedding dresses, the level of civility (or lack thereof) in New York City, the difference between vending machines for soda and newspapers, the tragedy of the commons, and the economics of love.

Size: 31.7 MB
Right-click or Option-click, and select "Save Link/Target As MP3.

Readings and Links related to this podcast

Podcast Readings
HIDE READINGS
About this week's guest: About ideas and people mentioned in this podcast:

Highlights

Time
Podcast Highlights
HIDE HIGHLIGHTS
0:36Intro. Book draws on experience in education. Students take economics courses because they are seen as a stepping stone, but six months later they don't score any better than people who never took the course at all. Is it just economics classes that fail their customers? Engineers, physicists also report same thing. Book grew out of an assignment, Knight Writing Program at Cornell, in the 1980s. Assigned students to twice come up with an interesting question and answer it. Eventually lost the Teaching Assistant and cut back on writing and papers. Originally found that this question-posing and writing experience had been helpful to the students. Book is a set of examples, greatest hits drawn on these essays. Art of the economic way of thinking, absorb by hanging out with economists over lunch. Narrative is what the brain is well-adapted for, as opposed to graphs. Daniel Pink podcast talked about story-telling in the business world. Why is the brain hard-wired that way, evolutionarily? Real economic resources are valuable. People who could acquire information from others must have had some survival advantages. If you are boring people won't want to spend time with you, won't be able to participate in cooperation experiences. While in France, Frank started translating shaggy dog stories into French and it got him listened to.
10:35Story-telling, chatting, thinking about puzzles is a good way to learn economics, but how do you apply that to teaching in the classroom? Do you just assign reading the book? Focus on what are the main points to teach. Maybe 7 or 12 basic principles. Then figure out how to wrap them up in examples, repetition, active using of the material. Brain doesn't usually carve out rewiring for something that only happens once. Teachers underestimate the value of repetition. Vernon Smith podcast interview, someone in a class of Leontief's asked: What's utility theory (the theory of the consumer) good for? Leontief's answer was "Teaching."
15:00Examples from the book. Why are vending machines for soda so different from those for newspapers? With newspapers you can take several and probably nothing would happen to you. More trusting. One answer: people who read newspapers are more educated, and educated people are more honest. Not the right answer and not the answer that student Quigley suggested. He argued that you could make a newspaper vending machine dispense one at a time on engineering grounds, but it would be more expensive. Not common to have a motive to steal an extra newspaper, so cost is not justified. But you could sell the second newspaper--that's a motive. It is harder to sell the second newspaper than to drink an extra soda, though. Soda machine owner is upset when you take a second soda, but newspaper owner less so because newspapers make a lot of revenue from advertising, so it's not so bad if it's resold or given away. Could perhaps put examples from the book up on the web in time and let people comment on them. Why do female models earn more than male models? Economically bad answer would be because women are more beautiful than men. Striking difference: Gisele Bundchen, highest paid female model, earned $30 million last year; no males last year earned 7 figures. Adams asked this in class; answered that women spend twice as much as men on clothing and give a lot of thought to what clothing they buy. Men don't think as much about what clothing they are searching for, don't read men's fashion magazines. Could read this book to your kids or pose the questions over the dinner table. Why in NYC if you stop someone on the street and ask for directions do you get a different answer than in Topeka, Kansas? Common answer: People in NY are just rude. But why? Cultural answers often are unsatisfactory because they don't explain why. In Topeka just opening a map can bring in passers-by to help; doesn't happen in NY. Student answer: higher value of wage in NYC. But maybe that's not right, sociologist suggested that in a densely populated area you need some personal space. Doctor might say it's because you would get germs. It's not that you do a calculation of the alternative cost of stopping to help--it's that it affects your demeanor. Russ's 9-year old's insight: Topeka is simpler and smaller so you are more likely to know where the person is headed. Boston's smaller than Manhattan, though. Lance Knobel blog Davos Newbies, reported he also gave book puzzles to 11-year-old. Kids like puzzles.
27:36Why do brides buy their dresses but grooms rent their tuxes? Weird, because brides only wear them once. Dalsky answered: mystery deepens when you note that bride spends thousands on a dress she'll never wear again. On big occasions it's more important for women to make a fashion statement than men--big assumption but no one seems to quibble. Economics of rental market would imply that a gown rental place would have to stock a large inventory, alterations, etc. Men are willing to show up in style someone else has worn, imperfect fit, so any given tux would rent out a lot, rental shop can stock fewer suits. Number of times that a parent bursts into tears on seeing the groom is lower than with brides. Why are brown eggs more expensive than white ones? Theme of book: once you see this puzzle explained by this economic principle, when you see puzzle again you can apply the template. Brown and white eggs taste the same and have same nutritional content. Chapter on supply and demand. You need to call on both the cost and the demand sides to explain this. Student, Chang, first suggested that people like brown eggs, associating them with healthful foods, so they are willing to pay more, just like they will pay more for a hotel room with a view. But that's not enough; if it were just the demand side difference the question would ring out: Why bother to sell white eggs at all? Turns out that hens that lay white eggs turn out to be a little smaller and to eat a little less than hens that lay brown eggs. So cost of making white eggs is a little lower. You need both the supply and demand sides differences else you won't get a stable outcome of seeing both kinds of eggs bought and sold. to get Washington Post reviewer complained bitterly that Frank doesn't tell us if it's supply or demand! Entirely missed the point. Alfred Marshall, need both blades of the scissors. Why are red peppers more expensive than green ones? And: Why is single malt scotch more expensive than blended? And: Why is older wine more expensive than younger wine? First answer is typically from demand side: People like older wine so they are willing to pay more. Response is: Yes, but why do they have to pay more? Why doesn't competition amongst suppliers drive the price down? In a competitive market there has to be a cost difference. For wine or aged scotch, it takes longer to make it, you tie up your money, and that has to be compensated. Both cost sides and demand sides work together as parts of the explanation to this kind of phenomenon. Alternatively, if you start with the cost side it is not enough to explain it: arguing that wines that are worth keeping tend to be big vintages that need time to develop, so even if they were sold at the same age, the demand side has to be willing to pay more for them to make it worth it.
35:48Theme in book, overtime example, in U.S. have to be paid time and a half. But if you want to take less than that, you are not legally allowed to. Frank's answer: Sounds like you are making both the worker and the employer worse off by prohibiting that transaction. Tom Schelling's hockey helmet example: Hockey players if left to their own devices skate without helmets; yet they vote unanimously for rules requiring them to use helmets. His explanation is that there is some competitive advantage you get by taking helmet off, may see or hear better, and so even with a rule that would make everyone better off, competition amongst players drives everyone to a worse situation. Risking safety for no ultimate gain, since teams still win or lose. Prisoner's Dilemma. School districts, housing prices. Relative distributions. In some situations, tragedy of the commons, invisible hand breaks down. But in most situations when competition breaks down there are no property rights--no one owns the air, Boudreaux podcast--and you occasionally get tragedy of the commons where you've limited entry or competition. Steroid use, ball players. But even in that case there's a benefit, sometimes quite large. In case of baseball, fans would rather see 600' home run than a 325' home run. Paper by Arthur DeVaney may refute that, though: claiming no real evidence. Steroids do seem to help. We also assume steroids are bad for your health. So everyone looks for an edge and seem to compete to worse situation; but in a certain dimension the game is more exhilarating. Overtime case, it's true we'll bid up the price of housing, we all work the extra hours, but there are lots of things we won't bid up. In case of hours, we do value the absolute increase, not just relative. If you look at how much your house costs, beyond a certain size, maybe the context of its relative size is what matters most. It's a distortion you only get if context matters more in some domains than others.
46:01Context, Relative versus absolute. Why is relative competition more prone to tragedy-of-the-commons problems than absolute competition? If your reward depends importantly on your rank relative to others, e.g., when Monica Seles was stabbed, it increased Steffi Graf's income the next year not because Graf got better but because relative to the competition that year she was better. Sherwin Rosen and Ed Lazear, economics of superstars. In certain places we want to see or hear the best in absolute terms. Now take that outside of sports. Military arms race: why is it problematic? If contestants are equally matched, each side would do better signing an agreement prohibiting spending beyond a certain amount. If you build more bombs you build fewer toasters--metaphor for other consumption goods. If your relative position in the toasters distribution were just as important to you as your relative position in the arms distribution, there'd be no problem. You'd build more of one, but then you'd fall behind in the other, and each would keep the other in check. But falling behind in the toaster distribution is just less significant than falling behind in the armaments distribution. In the workplace arena, two things you can do with your time after your 40-hours a week: earn more money, or spend more time with family and friends. If I work the extra 10 hours, I'll be able to spend more on a house--and more on a TV, a car, etc. If you think that my evaluations of the things I would buy are more sensitive to context than my evaluations of leisure, then there will be the same kind of distortion as in military arms race. Take money out of the toaster category and put it into the armaments category. Roberts: Let's say we are working harder now than 30, 40 years ago. In case of arms race, no one gets ahead. But aren't we all really getting ahead in income, getting better off than we were a hundred years ago? Frank: In case of work, some motives--getting ahead in absolute terms--are not zero-sum; but some motives are zero-sum [i.e., relative]. All motives don't have to be zero-sum for the problem to kick in, just some of them. Question of the magnitude of them, empirical question. Roberts: Evidence? Frank: If you ask someone where would you rather work: World 1 where you have a 2-in-100 thousand probability of dying on the job and everyone else has a 1-in-100 thousand probability of dying on the job, so you have a relatively unsafe job; or World 2 where you have a 4-in-100 thousand chance of dying on the job and everyone else has a 6-in-100 thousand chance of dying, so it's absolutely a much riskier world, but relatively safe. Everybody answers World 1. That's a domain where absolute amounts seem important. Ask same question about cars, interview suits, where would you rather be? Pick 2nd world, better chance of getting a callback. Roberts: But what about secondary ramifications? Maybe it's just harder to see the advantages of absolute returns in a survey situation. Happiness literature recently has argued that we are no happier now than 50 years ago so we should all go back to simpler life; but that result, from surveys, misses the absolute increase in life's advantages like health care that have happened in that time span.
55:57Why so much formalism in economics, so much math? You can appear more scientific if you do that, like an arms race. Just signaling in college. But maybe that's not compelling. Why do the incentives of the modern university, to teach out of complicated textbooks, continue? In language, in school learn complex grammar rather than how to function in the language, but better incentives from traveling, or from Peace Corps program, keep it simple, repeat often. If we send economics students out into the world who don't know economics, well no one else in the world knows economics, so there's really no feedback. Customer doesn't realize how bad the job is being done. Another reason: the incentives faced by professors. Tuition only covers a small portion of total costs, the rest comes from grants. Professor doesn't have a complete incentive to serve the customer. Is it going to work to improve teaching to tell a professor that doing a good job teaching is a good career move? Is it really a good career strategy, since monetary rewards may come from publishing, grant-getting? George Mason U. does reward good teaching. Some universities good teaching gets sneered at; more typically, chairman doesn't care if you do a good job. It's costly though to do a good job teaching. But if you do it as a chat, a conversation, your students may even like your course and it may be less costly than using a dull textbook.
1:03:52Economics of commitment and marriage, landlord and tenant example. Relationship market, people look for mates much as they might shop for apartments. Time is short, search is very costly. Can't look at every available unit in a large metropolis. You sample a bunch, decide what's on offer, decide that when you find one that meets a certain threshold you will go for it. Might stumble on a later one even better. Same on landlord side--landlords don't want to interview every conceivable tenant. Signing a lease results in better outcome for both parties than not signing because you don't have to engage in the search process again right away. Similar for marriage market. Once you are into a relationship it's more that person than the person's characteristics. Without that security it would be hard for people to go forward in relationships. Have, as a result, love. It's lovely.

Comments and Sharing



TWITTER: Follow Russ Roberts @EconTalker

COMMENTS (16 to date)
shawn writes:

...for some reason, itunes isn't 'seeing' this podcast and downloading it. Not sure if that's an issue on your side, or itunes'...

Hi, shawn.

We had a minor technical problem this morning that delayed releasing the podcast to iTunes. It's all fixed now. Sorry for the inconvenience.

In general, we release the podcasts here on EconTalk first. We then release them to iTunes, usually within a couple of minutes; but as you discovered this morning, the timing can vary a bit.

Unit writes:

Why is the military arm-race bad? What about the airline industry, nuclear reactors, nuclear medicine, the internet, coding-theory, game-theory? Aren't these also byproducts of the military arm-race?

shawn writes:

unit...I would guess that it's because it's a race to the bottom.

laura...no problem; just wanted to make you aware of it, if you weren't already.

Jake writes:

I thought that overtime laws were on a state by state basis. In Nebraska, I work 42.5 hours as a standard work week with no overtime pay.

I can also (and have) chosen to work up to 12 hour days when I had an hourly wage in college. I received no premium or overtime rate.

I like it this way. I like to work and make money.

Harry writes:

The book sounded very interesting. I've put it on my Amazon wish list and I can't wait to buy it.

However, I found the discussion about labor laws confusing. There really is no general law concerning the maximum number of hours you can work. Many people receive a salary, not hourly wages, and don't get any overtime no matter how many hours they work. Similarly, someone who is self-employed can work as long as they want. Presumably, these people work hard in order to maximize their income and so there is always an avenue available to get ahead. The argument doesn't make any more sense than having an arms control treaty where participation is optional!

Luke O writes:

Just one comment on the brown eggs vs. white eggs.

There can be an absence of evidence supporting the idea that brown eggs are more nutritious than white eggs. This does not mean however that there is evidence there is no difference between white eggs and brown eggs. The former acknowledges that it is impossible for us to know everything. The latter, which I felt was invoked in this show, is subject of course to induction problems.

The U.S. Department of Agriculture has no standards and allows egg producers to freely label any egg as a free range egg(not saying they should, it is merely what happens). Although most consumers imagine free-range hens(and thus labeled free range eggs) have access to the outdoors with plenty of sunlight, vegetation, and normal social interaction, to most egg producers, the "range" is simply a bigger cage than those in which battery-caged hens are kept. Many producers will label their eggs as cage-free in addition to or instead of free range. Consumers of free-range eggs want eggs from hens who are kept under traditional low-density free-range methods.

The nutritional content of eggs from genuine free-range hens (hens that forage daily on a grass range) is superior to eggs from other hens, with much higher levels of Omega 3 and Vitamins A and E, and lower levels of total fat, saturated fat, cholesterol, and Omega 6.
http://www.rps.psu.edu/0305/poultry.html

Rhode Island Reds(from which brown eggs come) are tough birds, resistant to illness, good at foraging and free ranging, and are typically docile, quiet and friendly, though males can be considerably aggressive.

Leghorns are excellent layers of white eggs (around 300 per year), but they can be noisy, flighty, and easily excited(and therefore not as suitable for free ranging)

There may be no difference between a genuine free range white egg and a free range brown one. The problem is you can't trust the label "free-range". Given the choice between unknown eggs that are brown and white, the only way consumers can be more confident they are actually getting the "free-range" eggs they want is to get brown ones. This is because when consumers for genuine free range eggs face a choice at the supermarket between brown eggs and white ones, theres a greater chance the label on the white eggs is lying. I haven't read Mr. Franks book, but perhaps he has a problem not with brown eggs, but with black swans. A little Popper, Taleb, or Hume wouldn't hurt.

John writes:

It's refreshing to hear non-apathetic professors strategizing and documenting ways to reach students with knowledge that they will retain beyond their final exam. The idea of selecting out the key principles and relaying them to the student through repetition is very effective. Making it entertaining and interesting sends it into new levels of possibility, and he has accomplished that here with his curriculum.

The book sounds like a very good read and I plan on acquiring it.

John writes:

I just purchased the book off of "half.com". I am awaiting the book's arrival, and it will be one that I loan/discuss to/with my 12 year old daughter. She needs to learn a bit about critical and logical thinking. This should be an excellent as well as entertaining tool. It'll make her think which is a good thing for any "gonna-be-a-teen".

Bruce Boston writes:

Just wanted to say that I also enjoyed the podcast and bought the book as a result.

If only these types of academic programs existed a few decades back, I, and every company that I have worked with, would have benefited greatly from it!

-bruce

Ken Willis writes:

In Frank's recent NYT Op-ed he said: "...the president's tax cuts have added hundreds of billions of dollars to the Federal deficit."

That's a lie. Tax revenue to the government is at an all-time high. The tax cuts are largely responsible for it. Frank knows this but can't allow facts to get in the way of his political agenda.

Also in that Op-ed Frank proposes a 100% consumption tax on anyone who spends an amount annually that, in his estimation, is too much. "Big spenders," as he refers to people who just happen to have too much money, according to Frank.

This is just class envy and jealousy. I won't mind if Frank eventually suffers the fate most who are motivated by envy face--dissatisfaction and unhappiness.

The only reason I see for taking Frank seriously is the reason you take seriously the sounds of someone breaking into your house in the middle of the night.

I hope this podcast does not signal a new turn to lower standards for Econ Talk podcasts. This one was a dud.

Schep writes:

Dr. Roberts

Your Quible relative to the news papers. Why don't people take multiple news papers and sell them. I would suggest that the market conditions are not that easy to sell plundered newspapers. People expect the official look of the guy in the orange vest on the queue by the stop signal and that if their were thefts of the magnitude to make it worthwhile the newspaper would try to find the theives. The regular on the street sales dude will also enforce his right to his good spot for selling the papers and report the unauthorized Theif.

Simon Hallett writes:

My question for Prof Frank would be, "Why do some of your books cost so much more than others?"
http://www.amazon.com/exec/obidos/search-handle-url/102-2898403-3418545?%5Fencoding=UTF8&search-type=ss&index=books&field-author=Robert%20H.%20Frank
I think we know the answer!

Peter Goff writes:

As a teacher, I second the opinion that is refreshing to hear professors striving to think pedogogically outside the box to make a more robust and lasting experience for their students. Thanks for the great discussion!

mulp writes:

In the discussion of overtime, I found the economists to be thinking irrationally, demonstrating that economists who argue that people act rationally is not evidence based.

If you were not determined to condemn the wages laws that mandate the minimum wage and the requirement for time and a half and double time for overtime, you would have asked the opposite question:

Why would an employer pay time and a half for overtime work when he should really be offering only three-quarters pay for the overtime because the worker's productivity is going to be much lower?

["France’s liberal (relative to the United States) pay and benefits/vacation structure are well-known and very important to French society, indeed to European society on the whole. It is also recognized that the United States boasts a higher per capita GDP than France and other European nations. What is not well-known is that worker productivity in France – GDP per hour worked or hourly productivity per worker – is actually higher in France than in the United States."
http://www.eurunion.org/welcome/ambassadorscorner/AmbWklyMess/2006/20060221jbwklymessage.htm]

Of course, the actual data serves only to validate what economic theory says, productivity, output per hour, increases as the amount of hours spent working increases from zero until it reaches a maximum productivity at which point the productivity decreases and continues to increase.

And in a way, it is this question which prompted the teaching method, the book, and this discussion. Jamming more and more economic theory into the course produced no tangible benefit, while cutting way back on the theory produced more results.

Which leads me to your discussion on why poor teachers are rewarded when the results are so poor. And your further question as to why anyone bothers paying for courses, or paying for teachers who produce so little.

Well, if a teacher came in and taught economics as if the world and the people in it mattered, and ended up with students who, while not using the words communism, argued that the purpose of the free market and capitalism was to benefit everyone by collectively analyzing the costs of actions from the standpoint of society and by having society invest in the capital that matters most to everyone, that being human capital via public education, comprehensive public health, sustainable infrastructures of housing, public transport, and concentrated housing to preserve natural open space, would they be rewarded for the enthusiastic and highly motivated students?

I think that as you suggest, the real customers of economic teachers, the conservatives who want to destroy FDR's legacy, would fire such a teacher at the end of his first semester teaching.

And in society, the economists who speak the conservative party line are rewarded with jobs teaching the party line, because after all, there is no cluster of Marxist Think Tanks, but a number that are devoted to the selected works of Adam Smith, Mises, Friedman, et al. (I never hear anyone invoke Friedman to condemn minimum wage laws go on, as Friedman did, to argue for the negative income tax.)

For public at large, these economists are merely names used in appeal to authority logical fallacies.

I have written perhaps 50 responses in defense of Milton Friedman when he has been called someone who wanted to make most of the people poor so that a few of his friends can be super-rich. My defense is his advocacy of the negative income tax, and his condemnation of the drug laws and of food stamps and housing vouchers which served to limit choice and impoverish people.

I have never seen an economist, actual or pretend, praising Milton Friedman for his negative income tax proposal, in the blogosphere, the media, et al.

The way I see it, economists teach students with a small number becoming economists so they can join the club of economists who man the economics faculty and the think tanks that provide the rationale for conservative Republican policy. For the rest of society, economists are merely the tools of the rich and ruling classes.

Remember that I am the one defending Milton Friedman for using economic theory to solve the problems of economic inequality and and disadvantage, and doing so by advancing his position by acknowledging the issues instead of denying them, as I see it done in past econtalk discussions.

For example: "no one pays me to recycle, so even if recycling costs less to society, it isn't in my self-interests to recycle so I'm just going to toss it. Of course, if I were charged to just toss it, then I would recycle because it would be cheaper, but then "they" would just illegally throw the trash away, so society needs to subsidize throwing away trash, because that is cheaper. Therefore, the only rational thing for me, AND SOCIETY, is to NOT recycle and just throw everything away for free."

So, economics as taugh is essentially useless to society, but it is beneficial to the individual to transfer the cost of society to others, ie., promoting self interest. Milton Friedman, on the other hand, saw his mission to improve the lot of everyone in society by seeking appropriate mechnisms to alter individual behavior to benefit society, to benefit everyone, not just the individual.

mulp writes:

Here is a question that I've been trying to answer in economic terms, without resorting to such evil explanation like morality or virtue:

Why be honest? Why not steal? Why not commit fraud?

While in a small relatively immoble society, whether as a member of a nomadic hunter-gather or as part of an early farming community, honesty is necessary for future dealing, in today's "internet age", one can, and often does deal with hundreds of people just once without any expectation that you will ever have contact with them again.

An ideal cover might be to become a member of the police in some fashion. This would provide access to both the information required to determine the risks of certain criminal activities, as well as providing access to helpful accomplices.

In reports by even the Bush administration on the police forces of other nations, including those that it calls democratic allies in the war on terror, they claim that police corruption, ie., the police acting as criminals, is a widespread problem.

Clearly drug dealing is very lucrative, so the ideal strategy is to seek out suspected drug dealer as a policeman and then enter into a bargain with him. And as the Tulia, Texas case illustrates, police and prosecutor corruption must be especially aggregious to cause anyone in government to do more than wrist slap before covering up the crimes.

So, why not be a criminal, and especially be a criminal working for the government in the police force or maybe the prosecutor's office?

Morality? Ethics? Religion? Where's the reward for that?

If recycling isn't worthwhile unless you are paid to recycle, why is being honest worthwhile unless one is paid specifically to be honest?

Citizenship?? Where's the reward in being a good citizen?

Comments for this podcast episode have been closed
Return to top