The Hindu Business Line : Easy economics to answer queasy questions

Have you wondered why female models earn so much more than male models? Or, why do stock analysts seldom recommend selling a company’s stock? Why do 24-hour shops have locks on their doors? Why do humanities professors often write so unclearly?

To these and more questions, Robert H. Frank has clear answers in The Economic Naturalist ( www.landmarkonthenet.com).

Less-is-more is a good approach to learning, be it language or economics, he says right at the start. Start slowly and see each idea in multiple contexts, the author guides. And allow the ‘naturalist’ in you to observe and ask questions.

Such as, this one, which is Frank’s all-time favourite: “Why do 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?”

The explanation is that since ‘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 40 or 50 in each size,’ making the operation uneconomical. “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.”

Basic principles of economics are simple and commonsensical, assures Frank, dispelling the common notion that the subject is arcane and incomprehensible. Most economics professors won’t tell you that you can learn a lot of economics by reading up a little evolutionary theory.

Do you know for instance why the bull elephant seal is so much bigger than the cow, while the male and female albatross are about the same size? Clue: The latter is monogamous. Remember, though, that the big size of the bull elephant seal has its costs, as well as benefits.

Economics can benefit more from such narratives, than from equations and graphs that usually inundate the students, says Frank. “Human brain’s specialty seems to be absorbing information in narrative form.”

Check if you know the answers to these questions: Why do bars often charge patrons for water but give them peanuts for free? Why do many people buy larger houses when they retire and their children leave home? Why is it easier to find a partner when you already have one? Why do we leave tips for some services but not for others? Why…

A book that can liberally rejuvenate your shrivelled economic concepts.

http://BookPeek.

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Easy economics to answer queasy questions