Copyright Copyright © 2007 by Robert H Frank Hachette Book Group supports the right to free expression and the value of copyright The purpose of copyright is to encourage writers and artists to produce the creative works that enrich our culture The scanning, uploading, and distribution of this book without permission is a theft of the author’s intellectual property If you would like permission to use material from the book (other than for review purposes), please contact permissions@hbgusa.com Thank you for your support of the author’s rights Basic Books Hachette Book Group 1290 Avenue of the Americas, New York, NY 10104 www.basicbooks.com First Hardcover Edition: May 2007 First Paperback Edition: April 2008 Published by Basic Books, an imprint of Perseus Books, LLC, a subsidiary of Hachette Book Group, Inc The Basic Books name and logo is a trademark of the Hachette Book Group The Hachette Speakers Bureau provides a wide range of authors for speaking events To find out more, go to www.hachettespeakersbureau.com or call (866) 376-6591 The publisher is not responsible for websites (or their content) that are not owned by the publisher Library of Congress Cataloging-in-Publication Data has been applied for ISBNs: 978-0-465-00217-7 (hardcover); 978-0-465-00357-0 (paperback); 978-0-465-00858-2 (2007 ebook); 978-1-5416-7383-0 (2018 ebook) E3-20180605-JV-NF Contents Cover Title Page Copyright Dedication Acknowledgments Introduction Rectangular Milk Cartons and Cylindrical Soda Cans: The Economics of Product Design Free Peanuts and Expensive Batteries: Supply and Demand in Action Why Equally Talented Workers Often Earn Different Salaries and Other Mysteries of the World of Work Why Some Buyers Pay More Than Others: The Economics of Discount Pricing Arms Races and the Tragedy of the Commons The Myth of Ownership Decoding Marketplace Signals The Economic Naturalist Hits the Road Psychology Meets Economics 10 The Informal Market for Personal Relationships 11 Two Originals Parting Thoughts About the Author Praise for The Economic Naturalist Notes Index For Thomas C Schelling Acknowledgments When I first started teaching introductory economics, a senior colleague advised me to begin each class with a joke It would start students off in a good mood, he explained, and make them more receptive to the ensuing lecture I never followed his advice It wasn’t that I thought he was wrong in principle Rather, I thought it would be too hard to come up with a relevant joke each time and felt that telling an irrelevant one would just be pandering As luck would have it, however, I stumbled upon a joke that seems just the right vehicle to launch this book The joke is set in Boston, a city known for its learned cab drivers, many of them dropouts from Harvard and MIT: A woman lands at Logan Airport, grabs her luggage, and jumps into a cab, hungry for a good New England seafood dinner “Take me to a place where I can get scrod,” she tells the driver Eyebrow arched, the cabbie turns and says, “That’s the first time I’ve heard anyone say that in the pluperfect subjunctive.” Few people actually know what the pluperfect subjunctive tense is I didn’t, or didn’t realize I did, so I looked it up on ASK JEEVES: The pluperfect subjunctive (or past perfect subjunctive) tense is used to express a hypothetical situation or an action which is contrary to reality In this case, the verb in the main clause is conjugated in the conditional form and it is necessary to use the subjunctive in the subordinate clause Here’s an example that will be familiar to New York Yankees fans from the late 1990s, when Chuck Knoblauch, the team’s second baseman, inexplicably lost his ability to complete the short throw to first baseman Tino Martinez: “The Yankees would have been out of the inning if Knoblauch had made the throw to first.” As is clear from the definition and example, the woman in the joke didn’t actually use the pluperfect subjective tense at all If the joke works, it is only because most of us haven’t the foggiest idea what this tense is Does it matter? Some psychologists once theorized that people couldn’t engage in clear counterfactual thinking unless they knew the technical details of the various subjunctive tenses But this claim doesn’t withstand scrutiny Notice, for instance, that although most American sports announcers don’t seem to know the pluperfect subjunctive (or at least choose not to use it), they manage just fine with counterfactual reasoning Thus, as Yankees announcer Bobby Murcer used to say during those games in the late 1990s, “Knoblauch makes that throw, they’re out of the inning.” Knowing about the pluperfect subjunctive is not a bad thing But if learning to speak a new language is your goal, the time and effort required to learn the explicit technical details of this tense would be far better spent in other ways Courses that focus most of their energy on such details are no fun for students, and they’re also astonishingly ineffective I took four years of Spanish in high school and three semesters of German in college In those courses, we spent a lot of time on the pluperfect subjunctive tense and other grammatical arcana that instructors thought important But we didn’t learn to speak When I traveled in Spain and Germany, I had great difficulty communicating even basic thoughts in those languages Many friends have described similar experiences My first inkling that there was a more effective way to learn languages came during the instruction I received before serving as a Peace Corps volunteer in Nepal The program lasted only thirteen weeks and was completely different from my earlier language courses It never once mentioned the pluperfect subjunctive Its task was to teach us to speak Nepali, and mastering arcane tenses had no place on the critical path to that goal The method of instruction was to mimic the way children learn to speak their native language Our instructor began with simple sentences and had us repeat them multiple times The first was, “This hat is expensive.” Since shoppers bargain for everything in Nepal, it was a useful sentence The next step was to announce a different noun—say, socks—and we would have to respond on the fly with the Nepali sentence for, “These socks are expensive.” The goal was to get us to respond without thinking about it In brief, instructors started with a simple example from a familiar context, had us drill it several times, then had us slight variations on it, drilling again Once we could function on our own at the current level—but not before—they would push us a little further The program’s responsibility was to make sure we were up and running after thirteen weeks My fellow volunteers and I had to teach science and math in Nepali shortly after arriving in the country And starting from zero, we did it The process itself created a sense of empowerment I had never experienced in traditional language courses So my first thanks go to my Nepali language instructors of long ago, who opened my eyes to the remarkable effectiveness of the less-is-more approach to learning As my students and I have discovered during the ensuing decades, this approach can also transform the experience of learning the core ideas of economics Students in most introductory economics courses spend much of their time grappling with the economics equivalent of the pluperfect subjunctive tense In contrast, the economics ideas you will encounter in this book appear only in the context of examples drawn from familiar experiences they help illuminate Learning economics is like learning to speak a new language It’s important to start slowly and see each idea in multiple contexts If you discover that this way of learning trumps the one employed in your college introductory course, tip your hat to my Nepali language instructors This book is the product of many fine minds Hal Bierman, Chris Frank, Hayden Frank, Srinagesh Gavirneni, Tom Gilovich, Bob Libby, Ellen McCollister, Phil Miller, Michael O’Hare, Dennis Regan, and Andy Ruina will recognize the many ways in which their comments on earlier drafts have improved the book I cannot thank them enough Others were helpful at further remove Some readers will recognize the ideas of my former teacher George Akerlof and former colleague Richard Thaler in many of the examples in the book But my biggest intellectual debt is to Thomas Schelling, the greatest living economic naturalist I dedicate this book to him I’m grateful as well to Andrew Wylie and William Frucht, without whose efforts this book probably would not have ended up in your hands I also thank Piyush Nayyar, Elizabeth Seward, Maria Cristina Cavagnaro, and Matthew Leighton for invaluable research assistance, and Chrisona Schmidt for superb copyediting It was a pleasure to work with Mick Stevens, whose drawings illustrate many of the examples in the book I am not much given to envy, but if there is a career I can imagine having been more fun than my own, it is his Over the years, I have tried, whenever possible, to use simple drawings or other illustrations that relate in some way to the examples I discuss in class For reasons that learning theorists could probably explain, this practice seems to root ideas more firmly in students’ minds, even though my drawings are often comically inept and contain no specific economic content I encourage students to produce their own crude illustrations to accompany the new ideas they encounter “Doodle on your notes!” I tell them What a wonderful luxury it was to describe ideas for drawings to one of my favorite New Yorker cartoonists and then have them appear, usually only days later, in much better form than I dared imagine I am especially grateful to the John S Knight Institute for Writing in the Disciplines for enlisting me in its program at Cornell in the early 1980s Except for my participation in that program, I never would have stumbled upon the economic naturalist writing assignment that led to this book But most important, I want to thank my students for the spirited essays that constitute the inspiration for the book Only a small fraction of the questions they posed made it into the final manuscript The ones that did are so splendid because of the effort that went into the thousands of essays from which I chose them A majority of the questions included in this volume were directly inspired by student essays Following each, I list the student’s name in parentheses A handful of questions were inspired by articles or books, most of them written by economists, and the relevant author’s name also appears in parentheses after those Most of the questions with no author credit are based either on examples from my own writings or on examples that I have developed for classes There remain three questions, however, that were inspired by student essays that I have been unable to locate I list these questions here, in the hope that the authors will step forward so that I can credit them properly in subsequent printings: (1) Why is milk sold in rectangular containers, while soft drinks are sold in round ones? p 18; (2) Why many bars charge patrons for water but give them peanuts for free? p 33; and (3) Why rental car companies impose no penalty for canceling a reservation at the last minute, whereas both hotels and airlines impose significant cancellation charges? p 91 In grateful acknowledgment of my former students’ contributions, I am donating half my royalties from this volume to Cornell’s John S Knight Institute for Writing in the Disciplines with full confidence that, dollar for dollar, no gift could more enhance the learning experience of future Cornell students Introduction Why the keypad buttons on drive-up cash machines have Braille dots? The patrons of these machines are almost always drivers, none of whom are blind According to my former student Bill Tjoa, ATM producers have to make keypads with Braille dots for their walk-up machines anyway, and so it is cheaper to make all machines the same way The alternative would be to hold two separate inventories and make sure that each machine went to the right destination If the Braille dots caused trouble for sighted users, the extra expense might be justified But they not Braille dots on keypad buttons of drive-up cash machines: Why not? Mr Tjoa’s question was the title of one of two short papers he submitted in response to the “economic naturalist” writing assignment in my introductory economics course The specific assignment was “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.” “Your space limit,” I wrote, “is 500 words Many excellent papers are significantly shorter than that Please not lard your essay with complex terminology Imagine yourself talking to a relative who has never had a course in economics The best papers are ones that would be clearly intelligible to such a person, and typically these papers not use any algebra or graphs.” Like Bill Tjoa’s question about ATM keypads, the best ones entail an element of paradox For example, my all-time favorite was submitted in 1997 by Jennifer Dulski, who asked, “Why brides spend so much money—often many thousands of dollars—on wedding dresses they will never wear again, while grooms often rent cheap tuxedos, even though they will have many future occasions that call for one?” Dulski argued that because most brides wish to make a fashion statement on their wedding day, a rental company would have to carry a huge stock of distinctive gowns—perhaps forty or fifty in each size Each garment would thus be rented only infrequently, perhaps just once every four or five years The company would have to charge a rental fee greater than the purchase price of the garment just to cover its costs And since buying would be cheaper, no one would rent In contrast, because grooms are willing to settle for a standard style, a rental company can serve this market with an inventory of only two or three tuxedos in each size So each suit gets rented several times a year, enabling a rental fee that is only a fraction of its purchase price This book is a collection of the most interesting economic naturalist examples I have collected over the years It is intended for people who, like Bill Tjoa and Jennifer Dulski, take pleasure in unraveling the mysteries of everyday human behavior Although many consider economics an arcane and incomprehensible subject, its basic principles are simple and commonsensical Seeing these principles at work in the context of concrete examples provides an opportunity to master them without effort Unfortunately that is not how economics is usually taught in college courses Shortly after I began teaching at Cornell University, several friends living in different cities mailed me copies of this Ed Arno cartoon: “I’d like to introduce you to Marty Thorndecker He’s an economist, but he’s really very nice.” Cartoons are data If people find them funny, that tells us something about the world Even before Arno’s cartoon appeared, I had begun to notice that when people I met at social gatherings asked me what I did for a living, they seemed disappointed when I told them I was an economist I began asking why On reflection, many would mention having taken an introductory economics course years before that had “all those horrible graphs.” Nineteen percent of American undergraduates take only one economics course, another 21 percent take more than one, and only percent go on to major in economics A negligible fraction pursues Ph.D work in economics Yet many introductory economics courses, abrim with equations and graphs, are addressed to that negligible fraction The result is that most students in these courses don’t learn much When students are given tests designed to probe their knowledge of basic economics six months after taking the course, they not perform significantly better than others who never took an introductory course This is scandalous How can a university justify charging thousands of dollars for courses that add no value? Even the most basic principles of economics don’t seem to be getting across If you ever took an Index Abdallah, Karim, 16 Accidents, 102–103, 126 Accountants, 54 Adams, Fran, 51 Aday, Don, 40 Adverse possession laws, 113 Airline child safety seats, 123–124 Airline fares/cancellation charges, 76–77, 81–83, 84–85, 90–91 Airline onboard meals, 88–89 Akerlof, George, x, 63, 120, 142 Alcoholic beverages, 33 See also Hotel minibar prices Alder, Timothy, 67 Altria, 58 Aluminum cans, 19–21, 150–151 Amusement park rides, 89–90 Anderson, Chris, 42 Anderson, Jennifer, 83 Animal rights activism, 197–199 Antibiotics, 96–97 Apartment buildings, 35–36, 42, 43–44 Apple Computer, Inc., 79–80 Appliances, retailers damaging, 77–79 Arbitrage, 31, 72 Arcnet company, 171 Arms races, 94, 105, 122, 139, 140, 203 Arno, Ed, Association of Fashion Designers of Spain, 121 ATM keypad buttons, 1, 12, 13 Austen, Jane, 97 Australia, 185 See also Films, Australian Automobile features, 13–16, 22–23, 125, 156–157, 203 See also Taxis Automobile prices/license fees, 142–143, 158–159 Average costs, 75, 76, 79, 82–83, 85–86 Babcock, Linda, 65 Background checks, 63–64 Badlani, Pankaj, 35 Bae, Minsoo, 17 Bair, Deborah, 87 Balet, Greg, 123 Balet, James, 67 Banks, transfer funds between, 74–75 Banks, Tyra, 166 Bars, 33 Baseball managers’ uniforms, 177–179 Baseball rookie of the year, 145 Beck, Leanna, 18 Ben & Jerry’s ice cream, 167–168 Bernanke, Ben, 12 Bias, 145, 146–147 Bierman, Hal, ix Big Love television series, 188 Blanco, Andrew, 190 Blondes/brunettes, 191–193 BMI See Body mass index BMW automobiles, 158, 171–173 Bock, Kelly, 64 Body mass index (BMI), 121, 122 Bonuses, 171–173 Books, 47–49, 117–118 Borders book-store, 47 Bouchereau, Valerie, 160 Bovine somatotropin, 30 Bras, jewel-studded, 166–167 Brazil, 150–151 British Commonwealth countries, 180 Broadway theaters, 81–83 Bruner, Jerome, Buffalo, 112 Bündchen, Gisele, 51 Bureaucratic language, 105–107 Business schools, 63–64 Business travelers, 76, 77, 85 Buttons See Clothing buttons Buzolin, Varga, 150 Cabs See Taxis Camerer, Colin, 65 Campaign contributions, 128, 129, 156 Caporicci, Mario, 130, 180 Car rentals, 39–40 Carter, Jimmy, 105 Carter, Kathy, Cartoons, x, Cashiers, 61–62, 170 Cash on the table See “No cash on the table” principle Caspian Sea, 115–116 Cavagnaro, Maria Cristina, x Caviar, 115–116 CDs, 26, 47–49, 64–65, 160–161 Cell phones, 34–35, 67, 127–128, 149–150 CEOs, 54 firing, 146 of tobacco companies, 57–58 Chan, Harry, 168 Chan, Jackie, 200 Chang, Jonathan, 44 Chefs, 57 Cherry trees, 101 Chicago Symphony, 80 Chickens, 113–115 Chien, Jacqueline, 158 Child safety seats, 123–124 Christmas decorations, 100–101 Civil Aeronautics Board (CAB), 105–106 Climate, 36, 56, 65–66, 118 Clothing buttons, 26–28 Clothing sizes, women’s/men’s, 175–176 Coins, 25 Commerce Department, 176 Commitment, 193–196 Competition/competitiveness, 13, 30, 31, 41, 46, 47, 48, 54, 60, 85, 87, 88, 93, 99, 100, 139, 185 competition for elite universities, 105 competitive advantage, 116, 119, 122 Computers, 33 See also Laptop computers Concerts, series tickets for, 80–81 Constancy of employment, 56 Containers for milk/soft drinks, 18–21 See also Aluminum cans Convenience stores, 18 Cornell University, x, xi, 9, 164 Cosmetics, 53 Cost-benefit principle, 7, 10–11, 13, 14, 15, 19, 30, 67, 95, 103, 110, 112, 115, 118, 119, 123, 130, 133, 134, 147–148, 156, 195, 198, 200, 204 benefit-side issues, 22–23 and cultural differences, 149, 153 and income, 16 and marrying young, 186, 187 and unemployment, 155 Costly to fake principle, 135–136 Counterfactual thinking, viii Cox, Caroline, 97 Crawford, Cindy, 52(caption) Cultural differences, 5–6, 149, 152, 154, 155, 184 and marketing similar products, 159–161 Custodial services, 169–170 Dai, Jia, 88 Dallas, Texas, 56 Darwin, Charles, 93 See also Evolutionary theory Das, Sachin, 124 Decker, Dave, 154 De Mestral, George, 174 Department stores, 176–177 Devine, Monica, 167 Discount pricing, 71–91, 201–202 See also Sales (on merchandise) Disney World, 89–90 Divorce, 187, 190 Doctors, 69–70, 96 Doganeli, Selin, 74 Dogs, 135, 147–148 Doyle, Walter, Driveway repaving, 56–57 Dulski, Jennifer, 2, 12 DVDs, 26, 42, 117, 160–161 Dylan, Bob, 47 Earning power, 183, 184, 192 E-commerce, 30 Economics, 2, 141 basic principles, ix, 2, 11 behavioral economics, 163–182 college courses in, viii, 3–4, 8–9, 201 and individual and group identity, 173 mathematical formalism in, 139–140 questions concerning, 9–10, 11–12 and self-interest, 168 Economies of scale, 75, 76, 77 Education, 119–120, 185, 188, 192–193 See also Economics, college courses in; School uniforms; Universities Efficiency, 75–91, 126–127, 130 Efthimiatos, Gerasimos, 81 Eggs, brown/white, 44–45 Electrical standards, 17 Electric power companies, 67–69 Elephant seals, 6–7, 94 Elk (male), 94–95, 105, 118–119 Elle magazine, 52, 53 Enaharo, Dolapo, 60 Endangered species, 113, 115 Enos, Laura, 26 Enron, 55 Ethical/moral issues, 168, 170, 171, 183, 203 Evolutionary theory, 6–8, 93–95 Fair Labor Standards Act, 120–121 Fashion models, 51–53, 121–122 Fernando, Luiz, 150 Ferraro, Paul, 4–5 Films, 42, 118 American/Asian multiplexes, 152–153 Australian, 143–144 release dates for, 160–161 reserved/open seating for, 151–152 special effects in, 199–200 ticket prices, 47–48, 71–72 Finland, 150 Firm, The (Grisham), 173 First-come, first-served norm, 180–182 Fishing industry, 95–96, 115–116 Fitzgerald, F Scott, 183, 184 Fixed costs, 16, 34–35, 80, 87, 89 Flat tires, 67 Focus groups, 137 Forbes Magazine, 51 Ford Motor Company, 15 Four Seasons hotels, 88 Fox, Lonnie, 49 Frank, Chris, 64, 79 Frank, Hayden, ix Franklin, Pat, 151 Fraud, 55 Fu, Frank, 152 Fur clothing, 197–199 Gasoline prices, 14–15, 16, 40, 157, 159 Gavirneni, Srinagesh, ix Gellert, Thomas, 115 Germany, 155 Gift giving, 172 Gilovich, Tom, ix Glambosky, Chanan, 174 Goffe, John, 39 Gold, 31, 71 Goldstein, Adam, 174 Golf driving ranges, 42–44 Gol Mol (film), 42 Gotte, John, 39 Grandparents/grandchildren, 36–37 Great Gatsby, The (Fitzgerald), 183–184 Great Salt Lake, 115 Greeting cards, 45–46 Grimm, Justin, 185 Grisham, John, 173 Gu, Tianxin, 34 Guarantees, 204 Guide dogs, 147–148 Gyozo, Peter, 125 Hadi, Rhonda, 37 Hagen, Matt, 187 Hallmark, 45–46 Halo effect, 165 Hampton Inn hotels, 88 H&R Block, 54 Harvard University, ix, 49 Health insurance/HMOs, 69–70, 155 Hearts On Fire, 166 Heberle, Fred, 96 Hedrick, Mike, 85 Heisey, Kevin, 197 Hernandez, Maurice, 147 Heuristics, 164 High heels, 97–98 High school valedictorians, 105 Hinske, Eric, 145 Hittle, Karen, 84 Hobbs, William, 199–200 Hockey player helmets, 104, 119 Hotel Internet access, 88–89 Hotel minibar prices, 73–74 Hotel rates, 37–38, 72–73, 74, 168–169 and cancellation charges, 90–91 Houses, size/price of, 36–37, 119–120, 121, 164–165 Hurdle method of differential pricing, 72–73, 74, 75, 76, 77, 78, 80, 83–84, 153, 201, 202 Ice cream container size, 167–168 Identity, individual/group, 173, 177 Income, 38, 39, 50, 65, 66, 128, 149, 150, 151, 152, 158, 170, 185, 191 of CEOs, 53–55 See also Salaries/wages; under Cost-benefit principle Income tax software, 34 Inconvenient Truth, An (film), 118 India, 35–36, 42 Information, 9, 23, 32, 123, 133, 135, 142, 147, 163, 164, 185, 204 and bias, 144–145 Intelligence, 191–193 Interests, individual vs group, 93, 96, 104, 118, 119, 123, 135, 152, 188, 202 Internet, 30, 42, 64–65, 73, 88–89 Intuit Corporation, 34, 54 iPods, 79 Iran, 116 Ithaca, New York, 23, 24–25, 40, 41, 44, 98–100, 167 one-lane bridges in, 180–182 Ito, Tsutomu, 161 Jain, Ashees, 116 Japan, 149, 161–162, 174 Jaywalking fines, 159 Jepson, Erik, 45 John F Kennedy Airport (JFK), 131 John S Knight Institute for Writing in the Disciplines, x, xi Johnson, Ebony, 18 Jonnalagadda, Kalyan, 149 Jowell, Tessa, 122 Kagan, Jerome, 149 Kahn, Alfred, 105 Kahneman, Daniel, 163, 164 Kamikaze pilots, 174–175 Kanazawa, Satoshi, 191 Katt, Sarah, 175 Kehler, Charles, 42 Kim, Gloria, 151 Kindergarten, 122–123, 203 Klum, Heidi, 51 Knoblauch, Chuck, viii Koontz, Pattie, 167 Kovar, Jody, 191 Kurkova, Karolina, 166 Labor costs, 39, 41 Labor market, 51–69, 119, 138, 185 as different from markets for goods, 59 and overtime work, 120–121 theory of competitive labor markets, 58–59, 63 Lack, Andrew, 25 Lake Champlain, 110 Lake Wobegon effect, 129 Land prices, 42 Languages, learning, viii–ix Laptop computers, 17, 79–80 Laundry services, 40–41 Law of one price, 31–32, 56, 71 Lawyers/law firms, 68–69, 137–139 Lazear, Edward, 62 Lee, Plana, 113 Leighton, Matthew, x Lehman, Jacob, 199 Li, Michael, 80 Libby, Bob, ix Libraries, 117–118 Lim, Up, 117 Lock, Digby, 97 Loewenstein, George, 65 London Fashion Week, 122 Long Tail, The (Anderson), 42 “Low-hanging fruit” principle, 32 Lucarelli, Joseph, 133 Lugones, Maria, 141 MacBook laptop computers, 79–80 Madonna, 64 Magrath, Scott, 180 Malthus, Thomas, 93 Managers/management consultants, 67–68, 146–147, 177–179 Manhattan, 6, 23–24, 73, 81–83, 129, 131, 159 Manual transmissions, 15–16 Marginal costs, 32, 44, 45, 54, 75, 85–86, 87, 89, 118, 123 Market-clearing price, 32 Market scope, 55 Market segmentation, 84 Marriage, average age of first, 185–186, 187 Marriage partners, informal market for, 184, 186–187, 191–192 Marriages, military, 190 Martinez, Tina, viii Massachusetts Institute of Technology (MIT), vii MBA programs, 63–64 McCollister, Ellen, x Mediterranean Sea, 115 Mehalchin, Martin, 155 Mehra, Tanvee, 124 Metallica, 64 Methicillin-resistant bacteria (MRSA), 96 Microsoft Word, 34 Milk, 18–19, 30 Miller, Phil, x Minneapolis, Minnesota, 56 Modern Times (CD), 47 Monogamous species, 7–8 Moore, Melissa, 100 Moriarty, Joan, 136 Motifs (CD), 47 MRI exams, 69–70 MRSA See Methicillin-resistant bacteria Murcer, Bobby, viii Music-sharing programs, 64–65 Napster, 64 Narrative theory of learning, NASDAQ Index, 29, 30 National Highway Traffic Safety Administration, 125 Native Americans, 112 Nayyar, Piyush, x Neblett, Liz, 125 Netflix, 42, 117 New York University, 105 Njoku, Okwu, 63 “No cash on the table” principle, 29, 30, 31, 41, 44, 59, 79, 88, 89, 90, 119, 168, 204 Nonprofit institutions, 116–117 Northwest Territories, 112 Office buildings, 42, 43–44 O’Hare, Michael, x Oil embargoes, 14 Opportunity costs, 4–6, 39, 44, 66, 82, 96, 100, 101, 124(caption), 130, 154, 155, 202 Optical illusions, 20, 21 Outsourcing, 169–170 Ownership issues, 109–131 Paper money, 25 Paris Combo, 47, 48 Parsons, Travis Murphy, 131 Pasarela Cibeles, 121 Peacocks, Peanuts, 33 Penicillin, 96 Petal, Hetal, 186 Pets, 147–148 Photographs, costs of color/black-and-white, 38–39 Photographs, free second set of, 46 Pleasure boats, 125–126 Ploof family, 110 Pollution, 115, 158 Polygyny/polygamy, 7, 8, 94, 188–190, 203 Predators, 7, 94, 95 Prices, 30, 35, 41, 42, 44–45, 93, 134, 135, 142, 152, 153, 167–168 See also Airline fares; Automobile prices/license fees; Concerts, series tickets for; Discount prices; Films, ticket prices; Gasoline prices; Hotel minibar prices; Hotel rates; Law of one price; Sugar prices; Taxis, fares Princeton University, 49 Product design, 13–28 Productivity, 30, 58–59, 62–63, 145 Professors, 137–139 writing of humanities professors, 140–142 Profits, 30, 45, 57, 62, 69, 74, 75, 79, 86, 93, 117, 156, 170 during Christmas holiday season, 100 Property rights, 109, 110–113, 115 Psaropoulos, Evan, 127 Pugel, Thomas, 156 Putman (owner of dock), 110 Quicken software, 34 Quigley, Brendan, 21 Radar detectors, 128–129 Rational choice theory, 165 Real estate, 42 See also Apartment buildings; Houses, size/price of Recessions, 43 Recycling, 150–151 Redding, Charles, 19 Refrigerators/freezers, 16, 19, 77–78, 126 Regan, Dennis, x Regression to the mean, 145, 146, 147 Rental car companies, 90–91 Research and development (R&D), 79, 80, 87 Restaurants, 57, 60, 61–62, 85, 90, 128, 169 beverage refills at, 85–87 check splitting at, 101–102 Roitman, Othon, 38 Rome, Italy, 159 Rosedale, Matt, 128 Routt, Danielle, 56 Rubinstein, Kate, 179 Ruina, Andy, x Russia, 116 Safety issues, 119–120, 123–126, 127–128, 203 Salaries/wages, 53–56, 99, 119, 120, 138, 154, 170, 171, 173 and high-ranked vs low-ranked positions, 58–59 theory of compensating wage differentials, 54–56, 58, 183, 203–204 wages and productivity, 62–63 Sales (on merchandise), 72, 77, 201–202 See also Discount pricing Sandoval, Laura, 46 Sass, Eric, 100 SAT scores/prep courses, 49, 202 Sawaya, Rima, 176 Scarzella, Carole, 124 Schelling, Thomas, xii, 102, 104 Schiffer, Claudia, 166 Schilke, Tobin, 36 School buses, 124–125 School uniforms, 104–105, 203 Schwartz, Salli, 175 Scratch ‘n’ dent appliance sales, 77–79 Sears Roebuck, 77–78 Seat belts, 124–125 Senior citizens, 36–37, 84, 174 Sense and Sensibility (Austen), 97 Sethia, Vivek, 149 Seward, Elizabeth, x Sexual dimorphism, 7–8 Sharm El Sheikh, Egypt, 37–38 Siahaan, Jim, 124 Simonson, Itamar, 165 Singapore, 158–159 Smith, Adam, 31, 55, 56, 93, 121, 183 Soccer, 154 Social status, 191 Soft drinks, 18–22, 85–87 Software, 33–34 See also Tax returns software South Korea, 151 Soviet Union, 115–116 Special interests, 127 Speed limits, 128, 129, 157 Squatters rights, 113 Stanczak, Bradley, 170 Staphylococcus aureus, 96 Starbucks, 83–84 Stevens, Mick, x Stocks, 29, 133–135, 204 Sugar prices, 156 Suicide, 164, 175 Super Bowl, 168–169 Supermarkets, 98–100 Supply and demand, 29–50, 184 demand side issues, 33–38, 44–50 and labor market, 51 and plural marriage, 190 supply side issues, 38–50 “Tactical Strategies of the Streetwalker” (Lugones), 141 Tagler, Jason, 164 Target Stores, 179 Tariffs, 54, 156 Tax-deductible gifts, 117 Taxis, 23–25, 65–66 fares, 129–131 Tax returns software, 54 Taylor, Laura, 4–5 Tchernoivanov, Andrei, 23 Technology, 54, 55 Television advertising, 136–137 Text messaging, 149–150 Thaler, Richard, x, 65, 168, 172 Theft (by cashiers), 61–62 Tingleff, Sam, 61 Tips, 60, 163 Tire companies, 54–55 Title IX legislation, 154 Tjoa, Bill, 1–2, 12, 13 TKTS window in New York’s Times Square, 81, 83 Tobacco companies, 57–58 Toburen, Andrew, 177 Tourism, 131 Tragedy of the commons, 96, 116 Trespass, law of, 110–112 Tuition costs, 49–50, 117 TurboTax software, 54 Tuxedos, 2, 39–40 Tversky, Amos, 163, 164, 165 Unemployment, 155 Uniformed Services Former Spouses Protection Act (USFSPA), 190 Universities, 49–50, 63–64, 105, 116–117, 122, 202 See also Economics, college courses in; Professors U.S News and World Report, 49 Utah, 115 Vanity sizing, 176 Varga, Ed, 47 Velcro shoes, 174 Vending machines, 21–22 Verizon, 34 Victoria’s Secret, 166–167 Videotapes, 26, 87–88 Viles, Lesley, 57 Vogue magazine, 53 Wages See Salaries/wages Waiters, 57, 60 Washington, D C., 42–44, 128 Waterfront property, 110–112 Wealth of Nations, The (Smith), 31, 55, 56, 93 Wedding dresses/parties, 2, 12, 161–162 Weiss, Jose, 159 Wenstrup, Stephanie, 166 Whales, 113–115 Wilde, Gordon, 26 Willers, Katie, 26 Wilson, Kem, 73 Wo-Ping, Yuen, 199, 200 WorldCom, 55 Wylie, Andrew, x Yu, Patty, 22 ... also transform the experience of learning the core ideas of economics Students in most introductory economics courses spend much of their time grappling with the economics equivalent of the pluperfect... surprising that engine sizes began increasing again in the 1990s As gasoline prices have again escalated in recent years, we are seeing a rerun of the trends of the 1970s Even before the price... distinctive mind-set known as “thinking like an economist.” Most of them spend so much effort trying to make sense of the mathematical details that the intuition behind economic ideas escapes them