Viewing Life Through an Economic Prism Robert Frank often wonders such things as: Why are milk cartons square? He solves the conundrums in everyday life using basic economics. Some of the findings are in his new book The Economic Naturalist.
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Viewing Life Through an Economic Prism

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Viewing Life Through an Economic Prism

Viewing Life Through an Economic Prism

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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It's MORNING EDITION from NPR News. I'm Steve Inskeep.


And I'm Deborah Amos.

Here's a question: Why are milk cartons, unlike just about any other beverage containers, square? Why does Christmas shopping season start earlier every year? These are questions that puzzle Robert Frank. He calls himself an economic naturalist, and he looks for conundrums in everyday life and then solves them by using basic economics. And that's how he's taught economics at Cornell University for many years. He says his students learn and remember economics much better when they see that the topic is all around them, all the time.

NPR's Adam Davidson spent some time out in the field with Frank.

ADAM DAVIDSON: Let's start with those milk cartons. I went with Robert Frank to Sammy's Deli in Sheridan Square, Manhattan. We stood in front of the refrigerated beverage cupboard and I asked him why the milk cartons are square when the soda cans and juice bottles are round. He said it's all because of the cost of refrigeration. Milk is always refrigerated. Soda and juice aren't.

Professor ROBERT FRANK (Henrietta Johnson Louis Professor of Management; Economics, Cornell University; Author, "The Economic Naturalist: In Search of Explanations for Everyday Enigmas"): They're paying to store a lot of milk and they don't want to have three of these big cupboards to do it when they could by with only two. You notice how fully the shelf space is utilized by the square container? There's not a wasted square millimeter of space.

DAVIDSON: His new book, "The Economic Naturalist," contains dozens of these puzzles. Why do drive-thru ATMs have Braille typed on them? Why is the passive voice used by bureaucrats? Why do lawyers drive BMWs while college professors with the same salary drive old Volvos?

Those are in the book, but these puzzles can be found anywhere. In Greenwich Village, Bleecker Street is lined with high-end clothing stores - Cynthia Rowley, Ralph Lauren, Marc Jacobs. I notice that the shop I've never heard of - Irma(ph) - has the least amount of clothing.

And I'm guessing 40 dresses that we see.

Prof. FRANK: Yeah, sure is. A very spare look, there's no question about it.

DAVIDSON: Whereas the Ralph Lauren shop it's hundreds and hundreds of pieces of clothes.

Prof. FRANK: So I'm guessing that Irma has some clothes that must be really good.

DAVIDSON: Frank calls this signaling. The Irma store is affectively telling passersby, hey, we can afford the most expensive rent in New York, selling only a handful of clothes. If our stuff wasn't the best, we'd be out of business. We go inside to find out if Frank's theory is right.

Hello. Can you quickly show me just some of your items?

Unidentified Woman: We have some Montclaire(ph) made in France.

DAVIDSON: Everything in this store is really pricy. Most things are around the grand.

This is, like, a cardigan sweater for $835.

Prof. FRANK: Yeah. It's not a low-end sweater, it's a nice one.

DAVIDSON: That's expensive.

We asked the manager, Galeck Balti(ph), why the store is so sparsely stocked.

Mr. GALECK BALTI (Manager, Irma): We are targeting A and A-plus customers.

DAVIDSON: You mean wealthy customers?

Mr. BALTI: Wealthy customers. When they come in, they know that we don't have cheap stuff inside.

DAVIDSON: It seems like Frank's theory is right. A spare store could mean good quality at a high price. Of course, a spare store might also mean the place is about to go out of business.

Just down the block, we find another puzzle. There's a huge line outside of Magnolia Bakery. There's always a huge line here, people waiting for their famous cupcakes.

We talk to Sabrina(ph) and Melina(ph) Ravan, two young sisters who are devouring their cupcakes.

Ms. SABRINA RAVAN: Green and white sprinkle.

Prof. FRANK: Are they really good?

Ms. S. RAVAN: They're really good.

Prof. FRANK: If they were more expensive, would you still buy them?

Ms. S. RAVAN: Yeah, because they're really good.

DAVIDSON: It's $2?

Ms. MELINA RAVAN: Yeah. Two dollars for one.

DAVIDSON: What if it was $4?

Ms. S. RAVAN: I'd still get it.

Ms. M. RAVAN: I'd still get it. Sometimes.

DAVIDSON: Ten dollars?

Here is the economic naturalist's puzzle. Why is Magnolia only charging $2 when there's clearly lots of demand at that price? Couldn't they raise their price and make more money?

We asked the manager, Shaina Sasman(ph). She says that line outside; it's their best asset. People come because of it. It means they don't have to pay any money to get customers' attention.

Ms. SHAINA SASMAN (Manager, Magnolia Bakery): The only kind of advertising is just the publicity that we've gotten from, you know, how popular we've got, and all that kind of stuff.

Prof. FRANK: So it might not be a good strategy to raise the price of a cupcake if that meant shortening the lines outside.

Ms. SASMAN: Yeah.

Prof. FRANK: It's a pretty smart decision to keep it at $2, is that correct?

Ms. SASMAN: Yeah.

DAVIDSON: I feel excited. We had an economic conundrum, an enigma that we didn't understand, and now I feel like we figured it out.

Prof. FRANK: Yeah. We're making progress.

Ms. SASMAN: Good for you.

(Soundbite of laughter)

Ms. SASMAN: Congratulations.

DAVIDSON: I'm not very impressed with Shaina Sasman.

After Magnolia, we walked some more and Frank explained to me why something like half of New York's falafel restaurants are all right next to each other on the same block.

Adam Davidson, NPR News, New York.

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