Sunday, June 24, 2007

Sunday dollars+sense: Why do brides buy their dresses, rather than rent?

Lets see what kind of an economist you are. Why do brides spend so much money - often thousands of dollars - on wedding dresses that they will never wear again, while grooms rent cheap suits, even though they will be able to wear them again?

Here’s another one: Why do some bars charge for water but give away bowls of peanuts for free?

Why do >diners at restaurants who split the bill typically spend more than those who don’t?

And some apparently non-economic questions: Why does a light come on when you open the refrigerator, but not when you open the freezer? Why do the doors> on 24-hour convenience stores have locks?

If you can come up with answers...

...you are probably a good economist. If the questions occurred to you in the first place, you are probably brilliant.

Robert Frank is one of the world’s leading economists. But a lot of his work has nothing to do with formulas. My favourite is about the employment arms race.

It helps to wear an expensive tailored suit at a job interview. But as soon as everyone discovers that the money will be wasted, and quite a lot of it. The outcomes will be the same as if no-one wore the expensive suits. It would make sense to ban them.

A few years back Frank noticed that his students seemed to be taking in very little. So he started asking them questions about the real world. Then he asked them to set the questions. Questions such as “Why do ads in newspapers sometimes include the phrase ‘as seen on TV’?

He wanted them to behave like David Attenbroughs, economic naturalists who asked questions about and describe the world they saw. He has just published the questions and answers in a book entitled The Economic Naturalist which might just help you discover that you’ve been an economist all along, or open your eyes to economics if it hasn’t yet happened.

(It is not available here yet. You’ll have to order it, a mystery I would like him to explain.)

Brides buy rather than rent expensive dresses because each is usually a unique fashion statement. It would be too hard for a hire company to store them in case anyone wanted that exact one again. Men are more comfortable conforming.

The other answers are in the book, although you might just want to fire up your inner economist and work them out yourself.

Robert H. Frank THE ECONOMIC NATURALIST: In Search of Explanations for Everyday Enigmas, Basic 2007 ISBN 046500217X

1 comments:

Kevin said...

I hope all economists take notice of this article.
We are proposing the system Water Rewards which helps reduce consumption through some price increases, through rewards and through giving consumers control over where money will be spent rather than government officials. In our opinion the latter two are the most important factors in reducing consumption. The first because people want to be recognised and the second because people get better value when spending their own money than government officials when spending the consumers money.
When the system is presented to economists they invariably say that the only thing needed is to increase the price and the rest of the system is an unnecessary complication - even in the face of evidence that the system is simpler than a price increase plus the spending of the money raised.

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