SYLVIE DOUGLIS, BYLINE: This is PLANET MONEY from NPR.
(SOUNDBITE OF COIN SPINNING)
SAM YELLOWHORSE KESLER, HOST:
Just a heads up for parents - part of this episode talks, quite mathematically, about contraception.
KENNY MALONE, HOST:
There are two sides to professor Linda Ghent. There is the side that worries about social norms. And then, there is the side that is an economist.
LINDA GHENT: I always joke with my students about wanting to pay the person who sits in front of me on an airplane to not lean back their seat if I want to work on my computer.
KESLER: Linda teaches economics at Eastern Illinois University.
GHENT: But I'm always worried to make that offer because they might look at me like I'm absolutely crazy. And I've never done it because I'm just always worried about what reaction I would get even as - even though, as an economist, I know it's the right way to deal with that situation.
MALONE: And do you know what show that scenario would be right at home on? I can think of one.
GHENT: "Seinfeld." Absolutely, "Seinfeld."
MALONE: "Seinfeld."
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KESLER: There is a case to be made that the very popular '90s sitcom was actually full of economics.
MALONE: Yeah, yeah. Hear us out here. So "Seinfeld" was famously called a show about nothing because it's about comedian Jerry Seinfeld and his three friends, George, Elaine and Kramer - they're just living in New York City, dealing with the dilemmas of everyday life - like what gift to give your friend.
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JULIA LOUIS-DREYFUS: (As Elaine Benes) Cash?
JERRY SEINFELD: (As Jerry Seinfeld) What do you think?
(LAUGHTER)
LOUIS-DREYFUS: (As Elaine Benes) You got me cash?
SEINFELD: (As Jerry Seinfeld) Well, this way I figure you could go out and get yourself whatever you want. No good?
LOUIS-DREYFUS: (As Elaine Benes) Who are you, my uncle?
MALONE: Giving cash as a gift is something that we at PLANET MONEY talk about a lot as it is a very efficient gift. However, we also know that society does not often give cash as a gift largely because of social norms.
KESLER: Yeah, "Seinfeld" is kind of a world populated by characters who are, A, constantly weighing the costs and benefits of every mundane decision and, B, not really afraid to break those social norms to make the optimal and sometimes selfish decision.
MALONE: Very economics-y. And professor Linda Ghent and her colleague Alan Grant have, in fact, written a whole book on "Seinfeld" and economics titled "Seinfeld And Economics." And Linda says perhaps no character represents this connection more than George Costanza.
GHENT: He is probably the - you know, the most diligent user of cost-benefit analysis I've ever seen.
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JASON ALEXANDER: (As George Costanza) I go to drop a buck in the tip jar. And just as I'm about to drop it in, he looks the other way. So then, as I'm leaving, he gives me a look like, thanks for nothing.
SEINFELD: (As Jerry Seinfeld) You got no credit.
ALEXANDER: (As George Costanza) Exactly. It's like I'm throwing a buck away.
GHENT: And I mean, he will not do anything if it doesn't benefit him. And so, you know, in some ways, he really is the true economic man.
MALONE: Right, the homo economicus, the mythological economic rational actor.
GHENT: Yes.
KESLER: And when you start watching "Seinfeld" as a sort of economics wonderland populated by these homo economici, the show about nothing does become a show about something.
MALONE: Economics. Yeah, it becomes about economics.
(SOUNDBITE OF JONATHAN WOLFF'S "SEINFELD THEME")
MALONE: Hello, and welcome to PLANET MONEY. I'm Kenny Malone.
KESLER: And I'm Sam Yellowhorse Kesler. Today on the show, economicus for the rest of us, the new way to watch "Seinfeld."
(SOUNDBITE OF JONATHAN WOLFF'S "SEINFELD THEME")
MALONE: Would you, at this point, describe yourself as a "Seinfeld" scholar?
GHENT: I'm a scholar, comma, "Seinfeld" enthusiast. How's that?
MALONE: Aha.
KESLER: Again, Linda Ghent - professor, comma, "Seinfeld And Economics" author.
GHENT: It's funny because I like the show so much more now than I did in the '90s, which is interesting. But I think it's the economics in it that makes me like it even more.
MALONE: Today, with Linda's help, we are going to walk through three episodes of "Seinfeld" that demonstrate how the show is not just about economics, but perhaps reveals the very essence of economics.
KESLER: Now, one way to think about economics is that it just kind of comes down to studying how people make decisions.
MALONE: Certainly, a good chunk of economics is about people making decisions, and so, too, is our first "Seinfeld" and economics moment. So, OK, here we go. A little bit of setup for this first episode - so the character George Costanza, we see him in a job interview, and we hear the person interviewing George talking.
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JACK SHEARER: (As Mr. Tuttle) We have a small, but prestigious, group of clients.
ALEXANDER: (As George Costanza) Well, a lot of people consider me small and prestigious.
(LAUGHTER)
GHENT: So George is sitting in the interview, and he thinks it's going really well.
MALONE: And then, right as it sounds like this employer is about to make a hiring decision...
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SHEARER: (As Mr. Tuttle) I want you to have this job. Of course...
PEGGY ETRA: (As Clarisse) Stu Zimmer's (ph) on Line 2.
SHEARER: (As Mr. Tuttle) Great, thanks.
MALONE: He's interrupted.
GHENT: And he never finishes that sentence, and then, they send George on his way.
MALONE: So all George has heard is, I want you to have this job; of course - and that's it. He doesn't actually know if he has the job or not.
KESLER: And this is the moment, Linda says, the episode gets very econ-y because George, along with his friends Elaine and Jerry, now have to figure out how can George make the best decision despite not knowing how this other person, the hiring guy, is going to act.
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LOUIS-DREYFUS: (As Elaine Benes) Look, why don't you just go ahead and call him?
ALEXANDER: (As George Costanza) Because he made a big deal about how I understand everything immediately. That's what impressed him.
SEINFELD: (As Jerry Seinfeld) So if you call to ask if you have the job, you might lose the job.
ALEXANDER: (As George Costanza) And if I don't call...
SEINFELD: (As Jerry Seinfeld) You might have the job, but you'll never know it.
GHENT: And so he's trying to do this cost-benefit analysis in his head about, well, do I - what if I just show up and just pretend like he hired me? What if I - if I don't show up and they're expecting me, then that's going to look bad.
MALONE: Getting to hear George and the old "Seinfeld" gang talk through all the different ways this could go, I mean, that is sort of the joke here. But in fact, it is also the most economics-y thing here, too, because whether they know it or not, they seem to be using a decision-making device straight from the pages of economics textbooks - a payoff matrix.
KESLER: Now, a payoff matrix is a tool from the world of game theory that kind of forces you to work through all the different scenarios to see how you can optimize your outcome.
MALONE: So, for example, let's say George assumes the worst and does not show up to work. Well, that is fine if the hiring manager had not hired George. Like, that outcome is a small win for George. He doesn't go to work. He saves himself some time and some embarrassment by not showing up in that case.
KESLER: On the other hand, if George does not show up for work but it turns out he actually did have the job, that is a huge loss for George because he could have had the job, and he missed out.
MALONE: Working through the various scenarios this way allows anybody using a payoff matrix - but, you know, George, in this case - to figure out what is optimal. What is the winning strategy? And George believes he has found one.
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ALEXANDER: (As George Costanza) I show up. I pretend I have the job. The guy's on vacation. If I have the job, it's fine. If I don't have the job, by the time he comes back, I'm ensconced.
(LAUGHTER)
SEINFELD: (As Jerry Seinfeld) Not bad.
ALEXANDER: (As George Costanza) What's the worst thing that can happen?
KESLER: So is there any other times in which, like, this sort of kind of calculation, this kind of payoff matrix is used?
GHENT: Well, we see it a lot in discussions of political policies across countries.
MALONE: So, like, the highest-stakes things possible - is that what you're saying?
GHENT: Absolutely. You can think about the Cold War, the buildup of all of these weapons between the U.S. and the Soviet Union happening because of a situation that you can describe easily in a payoff matrix.
MALONE: The payoff matrix - useful for people trying to make rational decisions when they don't know what exactly another person is thinking, whether that be George and the hiring guy or Kennedy and Khrushchev.
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MALONE: OK, so that last bit was about decision-making. This next "Seinfeld" idea is more about the way economics helps us think about the problem of scarce resources.
KESLER: And for this idea, we're going to leave Linda for a second because she is not the only econ professor who has noticed the econ stuff in the show.
MALONE: Would you like to read the opening line, I guess the abstract?
AVINASH DIXIT: Abstract obviously says this is a paper about nothing.
KESLER: Avinash Dixit is a retired professor of economics at Princeton. He's written very serious books and papers about investment and uncertainty. But then also in 2011, he published the paper we're going to be talking about today.
MALONE: A paper about this one particular episode of "Seinfeld."
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LOUIS-DREYFUS: (As Elaine Benes) The sponge.
UNIDENTIFIED ACTOR #1: (As character) Sponge?
LOUIS-DREYFUS: (As Elaine Benes) OK? The Today sponge.
MALONE: OK. So the conceit of this episode is that the character Elaine uses a very specific form of contraceptive, the sponge. The sponge is a single-use item, and that is a problem because it's going off the market, leaving her with a finite supply. And so she starts to worry about whether potential partners are worthy of these few remaining sponges.
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LOUIS-DREYFUS: (As Elaine Benes) I just couldn't decide if he was really spongeworthy (ph).
SEINFELD: (As Jerry Seinfeld) Spongeworthy?
LOUIS-DREYFUS: (As Elaine Benes) Yeah. Jerry, I have to conserve these sponges.
SEINFELD: (As Jerry Seinfeld) But you like this guy. Isn't that what the sponges are for?
LOUIS-DREYFUS: (As Elaine Benes) Yes, yes, before they went off the market. But, I mean, now I've got to reevaluate my whole screening process. I can't afford to waste any of them.
MALONE: Now, Avinash saw this episode and thought to himself, you know what? I bet I could write a formula for spongeworthiness (ph).
KESLER: A formula that would tell Elaine if a potential partner is worthy of one of her scarce sponges. Here's a taste of that formula.
DIXIT: So VM minus 1 is the total value of having M minus 1 sponges used in the best possible way.
MALONE: It is a beautiful but also quite elaborate formula.
DIXIT: Discounted by beta - that's less than 1. That's, like, 1 over 1...
KESLER: OK, just to walk through this, there are three basic components in Avinash's formula. There is the number of sponges Elaine has remaining, which Avinash calls M.
MALONE: Then there's the particular partner that Elaine is considering at the moment. And so Elaine would need to put a number on how much she expects to value - how might Avinash put it? - the value of moving from M to M minus 1 sponges with that particular partner.
KESLER: Deftly handled. But then you also have to factor in beta, which Avinash describes as Elaine's impatience factor. It's a number that quantifies how much Elaine values having something today versus waiting until tomorrow.
MALONE: So take this scene with Elaine and a guy she's dating named Joel (ph).
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LOUIS-DREYFUS: (As Elaine Benes) So you think you're spongeworthy?
UNIDENTIFIED ACTOR #2: (As Joel) Yes, I think I'm spongeworthy. I think I'm very spongeworthy.
LOUIS-DREYFUS: (As Elaine Benes) Run down your case for me again.
UNIDENTIFIED ACTOR #2: (As Joel) Well, we've gone out several times. We obviously have a good rapport.
MALONE: Now, what Avinash's formula does is it takes into account the idea that as sponges become more scarce, Elaine will have higher and higher standards for who counts as spongeworthy.
KESLER: Yeah. So if we set Elaine's impatience at, let's say, moderate and we set her sponge supply to 100 sponges, then Avinash's formula says as long as Joel is in the top 38% of people Elaine might meet, then she's not going to regret using a sponge on Joel.
MALONE: But if she only has 10 sponges left, Joel had better be in the top 13%.
KESLER: And if she only has one sponge left...
DIXIT: Close to the top.
MALONE: Quite close to perfect.
DIXIT: Basically in the top 5% of the distribution of qualities.
KESLER: Avinash says this formula of his - it can be used for more than just spongeworthiness because these kinds of situations happen all the time, situations where changes in scarcity change what we expect or want.
MALONE: Yeah, like deciding who is worthy of one of your fanciest bottles of wine.
DIXIT: And you have people over to dinner from time to time. When should you open it - when your boss is coming or when the president of the United States is coming? It's exactly the same kind of mathematical problem.
KESLER: We often think of the economic value of something as being fixed. But Elaine's calculus in the spongeworthy episode reminds us that value changes based on everything from patience to scarcity.
MALONE: What would you tell Elaine now that you've done all this math? Like, what conversation would you have with her?
DIXIT: Simplest, I'll say, hire me as a consultant, and I'll do the calculation for you.
(SOUNDBITE OF JONATHAN WOLFF'S "SEINFELD THEME")
MALONE: After the break, our final "Seinfeld" episode and lesson. We go in search of a rare economic phenomenon - the bad.
KESLER: OK, we've talked about econ as decision-making and as the study of scarcity. Our last "Seinfeld" stop is about utility.
MALONE: Utility is a useful econ shorthand for, like, what you get from something. How useful is a thing or profitable or satisfying? And typically we talk about this stuff in terms of gaining utility. We can ask questions like, how much does a good or service make our lives better? But there is a pretty fascinating flipside to this.
KESLER: Our third and final "Seinfeld" economics example - the muffin top.
MALONE: The muffin top. So to set this up, Elaine is at a book signing where there are free muffins. A bookstore employee notices that there is a half a muffin sitting in the free pile as if someone just, like, took the bottom half of the muffin and left it behind.
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UNIDENTIFIED ACTOR #3: (As character) I can't believe somebody pulled the top off this muffin.
LOUIS-DREYFUS: (As Elaine Benes) That was me. I'm sorry. I don't like the stumps.
UNIDENTIFIED ACTOR #4: (As character) So you just eat the tops?
LOUIS-DREYFUS: (As Elaine Benes) Oh, yeah. It's the best part.
KESLER: To walk us through this example, we have brought back Professor Linda Ghent.
GHENT: They realize that everybody, when they're eating a muffin, really enjoys the top, and the stems, that little part that's down under the wrapper, just is not nearly as enjoyable as the fluffy goodness at the top.
MALONE: So Elaine comes up with an idea to have a bakery, make muffins, cut the bottoms off and just sell the muffin tops.
GHENT: And then they discovered a problem because they didn't know what to do with the muffin stems. They ended up with all these muffin stems, and even when they try to give them away - they were talking about taking them to a homeless shelter - they were turned down.
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UNIDENTIFIED ACTOR #5: (As character) We've never gotten so many complaints. Every two minutes - where's the top of this muffin? Who ate the rest of this?
LOUIS-DREYFUS: (As Elaine Benes) We were just trying to help.
UNIDENTIFIED ACTOR #3: (As character) Why don't you just drop off some chicken skins and lobster shells?
LOUIS-DREYFUS: (As Elaine Benes) I think I might.
GHENT: Nobody seems to want them. They don't seem to have a value.
MALONE: Or more specifically, the muffin stumps seem to have a negative value. The utility of the muffin stump is less than zero.
KESLER: This means that in the world of Seinfeld, at least, they seem to be the opposite of an economic good. They are what's known as an economic bad.
GHENT: And a bad is something that you would actually pay people to take rather than you would pay to get it from them.
KESLER: And once you know how to look for economic bads, you'll start to notice them everywhere.
MALONE: Yeah, just look at boneless versus bone-in chicken. Like, the same chicken costs more when they take something away - the bones. Bones appear to have negative value. Bones are a bad.
KESLER: Yeah. Or to use another example - broccoli. If you want just the tasty broccoli tops, the florets, and not the stumps, you can buy just those broccoli tops, but they'll cost you a little bit more.
MALONE: Yeah. And when you start to look at the world this way, with a lens of value and utility, it becomes helpful at a place like the grocery store. You can stop and say, OK, what is my utility function here? Because the grocery store is kind of offering me a couple of bucks or whatever if I'm willing to spend the time and energy to deal with those broccoli stumps or those chicken bones.
KESLER: Or you can decide, nah, I'll pay more. Let someone else do that.
GHENT: I honestly have never deboned a chicken breast in my life, so I would have no idea how to do that. So I gladly pay someone else to do it for me, right?
MALONE: Well, you have been, it turns out. You have been.
GHENT: Oh, all the time.
KESLER: Just like people would, in theory, pay Elaine to remove the bad part of the muffin.
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LOUIS-DREYFUS: (As Elaine Benes) You got to make the whole muffin. Then you pop the top...
RICHARD FANCY: (As Mr. Lippman) Uh-huh.
LOUIS-DREYFUS: (As Elaine Benes) ...Toss the stump.
MALONE: Listen, you know, muffin tops, interrupted job offers, spongeworthiness - like, the whole thing about "Seinfeld" being a show about nothing - really, "Seinfeld" was a show about nothing special. It was a TV show that depicted unusually mundane parts of life, and then people making decisions about those mundane things.
KESLER: But that, Linda says, is basically what the economy is.
GHENT: Probably my favorite definition of economics came from 19th century economist Alfred Marshall, who says that economics is the study of mankind in the business of ordinary life. And I love that because I like to teach economics as a class about or a discipline about making decisions and making choices. We can't have everything we want. We have unlimited wants, but we can't satisfy all those wants. And so how do we go about making ourselves as best off as we can in those situations?
MALONE: In other words, what if the economy is just a million little "Seinfeld" episodes happening all at once? And once you look at it that way, you start to see that we've all got a little bit of that relentlessly self-interested homo economicus energy that is George Costanza.
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ALEXANDER: (As George Costanza) Why can't there be some things just for me? Is that so selfish?
SEINFELD: (As Jerry Seinfeld) Actually, that's the definition of selfish.
KESLER: This episode was produced by Alyssa Jeong Perry with an assist from Emma Peaslee and edited by Keith Romer. It was mastered by Robert Rodriguez.
MALONE: This episode was fact-checked by Sierra Juarez. Jess Jiang is our acting executive producer. I'm Kenny Malone.
KESLER: I'm Sam Yellowhorse Kesler. This is NPR. Thanks for listening.
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