The Economics Network

Improving economics teaching and learning for over 20 years

Student essays from the Economic Naturalist writing assignment

Provided by Wayne Geerling , LaTrobe University with grateful thanks to all the students who contributed.

Why would a consumer spend up to $4,000 on a fixie bike when a standard one is much cheaper?

How should one overcome the perils of online dating, why does steroid usage lead to an inefficient outcome for society, eggspensive taste: why do eggs that cost 95c a dozen to produce sell for up to $9.00.

  • The Market is Amoral: Should you buy the last can of Coke on the shelf?

"Why are motorbikes exempt from paying fees on toll roads in Victoria?"

Why are designer denim shorts so expensive, does mcdonald’s three minute drive-thru service lead to better outcomes for society, how has the contraceptive pill contributed to the split in the relationship market in western societies, why are soft drink cans sold on aeroplanes half the size yet double the price of those sold in supermarkets, why are mobile phone calls more expensive than landline calls, why do some people choose to exceed speed limits whilst others do not, was my decision to live in reservoir rational, will the new red p-plate driver restrictions decrease or increase road safety.

Given the option of purchasing a road bike from Target for $99 that comes equipped with 18 speeds, brakes and front suspension support or a basic “fixie” bike for an average $1,000, which comes with none of the aforementioned items, which would you prefer? Interestingly enough, many of Melbourne’s younger generation are choosing the latter option.

A fixie bike is a  bicycle that has no  freewheel , meaning it cannot coast; the pedals are always in motion when the bicycle is moving. Fixie’s are associated with a young, hipster crowd; each individual rider identifies with other fixie riders because they ride the same bikes and a fixie culture is established. This fixie culture has created a lucrative market where suppliers are able to mark up the price of certain bikes and purchasers willingly continue to purchase.

The vast amounts of money spent on purchasing, but mostly modifying, a fixie bike is well in excess of what most young “Melbournites” would spend on the average consumer good. Having ownership of a luxury item such as a fixie allows the rider to attain a certain social status within friend groups, work atmosphere and the society that he or she rides.  A luxury item, economically speaking, is defined as a good or service where demand increases more than proportionally as income rises.

The social status attached to riding a fixie bike does not, alone, explain why consumers are willing to pay such hefty amounts of money for them. The niche market theory provides further clarification: specific demand requirements such as price, quality, demographics, etc, dictate the need for a specialised market to materialise. A successful niche market will have higher prices and a smaller market share than its competitors but be more profitable in the same product category. As outlined, niche markets depend less on the price of a good and more on the specific needs of the consumer. These needs can extend to brand recognition and other assets that the consumer wants to be associated with (e.g. prestige, environmentally conscious consumers, etc). The needs of fixie riders include brand recognition, the ability to modify the bike and make it a reflection of themselves, and social association.

Various literature, including websites and newspaper articles note that many consumers see appeal in the hardened image of riding without brakes (it is also worth noting that it is illegal to ride a bike without brakes in Australia).  In economic terms, this intended projection of image is called signaling: when one party conveys a certain image of itself to another party. In the case of fixie riders, they are signaling to other riders, and the general public, that they are young, fashionably conscious, hardened riders.

The decision to purchase a fixie can also be justified with a cost/benefit analysis: purchase if MB > MC. The benefits of riding a fixie bike include the increased social status and belonging to the fixie culture. A fixie can also provide the same benefits as a standard bike: exercise & cheap transportation. The costs of purchasing a fixie bike include the purchase of a bike (ranging from $600-$2000) and the modifications (a further $60-$2,000). The consumer’s marginal willingness to pay plays a major role here. According to the laws of economics, a consumer cannot be duped into spending too much money on their bike of choice, as they will only spend up to a point where MB = MC. If a buyer values a bike at $2,000, then he/she will pay not a cent more.

Purchasing a fixie bike may seem like an irrational choice for those who do not delve beneath the exterior motives of the rider. In reality, the underlying benefits gained through buying a luxury item, such as a fixie, provides recognition and many other intrinsic benefits to the rider. Although the price may seem excessive compared to a standard road bike, after careful research and the application of economic reasoning, it is apparent that a fixie is not just any bike. It is a “lifestyle changing” purchase.

Diana had been on OasisActive for over a month now and had yet to find a mate. Initially, Diana had a choice between two dating websites: OasisActive and eHarmony. She choice OasisActive because the opportunity cost was lower, as it is a free dating site (OasisActive’s comparative advantage). What she didn’t consider was that incentive of satisfying materialistic needs such as sex would not motivate men to register for eHarmony, as consumer price discrimination favours Oasis and features younger women – a trait valued by men. There was also greater information asymmetry in choosing OasisActive over eHarmony. Diana had attempted to attract a like-minded mate by listing “No Casual Sex” on her profile. This turned out to be a perverse incentive as it encouraged men to be deceptive about their intentions in order to increase their supply of sexual intimacy.

It was clear that whilst her opportunity cost for using OasisActive over eHarmony was lower, it had also reaped less net benefit. Her initial cost-benefit calculation had been incorrect. So Diana began to think, I’m still single, and the variable costs are mounting. She had made a large emotional investment into online dating. Diana knew she was dealing with sunk costs but was irrationally driven to wait for her marginal benefit to exceed her marginal cost to regain a feeling of value and worth.

As an economics student, she had also begun to realise she was in a very competitive market. She had been realistic about her purchasing power; she was attractive, though not supremely beautiful and she knew she needed to contend with women who were willing to lease instead of buy and who had maximised their total utility – at least in terms of superficial looks. Because OasisActive offered few metrics to measure compatibility, search and rejection costs accumulate, increasing marginal cost. Diana began to wonder; “at what point does my marginal benefit exceed my marginal cost and make this worthwhile?”

Diana was right to re-consider the costs and benefits of dating. She had dealt with much immorality in what should be an amoral market. After all, OasisActive is known as a dating site for youth and considering the time constraints, social commitments and friendship networks of such youth, how many want to commit to a serious relationship? Nevertheless, it seems the expectations of men and women entering the market seem to differ. Expectations are high, the quality of the product is low but the supply is high and equilibrium is therefore difficult to strike.

Men on OasisActive have lower standards for gratification and were less inclined to fall into emotional intimacy as their rational intellect prevailed over their emotional mind. In this way, men possess market power as they are price-setters. Women, searching for traits that are rarer amongst the male population on the website, are price-takers as they must reassess their willingness to pay in order to find a mate. What Diana realised is that this perfectly illustrated scarcity and shortage; men who fulfil the higher expectations of women naturally attract more attention. As a rational agent, Diana knew that her hopes of finding this man were unlikely; after all, efficient market hypothesis states that all the good ones are either taken or gay.

After a while Diana realised that her profile views were growing less frequent. Diana considered that by allowing searches by profile picture, the website was incentivising a superficial interaction between buyers and sellers and creating barriers to entry for women who did not post an attractive picture. Suddenly, her chat window opened – somebody was talking to her. After a few minutes of talking, however, she quickly cottoned on that this man was using game theory, and moreover, he had a dominant strategy! It didn’t matter what she said, the man was duly sympathetic and excitable at the times when he should be. He seemed so nice. When she questioned him about this, he became defensive. “Argh, she thought. This site is a perfect example of market failure!”

Diana had rejected guys who asked for sex before, and they quickly began to berate her and call her unsavoury names. Although she knew this was a technique to reduce her self-worth and therefore her purchasing power, she couldn’t help but feel terrible afterward, a negative externality.

Active, social young adults are especially prone to the influence of social norms, expectations and values systems as projected by their peers, parental figures and the media. It is no coincidence that Australia’s mainstream media is more concerned with idealistic images of beauty than with realistic representations of the human body. Media agencies are rent-seeking, trying to bolster private economic growth through political manipulation. They are reliant on advertising revenue for profit. The products sold in the advertising are driven by consumer need, therefore magazine publications have an incentive to ensure consumers believe they have a problem that needs fixing. This creates an obvious negative externality in perpetuating a social problem of low esteem.

Perhaps more than any other Generation, Generation Y (aged 18 – 29) is impatient and wants quick results. The quickest and easiest way to bulk up quickly is with anabolic steroids. Arguably, the greatest issue with confronting the popularity of the drug is the moral hazard involved. Steroids deliver instantaneous results with minimal short-term risk and thus, present great benefit at low cost to people looking to build fast muscle. What results, however, is an inefficient allocation of resources whereby growth is maximised early but habits for maintenance of those gains are not established. In this way, performance enhancers such as steroids do maximise utility but also incentivise lazy workout habits. So whilst short-term gains are good, the long-term risks of using steroids inevitably contribute to a dependence on government-funded health care.

It is also inefficient on a fiscal level whereby cash is fed into the black market – giving dealers market power, who can then price gouge – and not into the private sector, to nutrition companies who can then further invest in research and development to yield better quality produce. If this were to be a government regulated market through decriminalisation, information asymmetry would be reduced by rule of law and competition will drive the price down. If governments were to control the supply of performance enhancing drugs, taxation could be used to supplement government revenue.

As steroid abuse is potentially addictive, it is possible that a percentage of heavy users of steroids would have perfectly inelastic demand for the good. The government has made steroid use available through prescription, which some addicts are using to obtain quality-controlled goods. Although the government is signalling that steroid use is not condoned, they still offer market access for steroids legally for legitimate medical reasons. Through screening for loopholes and access to corrupt doctors, the system is adversely selected by addicts who are able to circumvent the system. This, however, is the only mechanism preventing drug dealers from possessing scarcity power, even if it does, in some way, act as a perverse incentive. On a personal level, it could be that wealthier steroid abusers stockpile the drug from prescriptions and experience free-riding from addicted, less financially stable friends.

Whatever the case, it can be assumed that the market for steroids is populated by people serious about fitness or muscular development. If young people where to consider the benefits of health and nutrition education, they would be able to up-skill, gain employment within the sector, raise capital to build muscle and receive discounts on health products. Furthermore, it is ironic how irrational behaviour leads people to choose low-hanging fruit instead of healthier, more sustainable substitutes to muscle growth.

Despite the trade-offs and opportunity costs – including reduced health at older ages for dependant users -, steroids still apparently deliver strong return on investment. Revealed preferences theory proves that social welfare is not considered, and that marginal benefit clearly outweighs marginal cost. This goes some way to explaining how the market for steroids is still active. The greatest consideration, however, is the impact steroid abuse has on society.

There are many negative externalities associated with steroid abuse, such as improper disposal of needles polluting the public sphere. The broader problem, however, is that it is counter-intuitive to efficient level of crime. Steroids are of more value to patients in rehabilitation than to recreational users, so the commodities, or resources, are inefficiently allocated in the market (where marginal social cost outweighs marginal social benefit). The side-effects of the drug such as steroid-induced rage may lead to statistical discrimination against the body-building community and could have permanent effects on the hedonic treadmill due to its hormone adjustment. Another consideration is that income inequality contributes to steroids being used in higher-income areas, where physical health is an affordable hobby. This could potentially lead to segregation between recreational performance-enhancing drug addicts and psychotics or depressants in different socio-economic regions. Whatever the perspective, economically, steroid use is an inefficient outcome for society.

How is it that supermarket’s are able to sell eggs at such a mark-up price? A dozen eggs can sell for anywhere from $2.39 to $9.00 in a supermarket in Melbourne (All prices quoted in this essay are based on figures obtained from Coles supermarket in Greensborough on 10 October 2010). What causes such a price differential and why do people pay for the more expensive eggs? The answer lies in the economics of everyday life.

It costs a Victorian farmer approximately 95c to produce a dozen eggs. Current wholesale prices being paid to farmers are up to $1.60 per dozen. On shelves in local supermarkets, eggs cost anywhere between $2.39 for the no frills home brand eggs to $9.00 for homestead laid, free range eggs. Supermarkets are able to artificially inflate prices using many techniques, such as product placement, packaging, branding, asymmetrical information and signalling.

The first thing that is obvious when you walk up to the egg section is the abundance of varieties available. The supermarket singles out those who place a high opportunity cost on their time by the way the eggs are placed on the shelf. Customers who are relatively insensitive to prices won’t take time to compare and are likely to grab the box that is easily accessible with packaging that quickly appeals to them. It should come as no surprise then that those with the highest prices and mark-ups are located at eye level in easily accessible spaces.

The way in which different eggs are packaged signals different things to groups of customers. The cheapest options are found in egg cartons with the basic information printed in black with little or no colour, whilst the more expensive eggs are more vibrant and eye catching. These design techniques have no impact on the quality of the eggs in the box; however it signals to the consumer that the eggs are of differing quality. This is targeting customers with varying levels of willingness to pay.

Packaging style is not the only way in which prices are gouged by the supermarkets. Labels on how the egg was produced and under what conditions are used to increase the buyer’s willingness to pay. Supermarkets price target different segments, which are more sensitive to certain situations. Eggs labelled as being “locally produced” attract a mark up of 66%. The eggs that donate 20 cents a box to charity cost the customer an extra $2.60 to buy. Eggs produced to RSPCA standards attract an 88% mark up. Each product is aimed at a different consumer, and is designed to identify and exploit that customer’s marginal willingness to pay.

Asymmetrical information plays a large role in the ability to impose such large and seemingly arbitrary mark-ups. A dozen caged eggs cost approximately 95c per dozen to produce. Barn laid eggs cost 25% extra to produce, and free range eggs 50% more. Supermarkets charge mark-ups of up to 109% for barn laid eggs and 276% for free range! The average customer will be unaware of the production costs and therefore be more willing to accept that they must be so much more expensive.

 Customers will purchase eggs that have been laid free range for two dominate reasons: they object to chickens being caged or they believe that free range eggs are of higher nutritional value or quality. Whether it has been laid by a chicken in a cage barely big enough to fit the chicken or on a farm with kilometres of open space, the end product is simply an egg. Research done by the US Department of Agriculture found that there were no nutritional benefits to free range eggs. As you are able to inspect eggs before purchasing, the quality is assured, regardless of whether they are free range or caged. Therefore, supermarkets are effectively putting a price solely on your conscience.

With all of these techniques the supermarkets strive for perfect price discrimination, where the buyer will be charged the highest price they are willing to pay for a product. Leakage occurs when customers who are willing and able to pay a higher price for eggs choose the relatively inexpensive home brand eggs. But what is the loss to the supermarket? They still make a profit margin off these eggs, even if it is less than the mark up on their ‘premium’ eggs.

So how can a supermarket openly display such price disparity, yet customers willingly choose the more expensive products? Although they cannot practice perfect price discrimination, what they do is employ economic techniques such as signalling, information asymmetry and price targeting in order to identify those customers with the highest marginal willingness to pay, and increase profits as a result. If you feel ripped off in the knowledge that you paid $9.00 for eggs that are for all intents and purposes the same as eggs less than a third the price, next time choose differently.

What the hell is ‘amoral’?

Amoral is a neutral term which infers that something is neither good nor bad. Economic markets are amoral; they are a ‘forum’, for lack of a better term, where goods and services can be traded. Markets vary - they can be good, bad and sometimes ugly, for example the market for renewable energy or volunteering in Africa may seem saintly compared to the crack cocaine markets of inner city Ghettoes, or the gun market in Mogadishu. Although both of these sit at opposite ends of the moral spectrum they both operate in exactly the same way: they are simply offering different goods or services. If we accept Mr. Paul Zak’s inference that almost all people do have some altruistic moral fibre then why are gun merchants selling arms to child soldiers?

Why do they feed Paris?

One of the most important ten lessons in economics is that people respond to incentives, so if a person sees an incentive in selling an AK-47 to a pre-pubescent child, they generally will. The market answers the question of “who feeds Paris?” and incentives answer the question of ‘why’. People seek to maximise their utility; they do so by selling their labour or commodities to the market. In the more eloquent words of Charles Wheelan “these guys don’t care about upscale diners in Paris. They care about the wholesale price of fish” [1] . Markets organise themselves through people’s patterns of behaviour and this behaviour is governed by an incentive: for a person to be better off than they were before.

I guess at this point you are probably asking “what does this have to do with the last can of Coke on the shelf?” People face trade-offs every day; the money a person spends on a can of Coke could have easily been spent on a chocolate bar or a cigarette lighter. Therefore, if someone buys a can of Coke it is safe to assume that this product was the most important thing to them at the time. Now imagine this was the exact same case for a separate person, only with one problem: two people want a can of Coke more than anything else that is the same price and in the near vicinity; however, in this case there is only one left. By Smithian logic the best possible thing for the market is for both actors to behave in a self-interested manner, but will this lead to the best possible result for the market?

Let us assume for a moment that the market is founded on a different basis to Smith’s self-interested perspective, maybe one of “morality”. Morality is an elusive term so we will substitute it with ‘altruism’ to make it easier. Would the market be better off if this were the case? The simple answer is ‘no’. If both parties vying for the can of Coke acted altruistically, which is to say they both sacrifice their own want for that delicious beverage, making it available to the other. In this scenario there is an asymmetry of information - neither party knows the value of the Coke to the other person. The best approach for both people now would be to send a ‘signal’. They reveal information to the other person and as a result the ‘receiver’ adjusts his consumption behaviour. If, for a number of reasons, any information is ‘not received’ (misinterpreted, poorly sent) then we have what is called a ‘separating equilibrium’.

Let’s play the Moral Bayesian game!

Sending signals sounds much simpler than it actually is. The problem is that much of the information sent, even in a rather simple scenario of trying to quench your thirst for caffeine cola, is incomplete. Put simply (or at least attempting to) both players (the two Coke consumers) are trying to understand the ‘nature’ of the other; however, there are too many factors which can be ‘misinterpreted’. Essentially, the only information that both people have is that the other is going to act altruistically and as a result questions begin to arise like how thirsty are you? Have you had a hard day at work and would a Coke make it better? These are potentially all categories of information which need to be revealed for both people to establish who wants that can of Coke more.

Acting morally could lead to negative externalities.

Let us now imagine that both players do not arrive at a conclusion. Instead they both decide not to purchase the Coke because of the quaint idea that one will benefit at the other person’s loss. In effect they are in collusion, but it is a cooperative pact that is actually not ideal for all parties involved. Before you think this is turning into a Dostoyevsky novel with 70 characters, I will assure you there is only one more person involved in this transaction. That person is the one selling the Coke of course. As a result of the two people deciding not to purchase the Coke due to altruistic tendencies, the shop owner loses. Actually, everyone loses. The two individuals who want to buy the Coke incur the opportunity cost of the time it takes to learn the ‘value’ of the other and the shop owner does not sell his can of Coke.

If this was how an altruistic market operated (in very simple terms) then it would most likely fail due to the large part that asymmetry of information would play. Fewer transactions would occur because of consumer altruism and a change of incentives, which basically means people are no longer trying to make themselves better off than others. This may have a positive effect on markets mentioned before, like drugs, however how would this affect everyday markets? For one, you would definitely be paying double for almost everything. In other words next time you are at the shop and staring at the last can of Coke on the shelf, just buy it. Unless of course you derive more benefit from allowing a nice young lady, or large under-caffeinated fridge with a head, to purchase it.

[1] Charles Wheelan, Naked Economics: Undressing the Dismal Science , W.W. Norton and Co. (New York), 2002, p 12

While it may seem like a pointless loss of revenue for CityLink [2] to not charge bikers for their use of toll roads, it makes economic sense to leave them exempt from the fees, which, for a 24 hour pass, ranges from $4.70 (car) to $21.25 (heavy commercial vehicle). Motorbikes cause less congestion than cars and emit much less pollution from their considerably smaller capacity engines. Cars are charged by way of e-tags kept inside the cabin. An e-tag for motorbikes would have to be weatherproof and the costs involved in developing such a device may be too great.

Some might argue that motorbikes, regardless of their size, still contribute to the traffic congestion dilemma. Any “crowding out” effect that people may contend is basically negligible. Even if there has been an increase in the numbers of riders using toll roads, traffic congestion has not become considerably worse. In fact, it may have taken motorbike traffic off public roads and spread it out over both public and toll roads, creating improved traffic flows across all metropolitan areas.

The typical motorbike has a much smaller engine than even a small car. Hence, the pollutants emitted by motorbikes are far less than those emitted by cars on average. In order to reduce pollution, providing free travel on toll roads for motorbikes is a strong incentive for commuters to make the change. Improving air quality became pivotal for CityLink when the smoggy air in both its tunnels appeared to be worsening. A rational way of reducing the poor air quality was to allow free travel for vehicles that contribute very little to the pollution. This, along with some improvements to the ventilation, eradicated the thick smog.

Cars are chargeable via a simple e-tag that gets scanned at each toll gantry along the CityLink. It needs direct line of sight with the sensors and has variable beeps to indicate different things to the driver. An e-tag for motorbikes would need to be able to resist the elements and still somehow communicate with the gantry sensors and the rider. To develop a different e-tag capable of doing all these things would increase overall costs of production for CityLink. Given the relatively small impact bikers have on CityLink's efficiency in reducing traffic congestion, it appears that e-tags for motorbikes would lead to marginal costs being greater than marginal benefit (MC > MB).

Furthermore, to maintain marginal profits after developing motorbike e-tags, CityLink would have to raise prices, deterring car drivers and most bikers. Bikers' demand for CityLink is quite elastic since there wouldn't be much difference riding on CityLink or public roads during busy periods. These price increases would then impose a negative externality on the car drivers who now face higher prices for the same good. The opportunity cost for bikers returning to public roads after fees are implemented reduces very quickly. In this sense, not only is the positive externality of not charging riders being the reduced congestion and pollution but also the lower prices charged to car drivers!

To some it may seem unfair that bikers get a “free lunch” and they will argue that a free-rider problem may ensue as a result. While the bikers may essentially be getting an actual free ride on toll roads, this case is not leading to any significant negative effects. As mentioned earlier, there is no overuse of the good and it can’t lead to any underproduction from lack of funding because the capital has already been funded and constructed. By eliminating this free-rider situation, the entire system will suffer as a result. For once, a free-rider situation is beneficial.

To conclude, while there are certain arguments promoting fees imposed on motorbike riders, it would simply be a poorly judged trade-off to charge them. Motorbike fees would raise CityLink’s prices across the board and it would see very little usage by riders given their highly elastic demand for toll roads. The costs involved in producing vastly different e-tags to those already in cars would be a huge cost - one that’s best off being avoided as the return on this cost is very low. Given the agility and small size of motorbikes, they don’t increase traffic congestion and have little reason to be charged as they don't sit behind traffic but simply ride through it. While it may be seen as a free-riding issue, these riders using the toll roads are not over-using them and only very minimally “crowding them out”. All in all, the current system of free travel for bikers is Pareto inefficient in that by making one party better off, other parties are not seriously worse off.

[2] CityLink is a 22-kilometre automated tollway in Melbourne, which is divided into two sections: the Southern and Western Links. It connects the Tullamarine Freeway, the West Gate Freeway and the Monash Freeway. CityLink roads are clearly marked with blue and yellow tollway signs.

As the weather has been changing for the better recently, I have been on a regular hunt for shorts. Picky as I am, I have been browsing through many shops in order to find the ideal pair to be included in my summer apparel wardrobe. During my search, I stumbled upon something my inner economist found peculiar: the price of so-called “designer denim” shorts costs anywhere from $150-$250! [3] Since denim shorts use roughly half the amount of fabric as a pair of jeans, one could rationally assume the price would reflect this. Seeing as this is clearly not the case, why exactly is it that designer denim shorts are so expensive?

Many apparently 'obvious' reasons why designer clothing is more expensive than the alternative generic brands initially come to mind. Often, I have heard: “designer clothes are equal to prestige and exclusivity”, “they provide a better fit”, “the quality of the materials is higher”, “remember that much time is spent on the innovation and designing process”, etc. And while there is definitely some truth to all of those statements, I would like to argue that other factors also contribute to the higher price. After all, denim is denim and there is only so much that you can do with the design of shorts.

We are dealing with a standard market. The designer firms wish to make profits (and attempt to maximise these) by delivering goods we want to buy and we, individuals, simply want to maximise our utility. By applying market theory, the answer to my posed question is simply: the reason these shorts are set at the price they are is because the consumers’ marginal willingness to pay for them equals or exceeds their value (marginal benefit > price). Thus, the interesting question now becomes: what utility is it that consumers derive from denim designer shorts? And why is their willingness to pay so high?

Appearance and being fashionable explains some of it. For example, men who wish to date attractive women would be very interested in increasing their ‘purchasing power’. By wearing more expensive, designer clothing it could be argued that men improve their physical appearance and thus signal a higher 'value'. As designer clothes do signal values like prestige and exclusivity, they do send a clear message to potential dates: I am wealthy and fashionable. Since women generally regard men with higher incomes and higher social status as more desirable marriage partners, men can take advantage of this signaling and consequently their marginal willingness to pay for designer shorts rises.

Another reason relates to the pursuit of happiness. The research of Robert Frank has proven that being rich does not necessarily equal being happy due to the fact that our expectations and aspirations adjust over time. Nevertheless, having certain positional goods, for some, is important for a general sense of self-value and level of contentment. Some people simply feel happier if their relative position to others is better. Unfortunately, a relative position implies that you can only get ahead if somebody else falls behind. As consumption is important in relation to relative position, people wishing to have this ‘higher’ status must continue to buy designer clothing. This again affects one’s willingness to pay.

Lastly, I think it can be argued that designer companies try to create scarcity in the minds of the consumers through advertising. The different labels are in need of some degree of market power to actually sell their products at above normal economic profits. They achieve this by differentiating themselves through price, design, advertising, etc. This differentiation is so important because, if excluded, denim shorts could be categorised as a fairly homogenous product, i.e. shorts are shorts. If consumers think the same way, then firms’ profits would be under threat. Many labels supply denim shorts. If, for example, Generic Shop B undercut its competitors, Design Shop A would quickly lose all of its customers, and a bidding war would start between the shops selling denim shorts, eventually driving the price down to where price equals marginal costs i.e. no economic profits.

Therefore, labels try to create a perception of premium value and, to an extent, a sense of scarcity through proactive marketing efforts essentially saying: “There is only one company that delivers, for example, “Diesel Shorts” and these are worth much more than the next best alternative”. These branding efforts create the perception of premium associated with the product in the mind of consumers. Consequently, the designer products become price inelastic for consumers and the designer companies are able to capitalise on this by reaping above normal economic profits.

[3] Denim is the rugged cotton twill textile that jeans are made of.

McDonald’s restaurants have been at the frontier of the fast-food industry in adapting their service to better suit their customers’ preferences. The competitive nature of the industry forces them to be dynamic. Hence, they recently introduced a three minute timer on Drive-Thru meal orders. If a customer’s Drive-Thru order takes longer than three minutes to fulfil, that customer will receive a free burger on their next visit. This seems fair enough: waste a customer’s time, then make it up with a freebie. However, the overall effects on society are ambiguous.

A McDonald’s employee would ideally like to uphold their three minute promise to signal to their superiors that they are an efficient and more valuable worker. The manager can use the number of free burgers each employee is giving away (among other metrics) as a form of screening to decide which employee is more valuable to the restaurant. The better employees may be rewarded to provide the incentive for increased labour productivity while other employees may be reprimanded or fired for poor performance. These improvements in labour should, in theory, increase McDonald’s overall profit.

On face value, this policy should make McDonald’s restaurants better off financially and improve their consumer image. Customers whose Drive-Thru order is too slow would receive a free burger, but not immediately: the burger is claimable on their next visit. When they return to the restaurant to claim their burger, they might come with a friend who in all likelihood will make a purchase. The customer who claims their free burger might make an additional purchase, say chips and coke. These extra items are complementary goods to the burger because they are normally consumed together. McDonald’s would generate a tidy surplus on these goods, as they otherwise would not have been sold. In this case, the extra trade and profit generated more than covers the cost of supplying that one free burger. Assuming customers return to claim their free burger, McDonald’s increases its market power over rivals (provided they do not imitate).

The Drive-Thru Promise is not a perfect, flawless policy. It has many drawbacks which can be traced back to the law of perverse incentives where unintended or undesirable outcomes result from a policy’s implementation. For instance, say an employee must fulfil a customer’s order, but is running out of time. That employee would prefer not to give a free burger as it will reflect poorly on their performance. Hence, there is an incentive to deliver an order on time, even if it is not ready. By using marginal cost-benefit analysis, the employee will determine if it is worth the risk of being caught undercooking a customer’s meal or leaving items out of the order just to get the meal in the customer’s hands before the time is up. McDonald’s would not condone its employees behaving in such a way, yet their policy has the potential to lead employees to act in their own best interests, which will be at the customer’s expense.

The customer is not always worse off as a result of perverse incentives. McDonald’s assumes that consumers will continue to buy from their store, with only the odd free burger when a meal is late because of understaffing or a busy front counter. Yet the Drive-Thru promise night cause consumer habits to change. Drive-Thru customers may try to rort the system in order to increase their chance of receiving a free burger. A customer could drive slower, fiddle with their money and make complex and confusing orders in the hope that the order will take longer than three minutes to fulfil. This customer sees a free burger as maximising their utility, or their enjoyment, and will act in a way that allows them to achieve this. However, if every customer decided to employ this strategy, McDonald’s will be giving away too many free burgers (possibly causing a decrease in profit) and will have to either increase the price of their products or scrap the policy altogether. This is known as tragedy of the commons where multiple agents, while acting individually in their own best interests, cause a long-term outcome which is bad for society (and not initially intended).

McDonald’s is the first franchise in the fast-food industry to implement a three minute Drive-Thru policy, giving them a first-mover advantage over other restaurants. The actual effectiveness of this policy really depends on where customers and employees draw the line in terms of how much utility a free burger brings them. If consumption and supply habits do not change, the policy’s only effect should be positive: an increase in sales volume.

Some modern luxuries we have taken for granted, such as cars, mobile phones, even the contraceptive pill. The contraceptive pill has long been voiced as a liberator of women, allowing frequent sexual experiences without the unintended (negative) externality of becoming pregnant, therefore lowering the cost of premarital sex. Over time it has come to light that some perverse incentives from the regular use of the contraceptive pill have split the unitary relationship market from one in which you find a long term partner into two: a sexual market and a relationship market. Other factors may also be responsible for this split but here I will mainly concentrate on what extent the contraceptive pill has split the relationship market.

The relationship market has extensively been considered as a place of courtship for people considering finding ‘the right person’ and settling down. This does not exclude sexual activity but places the emphasis on establishing a deeper connection and possible long term future relationship. Over time though, there has been a greater emphasis on sexual activity without the ‘strings’ of any type of relationship attached, basically one night stands/sexual partners. This split puts some strain on the aforementioned relationship market as there are now more options for both men and women to indulge in either market, though the levels of scarcity and bargaining power for either sex are different across the two markets. In the sex market, women are found to have a higher bargaining power as men are the majority of consumers in this market. The relative scarcity of women in this market means that men have to engage in higher sunk costs like buying new clothes, spending money on drinks for girls and taxi cabs for the ultimate product: sex. Whereas in the relationships market men have the higher bargaining power because of their scarcity as they are filtering out to stay in the sex market longer. With this understanding, we can look at how the contraceptive pill has attributed to the split in the relationship market.

The contraceptive pill has lowered the cost of having premarital sex by all but eliminating the possibility of falling pregnant, encouraging a split within the relationship market. The commodity most in demand in the sex market is sex and when men have a higher willingness to pay, women hold the bargaining power and can be a little more picky, creating personal, pardon the pun, barriers to entry. A woman in the sex market will determine what age bracket, occupation, physical attractiveness and other qualities she will be willing to exchange her goods for. At any given point in time, women of similar appeal to a man, may find themselves in an oligopoly situation where to remain competitive they have to lower their standards but only slightly to accommodate for outside competition. In the relationship market, it is men with the bargaining power and women who make compromises to fulfil their desires of starting a family and being in a committed relationship. Even though the contraceptive pill may have encouraged the split in the relationship market, other factors in human development should also be taken into consideration.

Over the last 50 years, women have gained unprecedented ground when it comes to rights and independence from men and the development of the pill contributed to this freedom by taking away the possibility of falling pregnant. Other factors that may have also contributed to this split are the sexual revolutions of the 1970’s and women being able to hold more prominent jobs in society, both of which have led women to consider having children at a later age.

As much as the pill may have encouraged a split in the relationship market, it was a contributing factor to a wider set of events. This miracle of modern science was supposed to liberate women from what was once an undesirable set of circumstances and be enjoy the freedom of promiscuity as practised by men but instead has encouraged a perverse incentive by enabling the split of the relationship market.

In today’s globalised world, aeroplane flying has become a part of everyday life for most Australians. With flights going cheap and the increased ease of booking a ticket, more people are flying in the air than ever before. Recently, while onboard a flight from Melbourne to the Sunshine Coast, something caught the attention of my ‘economic brain’. The woman beside me ordered a soft drink as well as a ham and cheese sandwich. Although the sandwich looked nice enough, it was the small soft drink can that caught my attention and made me ponder the question, “Why are soft drink cans sold on aeroplanes half the size, yet double the price of those sold in supermarkets?” Although some answers to this question may be obvious, my ‘economic brain’ went to work and came to the conclusion that several economic concepts were at play and they give some insight into why passengers pay so much for so little.

Onboard three out of four domestic flight carriers within Australia, food comes at an additional cost to the price of the ticket. This is one of the consequences of buying a cheaper ticket: you are paying for the seat and nothing else. Once onboard the flight, food and beverages are available to passengers at a price. Looking at the in-flight menus of both Jetstar and Virgin Blue, a 200ml soft drink can will cost a passenger $3.00 [4] . A standard soft drink can sold in a supermarket is 355ml and can vary in price from $0.70 cents to $1.50. There is a vast price difference between these two scenarios (buying in a supermarket v on a plane), which can be explained by the scarcity of the soft drink, pricing policies, willingness to pay, the existence of a captive audience, price gouging and relative market power.

There is only a small amount of space onboard an aeroplane that can be allocated for food and beverages. This exacerbates the level of scarcity. Flight carriers stock small cans in order to increase the quantity of cans without having to increasing the holding space of the scarce resource. Unlike supermarkets, the cans cannot be sourced from other locations such as storerooms and external warehouses, meaning there is only a finite supply for any given flight. Given this constraint, soft drink cans have a relative long shelf life, meaning the airline does not have to sell the cans within a certain flight and they can be rolled over to other flights. Airlines exploit this relative shortage by engaging in price gouging, setting prices that are higher than that of a competitive market. The airline becomes a de-facto monopoly once the plane is in the air. As there is no alternative supplier and the audience is a captive one, in theory, airlines are able to charge a price equivalent to a customer’s highest marginal willingness to pay, extracting all consumer surplus.

A consumer’s demand on a flight is less sensitive to price, hence, willingness to pay is much higher than when buying from a supermarket. In this situation, the passenger is not being “ripped off” by the airline because if their willingness to pay is lower than the price they are being charged, they will not buy the good. If they do buy the good, it confirms that the value the passenger places on the soft drink is at least equal to the price charged – in this case, much higher than for a comparative can from a supermarket.

Onboard the flight from Melbourne to the Sunshine Coast, the woman who sat next to me bought a can of soft drink, even though she was hesitant to pay the price at first. Many people would argue the price charged was extreme, but my ‘economic brain’ came to the conclusion that the price is in fact reasonable given the laws of supply and demand at work.

[4] Jetstar In-flight Menu:

Virgin Blue In-flight Men:

For many Australians, mobile phones have become an indispensible everyday tool. Many rational consumers might wonder why a mobile phone call is relatively more expensive than a fixed landline call. There are dozens of factors that determine retail telecommunication pricing structures. Many consumers dismiss high call costs as a form of being ‘ripped off’ without considering various factors. The following essay explains some of the reasons behind relatively high mobile phone call costs with the aid of various economic concepts.

An attractive component of many mobile phone contracts is the provision of a ‘free’ (or heavily discounted) handset – effectively acting as an incentive. Some consumers fail to realise that these handsets are hardly ‘free’ – there is no such thing as a free lunch. The provider recovers the cost of subsidising the handset through call rates that are greater than what they otherwise would be.

Mobile telecommunication providers encounter significant and immediate fixed costs in the provision of their services. Unlike landline copper network infrastructure that was built many decades ago (by Telstra’s government owned predecessor– Telecom Australia), mobile phone companies have been forced to build mobile phone reception towers and related infrastructure in a relatively short period of time (since the 1990’s) and must continue to build them as demand continues to increase. The cost of building this infrastructure runs into hundreds of millions of dollars and must be recovered from the consumer. Some of the high mobile phone call cost is reflected by the fixed costs incurred by the company.

Some consumers may believe that mobile phone calls should be billed per connection (as is the case for local landline calls) as opposed to a timed tariff. These consumers may not understand that wireless capacity is a scarce resource; there are a limited number of calls that can be supported in a particular geographic area. It is inevitable that some consumers would exploit untimed calls and unnecessarily prolong their conversations whilst tying up scarce wireless access to the detriment of those that really do need to make a call. To ensure that consumers are able to have access to the network when required, the pricing structure needs to reflect the fact that such access is a scarce resource.

There are relatively few mobile phone networks in Australia. This concentrates the mobile phone market into only a few companies, thereby creating an oligopolistic market. There could be an argument that these networks exploit their market power and keep their mobile phone call rates artificially high due to lack of greater competition. This means that such companies effectively engage in price gouging. The steady rise of mobile phone users and the increased integration of these devices in our everyday lives demonstrate to the mobile phone companies that the demand for their services is probably inelastic. Inelastic demand for services provides a perfect opportunity for the extraction of consumer surplus. Mobile phone companies know that consumers will continue to value the benefits of mobile telephony and continue to pay relatively higher prices, even if the prices appear to be unreasonably high.

Greater competition is difficult to achieve in this industry due to barriers of entry, three of which particularly stand out:

  • There are significant up-front fixed costs involved in establishing a viable mobile phone network. Many individuals / companies do not have access to such capital.
  • Due to the technical nature of wireless telephony, there is limited wireless spectrum that the government can auction off to these companies. The scarcity of wireless spectrum significantly raises the cost of the relevant bids / licenses.
  • Australia may not have enough consumers to provide the large customer base necessary to make a mobile phone telecommunications venture viable.

Finally, there may be a case of asymmetric information. A standard SMS message sent over the two largest mobile phone networks in Australia costs a consumer 25 cents. How is an ordinary consumer to know if this reflects the true cost of sending a SMS message? It is possible that the mobile phone companies know that the consumers cannot know what the true operating costs are and therefore exploiting this ignorance.

There is no question that mobile phone services are becoming increasingly important in our everyday lives and similarly that mobile phone calls are comparatively more expensive than fixed landline calls. The above has demonstrated that this cost difference can be at least partially explained through subsidies, fixed infrastructure costs, inelastic demand, asymmetric information, concentrated market power, barriers to entry, price gouging and scarcity.

Despite a saturation of government campaigns and tough penalties, some motorists consciously choose to exceed speed limits. Many people label such drivers as irresponsible ‘hoons’ that seek an adrenaline rush from travelling at high velocities. Whilst this may be true for some drivers, this widely held view is a simplistic interpretation of the complex decision making process that many drivers, possibly unknowingly, undertake prior to exceeding the speed limit. Economic theory is a useful tool in explaining why some motorists choose to do this – as will be demonstrated below. A seemingly simple issue has a surprisingly complex economic explanation.

In many cases, exceeding the speed limit allows people to arrive at their destination sooner. This can represent a time saving that ranges from minutes to hours. Driving at the speed limit represents an opportunity cost – the extra time required to obey the law is time that is lost that could be used for the pursuit of other activities. If this were the only consideration, most motorists would consistently ignore the speed limit. Motorists caught speeding are usually fined – this is a (literal) cost that many take into consideration. Given the opportunity cost of time and the potential cost of a fine, motorists (often on a subconscious level) assign a value to any potential time saving gained through speeding. If the benefits of saving a certain amount of time outweigh the costs of potentially getting caught and paying a fine, the driver is likely to exceed the speed limit.

Some motorists choose to exceed the speed limit because they seek the thrill of travelling at high velocities. Whilst such drivers are not necessarily a mutually exclusive group from the category of drivers that are intent on saving time, for the purpose of this essay it is assumed that they are. High speed driving for thrill seeking purposes can be considered a high risk activity that significantly increases the chance of injury or death should the driver lose control of the vehicle. Armed with this knowledge, the driver performs (an often subconscious) calculation where the benefits of a high speed thrill are weighed against the costs of injury or death. If the driver values the thrill greater than their life, he/she may decide to exceed the speed limit.

Some drivers may employ marginal analysis when considering whether they should exceed the speed limit. Freeways often designate speed limits of 100km/h or more. Many drivers appreciate that if they were to be involved in a crash at that (legal) speed, the chance of survival is relatively low. Therefore, some drivers may reason that by exceeding the speed limit by (for example) 10 km/h to bring their speed up to 110km/h (for one of the reasons outlined above) may not significantly impact on their chance of survival in the event of a crash. Given that governments tend to install fixed speed cameras along freeways, one can assume that this form of marginal analysis is quite common amongst some motorists.

Exceeding the speed limit carries many negative externalities on other members of society. Aside from noise and air pollution, speeding motorists may endanger the lives of other road users. Many decades ago, the government tried to combat these externalities with mandatory fines. Some motorists that are on relatively high incomes and choose to exceed speed limits may have an inelastic response to generally high fines that are indexed for inflation each year; other motorists will continue to speed no matter what the monetary cost is. In response to this, the Victorian government introduced a demerit point system where traffic offenses, including exceeding the speed limit, are penalised with the accrual of demerit points as well as being fined. Once a threshold is reached, the driver may have their driving license suspended for a prescribed period. The demerit point system affects all motorists equally (i.e. irrespective of income). Assuming that most motorists regard their drivers license (right to drive) as precious, there is a significant disincentive for the vast majority of drivers (that wish to legally drive) to exceed the speed limit.

It is inevitable that some drivers will elect to exceed the speed limit. Assuming that they are rational economic agents, a complex economic assessment will occur prior to any decision to break the law. Drivers may consider the opportunity cost (time) of travelling at the speed limit, or perhaps they value the thrill of excessive speed more than their life, or maybe the driver decides that when driving at a legal high speed, the marginal cost of increased death or injury is negligible compared to the benefits. It should be noted that the vast majority of drivers do not exceed the speed limit as they are deterred by fines and demerit points. Regardless of a motorist’s decision in relation to excessive speed, it is certain that economic considerations are involved – often without them even realising.

Being a student is not the most profitable profession. Therefore, the cost of rent was a major factor when I was deciding where to reside during my period of study exchange at La Trobe University in in Melbourne.

Having done my research from Denmark, I had it narrowed down to two options:

Stay in Fitzroy/Carlton (F/C): close to the city but 15-20 kilometres from La Trobe University

Stay in Reservoir/Bundoora (R/B): close to La Trobe University but far from the city.

There were, as there are with everything in life, trade-offs involved in each choice. Rent in Bundoora was roughly $40/week cheaper than the places that I had found in F/C, and I was quick to opt for a house close to La Trobe under the impression that I was saving money this way. Having had my inner economist awakened, however, I now want to take a closer look at this decision.

It is now apparent to me that I did not include all of the relevant costs when deciding between the alternative housing situations. Internet, food and utilities are all going to be roughly the same, both in normative price, as well as in usage level. On top of that, seeing as I have a job in the central business district [CBD] and go to university, in either scenario I would have bought a monthly zone 1 concession ticket (transport costs will be the same). What I really failed to take into account, and what would turn out to tip the 'rational scale' against me, was money spent on going out.

Being a young university student, I enjoy the odd night out in the city now and again. These nights tend to occur roughly once a week (4 times a month on average) and usually amount to approximately $100 per night for alcohol and a souvlaki. The problem though is: by the time I get to my 4 am souvlaki, the only means I have of getting home is taxi. Through empirical evidence from my own past, I can conclude that a Saturday night taxi ride from the city to home costs roughly $40 (or $160 per month). This shows that, based purely on the cost of nights out on the town and and taxis home, it is unclear whether my original rationale on choosing accommodation was correct.

Another aspect relevant to my decision is my propensity to consume 'going out', as a function of my housing situation. There are two factors to consider here. Lets assume that I only go out in 'downtown' Melbourne, which is in close proximity to F/C. This means that the marginal cost of going out is lowered, as I need only travel a short distance both to and from the city. Therefore, I now  have an incentive to consume more of 'going out'. However, my consumption of 'going out' is also, consciously or unconsciously, a function of my disposable income, that is, the amount of money I have left every month after rent and other fixed expenses are paid. Having more fixed expenses every month might make me more cautious about going out every single weekend of the month and I might cut down from 4 to 3 nights instead. Yet my housing decision’s effect on my propensity to consume “going out” is ambiguous.

Since the financial implications are equivocal, we can quickly look to the “other” costs associated with the trade-offs. For one thing, either housing situation may impact on my study and thus, my grades. Living in F/C would require a 40 minute tram ride to university each morning versus a 10 minute bus ride from R/B. This means that my marginal cost of going to university would increase, and I would have less incentive to go than would be the case if I lived in R/B. If we assume that my grades are a function of my attendance rate of lectures, this could be the tie-breaker I have been looking for in this analysis. But wait! Another argument comes to mind, which tips the scale back to the vague centre. Because I am an exchange student, the grades that I get whilst at La Trobe will never show up on my transcript from the Copenhagen Business School [my home institution]. They will simply be transferred and shown as Pass/Fail. This practically removes my incentive to want good grades and with it, the negative weight of the fall in lecture attendance if I were to choose F/C.

I am almost a little disappointed to say it, but after the analysis of direct financial and non-financial costs and benefits of either housing situation, it would appear that what it comes down to is in fact a question of practicality. If I were to ensure that I never take a taxi home from the city alone after a night out (which is not unlikely as I share a house with two housemates who are also fans of the Melbourne nightlife), I would significantly lower the financial costs associated with living in R/B. That small practical point actually tips the scales in favour of R/B and confirms that my decision to live in Reservoir is, in fact, rational indeed.

In 2007, 12% (39) of drivers killed in Victoria were aged between 18 and 20, even though this age group represents only 8% of Victorian licence holders. As a reaction to these statistics the government introduced new road user restrictions in the form of a red and green P plate system. The idea essentially was that while driving on a red P plate, drivers were restricted to having only one passenger aged between 16 and 21. Will this actually decrease or increase road safety?

The legal implications of these new restrictions give young drivers the incentive to get their licence sooner as they can no longer rely on friends for lifts and multiple car pooling. The increased incentives of having your license sooner along with owning your own car will also result in more young inexperienced drivers on the road. These drivers are considered inexperienced as they have only had to complete a minimum of 120 hours of supervised driving and in a lot of cases the hours are forged by parents so that their children can sit for their license test. This increase in adolescents getting their license and choosing to drive will result in higher negative externalities of smog, road congestion and pollution. More importantly though is that with a higher proportion of young inexperienced drivers on the road simultaneously, we can logically expect an increase in accidents and an overall decrease in road safety. This is due to not only the level of experience of these P plate drivers, but also the peer pressure to drive dangerously that results when multiple friends are driving simultaneously (as they can longer car pool due to the new restrictions) to the same destination. One needs only to drive on the roads during holiday season to witness this first hand.

Using Insurance premiums and TAC statistics as a basis, it can be justified that young drivers are more likely to be involved in accidents. The reasons inexperienced P plate drivers take more risks can be explained using Rational Choice Theory (RCT). RCT looks at how individuals weigh up the perceived marginal costs and benefits of their actions and choose a type of behaviour where MB > MC. The benefits of driving dangerously are overstated in the minds of these drivers as the bragging rights and perceived acceptance among peers (just spend a few hours in the car park of a McDonalds or a suburban shopping centre late at night) is considered greater than the marginal cost of serious injury, fines, repairs and death. A general consensus among young drivers is that they are immune to these costs. This belief lowers the MC of their actions, resulting in a rational choice in their mind to drive dangerously.

When the rational choice for P-plate drivers is to drive dangerously, combined with the incentive to be on the road sooner, a decrease in road safety is likely. The government’s decision to restrict the amount of passengers a red P-plate driver can have will have no effect on reducing accidents. Instead the perverse incentive to drive sooner will lead to an increase in driving related accidents.

The biggest problem is that there are limited incentives for young drivers to drive safely. The government’s current restriction doesn’t offer any incentives for young drivers to drive safer; all it does is increase the marginal benefit of driving sooner and does nothing to increase the costs of driving dangerously. The list below poses some potential solutions to increase road safety by increasing the incentive to display safe driving behaviour and/or increasing the costs of dangerous driving.

Increase costs of dangerous driving

  • Increased police presence at shopping centres, fast food outlets and other areas that attract a high density of young drivers
  • Increased fines for dangerous driving, and increasing police powers to fine on the spot and/or seize vehicles
  • Increased costs of purchasing high powered vehicles creates a greater incentive to purchase vehicles more economically friendly
  • Increased education on the costs and perceived benefits of dangerous driving lowers the MB of dangerous driving, as education creates an understanding of the danger they pose to the community and lowers the social acceptance from peers.

Increase benefits of safe driving

  • Lower insurance premiums for young drivers who have taken more hours of practice
  • Reduced registration costs for drivers who demonstrate good road etiquette and safety
  • Safe driver rewards program
  • Views on request


  • Undergraduate
  • High School
  • Architecture
  • American History
  • Asian History
  • Antique Literature
  • American Literature
  • Asian Literature
  • Classic English Literature
  • World Literature
  • Creative Writing
  • Linguistics
  • Criminal Justice
  • Legal Issues
  • Anthropology
  • Archaeology
  • Political Science
  • World Affairs
  • African-American Studies
  • East European Studies
  • Latin-American Studies
  • Native-American Studies
  • West European Studies
  • Family and Consumer Science
  • Social Issues
  • Women and Gender Studies
  • Social Work
  • Natural Sciences
  • Pharmacology
  • Earth science
  • Agriculture
  • Agricultural Studies
  • Computer Science
  • IT Management
  • Mathematics
  • Investments
  • Engineering and Technology
  • Engineering
  • Aeronautics
  • Medicine and Health
  • Alternative Medicine
  • Communications and Media
  • Advertising
  • Communication Strategies
  • Public Relations
  • Educational Theories
  • Teacher's Career
  • Chicago/Turabian
  • Company Analysis
  • Education Theories
  • Shakespeare
  • Canadian Studies
  • Food Safety
  • Relation of Global Warming and Extreme Weather Condition
  • Movie Review
  • Admission Essay
  • Annotated Bibliography
  • Application Essay
  • Article Critique
  • Article Review
  • Article Writing
  • Book Review
  • Business Plan
  • Business Proposal
  • Capstone Project
  • Cover Letter
  • Creative Essay
  • Dissertation
  • Dissertation - Abstract
  • Dissertation - Conclusion
  • Dissertation - Discussion
  • Dissertation - Hypothesis
  • Dissertation - Introduction
  • Dissertation - Literature
  • Dissertation - Methodology
  • Dissertation - Results
  • GCSE Coursework
  • Grant Proposal
  • Marketing Plan
  • Multiple Choice Quiz
  • Personal Statement
  • Power Point Presentation
  • Power Point Presentation With Speaker Notes
  • Questionnaire
  • Reaction Paper

Research Paper

  • Research Proposal
  • SWOT analysis
  • Thesis Paper
  • Online Quiz
  • Literature Review
  • Movie Analysis
  • Statistics problem
  • Math Problem
  • All papers examples
  • How It Works
  • Money Back Policy
  • Terms of Use
  • Privacy Policy
  • We Are Hiring

Economic Naturalist, Essay Example

Pages: 11

Words: 3087

Hire a Writer for Custom Essay

Use 10% Off Discount: "custom10" in 1 Click 👇

You are free to use it as an inspiration or a source for your own work.


Different People face various circumstances and situations when making decisions (Wayne 48). Decisions usually have implications under most of these circumstances (Fallis 379). Over time, Studies have revealed a significant difference in regards to how economic naturalists and non-naturalists make decisions (Robert 194). The explanation offered is that an economic naturalist can see the expression of economic principles in their everyday life. Studying economics changes how people see things from an economic point of view. Economics courses focus on ensuring that students realize economic principles in all aspects of life, and utilize economic theories in decision-making processes. The course focuses on two questions that are an excellent example, as they are everyday occurrences that the population often overlooks as they are used to them. The Braille on drive-by ATMs though strange from our perspective is another great example that has a logical answer. Economists tend to discuss simple terms in a complicated manner, something that this paper avoids when answering the questions presented below. The paper starts by discussing the link between social and economic theories, explaining how social economists regard gifting with products and services as opposed to money. After the discussions, the study delves into explaining the concepts of growth and income in economic terms. This discussion focuses on expressing how changes in outdoor appliances are being experienced with regards to the quality of the products becoming more advanced each time. Furthermore, there is continual improvement in the type of products being used, and when the products are introduced, they only serve the high end market. However, over time, they become available to the middle and lower level classes, as new appliances are introduced for the luxury market. After discussions on outdoor appliances, the paper provides a rationale behind the availability of taxis during rainy seasons and the changes in price. All of the explanations that the paper presents focus on how economic principles apply in everyday life, but often go unnoticed.

This question on why human beings choose to give gifts of items rather than the most usable tangible object, money, is an economist’s favorite riddle. Many have analyzed the question, and each social economist has a different response to it. The problem that many economists face is their inability to apply economic decision making, to social events that can be easily explained. Giving cash is only socially acceptable in certain circumstances, for instance in weddings, birthday parties or during Christmas. The reason for this is simply that gifts mean something to both the receiver and the giver. The only significance of monetary cash is that it can be used to purchase anything.

Humans are social creatures and gifts are given for a variety of reasons. They help to build relationships with other people. However, there is an economic loss in present giving, at least according to economist Joel Waldfogel (Waldfogel 319-324). Gift giving results in a deadweight loss that is one-tenth to one-third of the gift’s value. These estimates are wide, as it depends on the nature of the present. According to Waldfogel, gifts given by immediate family members or significant others are more efficient than those given by the extended family are. The logical theory behind it is that in close relationships the giver and receiver know each other’s preferences, which reduces the deadweight loss. One of the most important and logical findings from this research is that cash gifts were more likely to come from givers that believed that any gift they give would have a lower utility than the cash itself through being unaware of the recipient’s preferences.

This research is out of the ordinary as it is logical and rational. While it does not always explain every gift, such as grandparents’ preferences for giving sweaters or other unwanted gifts, it is interesting as it provides some economic rules behind how people should offer gifts. However, a clear gap is evident between the research and its application, as Waldfogel’s theory only applies to specific situations. This approach does not explain how someone would provide another with a gift for a housewarming party, or what an excellent gift for a baby shower would be. The society dictates that cash while being the most useful, is not a recommendable gift. People would be looked down on in these circumstances; one only needs to think about him/ herself in a similar circumstance to know this is true. Many economists ignore the utility in receiving as well as giving a gift. For example, it would be embarrassing to wear a sweater that a grandmother has knit with tangible reindeer on it in public. Regardless, the grandmother gains a significant amount of utility in hand knitting the sweater and giving it to her loved ones. However, the recipient may derive no pleasure from wearing it but may receive utility from knowing that someone cares about them enough to spend so much time making a sweater. Thus, the main problem with this line of research is that the anthropological perspective fails to take into account the utility arguments of economics (Swanson). Besides, the economic perspective fails to take into account the anthropological assumptions on why certain gifts and actions provide more utility to certain individuals than others. Researchers need to carry out additional research, as it is clear that economists need to consider the utility provided to the gift givers as well.

The fact that rapid income growth among people with a high income has been present throughout the years is a concept that has made the demand for high-quality appliances and products rise. The higher the demand for these types of products, the more their prices reduces. Economically, this attributes to the fact that when more people can afford the costs of goods and services, which are abundantly available, the businesses get to charge lower costs so that they can enjoy the benefits of economies of scale. Due to the rapid income growth, middle-class consumers can get their hands on appliances and products. However, some products and appliances are usually affordable only to the high-end spectrum of an economic market in terms of income. This market, according to many researchers is usually reserved for top-level managers of corporations such as CEOs and business owners. In the recent past, entertainers and celebrities have also become an integral part of this class.

According to economic principles, a majority of different types of goods and services normally have their prices reduce after a certain period. This, according to economists insinuates that the people with high income are usually the first ones to access products and appliances whereas the middle class can only afford them after the prices reduce. This has been going on for years, especially after the industrial age. For example, when the first few computers were released to the public, only the rich could afford them. The computers were not many and thus could not meet the demand, which led to their increase in price. After the evolvement in technology, companies spent less on building the computers and sold them for a more reasonable price. Among other similar examples, include cell phones and TVs where only a few people could afford them back in the 80’s. As the cell phones evolved past the pager era, more people were able to afford them for personal use. Regardless of the appliance or product being released to the public, most of the first generation ones are always at such a high cost that only people with high incomes can afford them. Once the second and third-generation are produced in large quantities, their cost significantly reduces.

Most of the recent growth and income in the United States occurred among the nation’s highest earners. For example, although median inflation adjusted, family income grew by less than 14% between 1979 and 2007. The corresponding growth for the top 1 percent of earners was over 200 percent. Later, the income growth was even more dramatic. The CEOs of the largest US corporations earned 42 times as much as the average worker in 1980, 531 times as much in 2000. Rapid income growth among those with already high incomes spawned an increase in demand for not only costly outdoor cooking appliances but also a broad spectrum of other luxury goods as well. The quote is from the Economic Naturalist 4.1 and it explains that the more Rapid Growth Income increases, the more demand increases for higher products. This is economically healthy for the middle class, as all the companies that create these products will start to compete with one another, to create the highest luxury good for the price. Eventually, old products begin to fall out from the market making way for the new products. In regards to cell phones, and especially the iPhone, when comparing the first generation phone to the newest, it is clear that iPhone has evolved while maintaining the cost price since consumers willing to pay the high price for the device to expect a more luxury phone to be released every year. When a new phone is released every year, the price of the older model drops significantly such that those in, the lower class can afford them. This is a perfect example of the term income effect , which means, “the change in quantity demanded that results from the change in real purchasing power are caused by the price change.” The creation of luxury goods will always be constant as long as there is a demand, but its price will always change. Whether it is available in the present moment or years from now, the quality of products will become more affordable as we evolve.

In line with the economic principles discussed above, it is evident that growth and income usually result in product and appliances prices reduction eventually. Therefore, what is not affordable to the majority today may be affordable within a certain period. This has the potential of resulting in improved quality of products and services over time. Furthermore, it has the capability of resulting in the growth of the middle class over a long period. In the end, it will also ensure that the population will at one point in time access and afford appliances and products that during their inception was only affordable to the affluent in the society.

Another interesting economic aspect with regards to economic naturalist can be expressed through the phenomena of finding a taxi in the rain in New York. In New York, it is difficult to find a taxi on rainy days, which is troubling considering the precipitation in the city on average 121 days of the year. However, explaining the phenomenon may be a little difficult, as it does not make rational sense. People are more likely to use a taxi on a rainy day to avoid being rained on, which means demand would naturally increase. The classical economic theory would hold that demand increases too rapidly for supply to meet it, and a new equilibrium to establish itself, which would make it difficult to find a taxi when one needs it most.

There are two competing theories that challenge the traditional economic model. The first maintains that taxi drivers are target earners, and force themselves to meet a specific income level. This was proposed in a seminal paper delivered by economists Colin Camerer, Linda Babcock, George Loewenstein, and Richard Thaler. The primary findings revealed that taxi drivers make labor decisions one day at a time instead of planning their working hours over multiple days (Camerer et al. 407-441). These economists also found that taxi drivers tend to work until the target income is met. This research also utilized a literature review that helped demonstrate that similar studies had been conducted before with similar results, though problems in their methodology prevented them from being conclusive.

The second theory regarding the supply of taxis stems from Faber’s research. He found that only a fraction of taxi drivers’ wages is unanticipated and that they do not make large changes to their labor supplies on a daily basis. The research also discovered that taxi drivers increase their labor supply during peak seasons, such as holidays and rainy days, which directly contradicts previous studies. According to Faber, the reason taxi drivers are difficult to find on rainy days is that demand has simply increased by an exponential amount and the supply cannot keep up, despite taxi drivers increasing their labor supply. Faber attributes the different findings to previous work using poor methodologies and not conducting accurate research.

The labor supplies of taxi drivers during rainy days and sunny days are therefore different but increase during rainy days. Earlier studies simply assumed that because drivers have target incomes that they try to meet on most days, they would not shift their labor supply curves during rainy days. The economists did not seem to consider one of the most basic elements of labor economics; namely, the extension of the income and substitution effects. Taxi drivers are more inclined to work during rainy days because they maximize their incomes as demand soars since people do not want to walk to their destinations no matter how short distance is. One needs to wonder, though, whether the type of demand has changed as a result of rain. For example, it would theoretically be possible for economists to study how far a taxi driver takes the average customer, and then compare those findings to whether they change during rainy days. It would also be interesting to examine whether Uber and Lyft have upset this stereotype.

However, the personal experience of many implies of fewer cabs on the streets on rainy days. It is possible that the income effect overrides the substitution effect, assuming it is true. Drivers would then minimize their work, as they will make more during a shorter amount of time. However, there is a more rational argument as to why drivers would decrease their amount of time on the road. New York is a busy place to drive in, and during the rain, the traffic increases and is made considerably more dangerous. While it is subjective to say that it is more miserable of a time to drive, let us assume for a moment that this is true. Drivers make the rational decision to end their shifts early because they choose to protect their vehicles from experiencing a wreck or causing an accident. The Economist reported this in an article that examined the relevance of these studies and whether they are far off the mark or not (The Economist). The article featured conversations the author had with taxi drivers, and while it was not a scientific study, it is still important to continue with the discussion. This matter is more related to game theory than it is related to labor economics.

If drivers make the rational decision to reduce labor supply to reduce their exposure to risk, it makes this decision more akin to a game theory decision. Therefore, drivers are changing the decision to drive into a composite indicator that determines the likelihood of remaining on the road. If the risk grows to a certain level, or conditions become unfavorable or unpleasant, then more drivers are likely to reduce their supply of labor. This also suggests that labor supply for taxi drivers is relatively elastic, though it depends on the driver. Further research is needed, but it is safe to assume that taxi drivers belong to a similar socioeconomic class based on similar income levels; the only thing that would determine whether they fight the trend during the rain is if they have specific consumption needs or random events that require income. This discussion is important because it shows that often, the most logical solution is the simplest and does not involve a complicated set of equations to prove. Intuition is enough to determine that driver preferences are dictated by more variables than just supply and demand functions. It is difficult to model this, but future studies should be conducted. As was mentioned earlier, it would be important to compare the findings of Lyft and Uber labor hours during the rain with taxi drivers to see if there is a difference in preferences.

The biggest take away from the two examples that have been discussed in this study is that economists often try to explain everyday events and things that the public takes for granted. They also appear to arrive at different results when studies are compared. As clearly shown in the paper, economic tenets exist in all aspects of life and that economic theories can be effectively used to deduce the best decisions that can be made in everyday occurrences. The inability to arrive at simple explanations for simple occurrences is ironic when one considers that the highly trained professionals are expected to formulate economic policies on a macro-economic level. The two questions are similar in the sense that they provide an economic rationality for why observable phenomena in the US are a certain way, but both differ for a variety of reasons. Firstly, the question about gift giving is related to anthropology as well as economics and is deeply concerned with utility. There is also the issue about outdoor appliances varying due to changing times where new products and appliances are only available to the luxury market until new and improved versions, or alternative outdoor appliances are developed. The issue of taxi drivers focuses solely on them balancing the risk and negative utility of staying on the job during poor weather conditions while still considering their need for income. Thus, the explanations are much simpler than economists pose them, which have led to over exaggeration as to why they occur. Therefore, it is safe to include that with an appropriate level of exposure, everyone would apply economic principles in their decision-making and not just economic naturalists.

Camerer, C. et al. “Labor Supply of New York City Cabdrivers: One Day at a Time.” The Quarterly Journal of Economics 112.2 (1997): 407-441. Web

Fallis, Don. “The Economic Naturalist: In Search of Explanations for Everyday Enigmas.” Library Quarterly , no. 3, 2009, p. 379. EBSCO host ,

Frank, Robert H. “A Less-Is-More Approach to Introductory Economics.” Journal of Economic Methodology , vol. 19, no. 3, Sept. 2012, pp. 193-198. EBSCO host , doi:10.1080/1350178X.2012.714148.

Geerling, Wayne. “An Exploration of Robert Frank’s ‘The Economic Naturalist’ in the Classroom.” International Review of Economics Education , vol. 12, 01 Jan. 2013, pp. 48-59. EBSCO host , doi:10.1016/j.iree.2013.04.008.

Swanson, Ana. “Why Cash Is The Worst Gift.” Washington Post . N.P., 2015. Web. 18 Nov. 2017

The Economist. “Cruising For Dollars.” . Web. 18 Nov. 2017

Waldfogel, Joel. “The Deadweight Loss of Christmas: Comment.” American Economic Review 90.1 (1993): 319-324. Web

Stuck with your Essay?

Get in touch with one of our experts for instant help!

Keynesian Prediction vs. American History, Term Paper Example

The Integration of Muslims Into Western Cultures, Research Paper Example

Time is precious

don’t waste it!

Plagiarism-free guarantee

Privacy guarantee

Secure checkout

Money back guarantee


Related Essay Samples & Examples

Voting as a civic responsibility, essay example.

Pages: 1

Words: 287

Utilitarianism and Its Applications, Essay Example

Words: 356

The Age-Related Changes of the Older Person, Essay Example

Pages: 2

Words: 448

The Problems ESOL Teachers Face, Essay Example

Pages: 8

Words: 2293

Should English Be the Primary Language? Essay Example

Pages: 4

Words: 999

The Term “Social Construction of Reality”, Essay Example

Words: 371

economic naturalist essay

  • Business & Money

Amazon prime logo

Enjoy fast, free delivery, exclusive deals, and award-winning movies & TV shows with Prime Try Prime and start saving today with fast, free delivery

Amazon Prime includes:

Fast, FREE Delivery is available to Prime members. To join, select "Try Amazon Prime and start saving today with Fast, FREE Delivery" below the Add to Cart button.

  • Cardmembers earn 5% Back at with a Prime Credit Card.
  • Unlimited Free Two-Day Delivery
  • Streaming of thousands of movies and TV shows with limited ads on Prime Video.
  • A Kindle book to borrow for free each month - with no due dates
  • Listen to over 2 million songs and hundreds of playlists
  • Unlimited photo storage with anywhere access

Important:  Your credit card will NOT be charged when you start your free trial or if you cancel during the trial period. If you're happy with Amazon Prime, do nothing. At the end of the free trial, your membership will automatically upgrade to a monthly membership.

Buy new: .savingPriceOverride { color:#CC0C39!important; font-weight: 300!important; } .reinventMobileHeaderPrice { font-weight: 400; } #apex_offerDisplay_mobile_feature_div .reinventPriceSavingsPercentageMargin, #apex_offerDisplay_mobile_feature_div .reinventPricePriceToPayMargin { margin-right: 4px; } -13% $19.96 $ 19 . 96 FREE delivery Saturday, May 25 on orders shipped by Amazon over $35 Ships from: Sold by:

Return this item for free.

Free returns are available for the shipping address you chose. You can return the item for any reason in new and unused condition: no shipping charges

  • Go to your orders and start the return
  • Select the return method

Save with Used - Acceptable .savingPriceOverride { color:#CC0C39!important; font-weight: 300!important; } .reinventMobileHeaderPrice { font-weight: 400; } #apex_offerDisplay_mobile_feature_div .reinventPriceSavingsPercentageMargin, #apex_offerDisplay_mobile_feature_div .reinventPricePriceToPayMargin { margin-right: 4px; } $7.88 $ 7 . 88 FREE delivery Tuesday, May 28 on orders shipped by Amazon over $35 Ships from: Amazon Sold by: FindAnyBook

Kindle app logo image

Download the free Kindle app and start reading Kindle books instantly on your smartphone, tablet, or computer - no Kindle device required .

Read instantly on your browser with Kindle for Web.

Using your mobile phone camera - scan the code below and download the Kindle app.

QR code to download the Kindle App

Follow the author

Robert H. Frank

Image Unavailable

The Economic Naturalist: In Search of Explanations for Everyday Enigmas

  • To view this video download Flash Player

The Economic Naturalist: In Search of Explanations for Everyday Enigmas Paperback – April 8, 2008

Purchase options and add-ons.

  • Print length 240 pages
  • Language English
  • Publication date April 8, 2008
  • Dimensions 5.25 x 0.6 x 8 inches
  • ISBN-10 0465003575
  • ISBN-13 978-0465003570
  • See all details

The Amazon Book Review

Frequently bought together

The Economic Naturalist: In Search of Explanations for Everyday Enigmas

Customers who viewed this item also viewed

economic naturalist

Editorial Reviews

About the author, product details.

  • Publisher ‏ : ‎ Basic Books; 60425th edition (April 8, 2008)
  • Language ‏ : ‎ English
  • Paperback ‏ : ‎ 240 pages
  • ISBN-10 ‏ : ‎ 0465003575
  • ISBN-13 ‏ : ‎ 978-0465003570
  • Item Weight ‏ : ‎ 6.9 ounces
  • Dimensions ‏ : ‎ 5.25 x 0.6 x 8 inches
  • #570 in Sociology of Social Theory
  • #1,146 in Theory of Economics
  • #3,991 in Popular Culture in Social Sciences

About the author

Robert h. frank.

Robert H. Frank received his M.A. in statistics from the University of California at Berkeley in 1971, and his Ph.D. in economics in 1972, also from U.C. Berkeley. He is the Goldwin Smith Professor of Economics at Cornell University, where he has taught since 1972 and where he currently holds a joint appointment in the department of economics and the Johnson Graduate School of Management. He has published on a variety of subjects, including price and wage discrimination, public utility pricing, the measurement of unemployment spell lengths, and the distributional consequences of direct foreign investment. For the past several years, his research has focused on rivalry and cooperation in economic and social behaviour.

Customer reviews

Customer Reviews, including Product Star Ratings help customers to learn more about the product and decide whether it is the right product for them.

To calculate the overall star rating and percentage breakdown by star, we don’t use a simple average. Instead, our system considers things like how recent a review is and if the reviewer bought the item on Amazon. It also analyzed reviews to verify trustworthiness.

  • Sort reviews by Top reviews Most recent Top reviews

Top reviews from the United States

There was a problem filtering reviews right now. please try again later..

economic naturalist essay

Top reviews from other countries

  • Amazon Newsletter
  • About Amazon
  • Accessibility
  • Sustainability
  • Press Center
  • Investor Relations
  • Amazon Devices
  • Amazon Science
  • Sell on Amazon
  • Sell apps on Amazon
  • Supply to Amazon
  • Protect & Build Your Brand
  • Become an Affiliate
  • Become a Delivery Driver
  • Start a Package Delivery Business
  • Advertise Your Products
  • Self-Publish with Us
  • Become an Amazon Hub Partner
  • › See More Ways to Make Money
  • Amazon Visa
  • Amazon Store Card
  • Amazon Secured Card
  • Amazon Business Card
  • Shop with Points
  • Credit Card Marketplace
  • Reload Your Balance
  • Amazon Currency Converter
  • Your Account
  • Your Orders
  • Shipping Rates & Policies
  • Amazon Prime
  • Returns & Replacements
  • Manage Your Content and Devices
  • Recalls and Product Safety Alerts
  • Conditions of Use
  • Privacy Notice
  • Consumer Health Data Privacy Disclosure
  • Your Ads Privacy Choices

Economics 201

Economic naturalist assignment, introduction.

Robert Frank, a Cornell labor economist and author of an excellent microeconomics text, admonishes his students and readers to become "economic naturalists," observing economic phenomena in the same way that a naturalist observes nature and asking questions such as "Why did this happen the way it did?" In this assignment, you are to play economic naturalist and find some economic phenomenon, pose a question about it that you think is interesting, then try to answer that question the best you can using the theories we have developed in the class.


The ideal place to find interesting phenomena to analyze is in your own experiences, either here at Reed or elsewhere. Alternatively, you may use phenomena that are described in newspapers or other places. You should recognize that Econ 201 gives you a fairly limited toolbox for analysis, so you won't be able to answer as many questions satisfactorily now as you could after completing an economics major. However, the basic tools of supply and demand are very powerful and apply to many situations. Try to keep your question simple and intuitive.

Written Assignment

You should submit a short essay consisting of three parts:

  • Facts. S ummarize the phenomenon you are looking at in as much detail as necessary. If you are relying on published sources for your information, you should include a copy of these along with your assignment.
  • Question. Pose as clearly as possible the question that the facts about this phenomenon raises in your mind.
  • Analysis. Use the theoretical materials of Econ 201 to attempt to answer the question. You may not be able to answer all aspects of the question satisfactorily.

Essays may be submitted electronically or on paper. They are due at class time on Wednesday, October 27 .

Selection and Discussion of Topics

The instructor will select a few of the naturalist topics to be discussed in an upcoming Thursday evening activity session. The essays describing these topics will be made available on the Web site for fellow students to read prior to the lab. The author of each will be invited to lead off the discussion by making a very brief presentation summarizing the topic and the analysis.

  • Thought Leadership

Bob Frank’s legacy as a teacher, behavioral economist, economic naturalist, and author

photo of Robert H. Frank

Robert H. Frank in his office in 2015 (photo by Jason Koski)

In 1966, when Cornell economist Robert H. Frank arrived in Nepal to teach high school math and science as a Peace Corps volunteer, he was surprised at how quickly he felt comfortable in his modest new home, even though conditions of life were dramatically different from what he was used to. “What was astonishing to me was that within a day or two, everything seemed normal,” Frank says. “You get up, you have things you want to get done that day, there are people you interact with … the day-to-day flow of life was really not in any meaningful way different.”

That experience was a defining moment for Frank that informed his outlook on life. “Knowing that when life is lived on a radically different material scale, it doesn’t much matter, is knowing something in a way that’s different from believing it to be true,” he says. “It’s sort of who you are, then.”

Frank, the Henrietta Johnson Louis Professor of Management and professor of economics in the Samuel Curtis Johnson Graduate School of Management, has written and spoken extensively about positional goods, cascading expenditures, inequality, and the ever-growing income gap in our society—all prevalent themes in his many books, essays, op-eds, media interviews, and podcasts. “Everybody knows that when the mansions get bigger, rich people probably aren’t much happier as a result,” he says. “Ordinary material conditions don’t do much to improve people’s lives when they happen across the board for everyone. We just get used to the new gadgets and bigger houses and more expensive wedding receptions. And they don’t have any lasting impact on our health or wellbeing or how happy we are.”

Many of Frank’s award-winning books, including Luxury Fever: Money and Happiness in an Era of Excess and The Winner-Take-All Society , co-authored with Philip J. Cook, are continually cited in both mainstream and business media outlets. Luck and the role it plays in people’s lives and the power of behavioral contagion are themes Frank expounds on in his most recent books, Under the Influence: Putting Peer Pressure to Work and Success and Luck: Good Fortune and the Myth of Meritocracy . (See Books by Robert H. Frank, below, for a complete list of his books.)

A Cornell professor since 1972, an influential teacher of economics, and a thought leader who played a central role in bringing legitimacy to the study of behavioral economics at Cornell, Frank retired from the university on July 1, 2020.

An affinity for teaching

As a mathematics major at Georgia Tech, Frank, then an undergrad himself, had an unprecedented opportunity to teach an undergraduate math class and discovered he really enjoyed the experience. In fact, he liked it enough to shed the “stereotypical life history ambitious students at Georgia Tech envisioned to become president of a company before you were 40,” as he put it. “Being a teacher rose right to the top of my list,” he says, after “an advisor in the math department talked to me about it and said that his family lived quite comfortably; it didn’t mean signing an oath of poverty to become a teacher,” recalls Frank.

So following two years of service in the Peace Corps, Frank studied micro, macro, and labor economics at the University of California at Berkeley, where he earned his MA in statistics and graduated with his PhD in economics in 1972, then interviewed for an assistant professor position in the Department of Economics in Cornell’s College of Arts and Sciences. “I was lucky to get that job,” says Frank. “They hired seven people that year and I was number seven.”

  A maverick economist

Although he remained an economics professor in Arts and Sciences for nearly two decades—becoming a full professor in 1986 and a chaired professor in 1991—intellectually, it wasn’t the best fit from Frank’s perspective. “Economics departments vary from being overly concerned about mathematical formalism at one end of the distribution to obsessively overly concerned at the other extreme. Cornell’s department was near the obsessively concerned end of that distribution,” he says.

  “I was able to do that kind of work; having been a mathematics major, that was not something that was daunting to me,” Frank says. “But the culture at Berkeley, where I’d studied as a graduate student, was quite different. There, they were concerned mainly with trying to get the right answer to whatever question they were posing. It wasn’t a matter of trying to prove how mathematically sophisticated they were; the ethos of that department was to use the simplest model that would get the job done was.

  “ The Cornell department was not quite to my liking and my own career evolved in reaction to that,” Frank says. “I did what I had to do to get promoted; I published technical papers in the leading journals in sufficient quantity. But once I was freed from that, I spent the lion’s share of my energy working in a much more discursive mode, writing books. And I’ve been lucky to get away with that. That’s not the standard way that economists make any headway in the profession.”

Robert H. Frank in 1985

Frank focused his work more and more on behavioral issues and continued to publish in untraditional ways. And he found an intellectual ally in Richard Thaler , who joined Johnson as a professor of economics in 1978. Frank says he and Thaler “spent a lot of time talking to one another about how the conventional economic models didn’t seem to describe the world we knew and experienced.” In 1990, when the Kellogg School at Northwestern offered Frank a chaired professorship, Thaler advised Frank to first take a half-time appointment at Johnson to find out how he liked teaching MBAs.

“I took the half-time appointment at the Johnson School and it was, in fact, a more congenial environment for me,” says Frank. “It was much more behaviorally oriented, and so I think it was a comfortable fit.” In 2001, he decided to join Johnson full time, while continuing to teach introductory economics in Arts and Sciences once every two years for many years. In 2002, Frank became Johnson’s Henrietta Johnson Louis Professor of Management and professor of economics.

A champion for behavioral economics

In 1989, Thaler, a professor of economics at Cornell for nearly two decades who later became a Nobel laureate in economics (2017), founded the Behavioral Economics and Decision Research Center (BEDR), an interdisciplinary center co-directed by Frank, among others , that “unites Cornell scholars who share a common interest in judgment, decision making, and behavioral economics.” The center is often cited as the birthplace of behavioral economics.

Behavioral economics challenges the “rational actor” model of human behavior, which forms a big part of the core traditional economics curriculum, says Thomas D. Gilovich , Irene Blecker Rosenfeld Chair of Psychology and a co-director at BEDR. “The ‘rational actor’ model is based on the idea that people are perfectly rational and perfectly selfish, neither of which strikes a psychologist or strikes a behavioral economist as realistic,” says Gilovich, who became friends with both Frank and Thaler after joining Cornell’s faculty in the 1980s.  “Bob was concerned that the focus on the rational actor as a description of human behavior just seemed inaccurate.

“Behavioral economics is an effort to draw upon psychological insights about how the mind works and what people are like to inform models of economics that often left out those considerations,” says Gilovich. “So it’s a way to build a more realistic and therefore effective economics.”

photo of Mike Waldman

“As an economist, Bob is a big thinker and intellectual leader,” says longtime colleague and friend Michael Waldman , the Charles H. Dyson Professor of Management and professor of economics at Johnson. “He tries to re-orient the profession to be more realistic about how economies behave. Bob and Richard Thaler built behavioral economics at Cornell and created fertile ground for behavioral economics champions like Ted O’Donoghue .” O’Donoghue, the Zubrow Professor of Economics and senior associate dean for social sciences in the College of Arts and Sciences, is also a co-director at BEDR. “Young behavioral economists at Johnson like Ori Heffetz and Marcel Preuss are part of Bob’s legacy in terms of the strength of behavioral economics on campus,” adds Waldman.

Richard Thaler, Bob Frank, Tom Gilovich, and Ted O’Donoghue, speaking

“I also think of Bob’s legacy in terms of the strength of behavioral economics in the profession,” says Waldman. “When I first started, there wasn’t really anything called behavioral economics; it wasn’t a field. In a sense, Richard and Bob created the field. And it’s not going away. Bob was an important contributor in making it a big part of economics, and it clearly fits in with what Bob was trying to do: Make economics more real.”

The genesis of the Economic Naturalist writing assignment

Most people don’t think of storytelling as a key, integral component to an introductory economics course. Frank does.

He describes the conundrum he sought to address in reforming the course: “Most students take only one economics course; mostly they don’t like it, and they don’t take any other [economics] courses. But more troubling is that six months afterwards, we give them tests that probe their understanding of basic economic principles and they don’t score any better than students who never took the course.”

Why? In Frank’s view, the reason was partly because introductory economics courses are overly mathematical, an approach he says is “not the best pathway” for students to understand basic economic principles. “Most people can absorb ideas most readily and efficiently if ideas are couched in a narrative, where there are actors, people with interests, a problem, a question to be answered, and a resolution,” he says. So he developed an assignment designed to get students to tell stories focused on applying economic principles in their answers to interesting questions.

“The title of the paper has to be a question—an interesting question based on something you’ve come up against in your own experience and that you’re curious about,” Frank would tell his students. “How do you know whether your question is interesting? Ask one of your classmates and see if they react in a way that signals interest. Do they want to know, ‘Yeah, why is that?’ Or do they blink dully and change the subject?”

Launched in 1987 with support from Cornell’s John S. Knight Institute for Writing in the Disciplines , over the years the assignment shrank from 20-page papers to narratives of no longer than 500 words. And Frank dubbed it the Economic Naturalist Writing Assignment.

“The reform for the course was to make a judgement up front about which six or seven ideas were the most important,” says Frank. “And in economics, at least, it’s fortunate that just a few ideas do most of the heavy work. Put those on display in as many contexts as possible and students can master them at a very high level in just a single semester.”

The proof is in the pudding, and hundreds of alumni have validated Frank’s approach by presenting him with the Stephen Russell Distinguished Teaching Award (established by Stephen Russell ’60, MBA ’61), which is given by fifth-year reunion classes to the Johnson faculty member whose teaching has most influenced them during their post-graduation years. “I’ve won that award four times,” says Frank, “and it’s by far the award I’m most proud of.”

economic naturalist essay

“A lot of us try to teach everything, every detail is so important—‘what if I didn’t tell the students this? They won’t get the full picture,’” relates Ori Heffetz , associate professor of economics, whom Frank and Waldman interviewed and hired in 2005. “Bob was the opposite. Bob always said, ‘Less is more. Focus on a few core ideas and just keep hammering them in with more examples and more applications.’

“This was really influential for me,” says Heffetz.

When alumni honored Heffetz with the Stephen Russell Award in 2015, he says, “I thought, ‘This is Bob!’ The fact that five years later they still remembered insights from my course was because ‘less is more.’”

Why do kids need safety seats in cars but not planes?

Frank describes one of his all-time favorite economic naturalist essays, written by Greg Bellinger ’93, MBA ’99, MEng ’00: “Why do regulators have you strap your toddler into a car safety seat to drive two blocks to Wegmans but then let you fly with your toddler loose on your lap when you fly from New York to Los Angeles?” As Frank says, “Greg reasoned that it had to be on the cost side of the cost-benefit test. And sure enough, if you have a safety seat in the back seat of your car, there’s no extra charge for strapping your kid in other than the few seconds it takes to do it. If you need to strap your kid in a safety seat on a flight from New York to L.A. and it’s full, you have to buy a seat—that’s a thousand bucks. So the cost of strapping your kid in a plane is much, much higher than the cost of strapping your kid in a car, and that’s why we see this difference.

“When you talk about that example with people,” Frank says, “then you understand the cost-benefit principle—which is probably the most important principle we have in economics—just a little better each time you do it.”

Economic Naturalist book cover

Frank compiled some of the best examples of students’ questions and answers into a book, The Economic Naturalist: In Search of Explanations for Everyday Enigmas (2007). It quickly became a bestseller in many countries, and sales around the world remain brisk more than a dozen years later. And as Frank wrote in the book’s introduction, he donated half his royalties from the book to the John S. Knight Institute for Writing in the Disciplines, “in grateful acknowledgement of my former students’ contributions … with full confidence that … no gift could more enhance the learning experience of future Cornell students.”

Thousands of economic naturalists

Ori Heffetz , associate professor of economics at Johnson, points out that Frank’s textbook, Principles of Economics, co-authored with Ben S. Bernanke and first published in 2001, is full of economic naturalist examples. In fact, as a co-author of the textbook since 2016 (it’s revised with new data and examples every year or two), Heffetz himself has written many economic naturalist question-and-answer summaries. Most recently, he’s been writing several about the corona virus and its effects on the economy and unemployment for the eighth edition of the book, which will come out in 2021.

“There are now thousands of economic naturalists out there,” says Heffetz. “First of all, thousands of our alumni took Bob’s course and turned in two one-page economic naturalist summaries. Plus [there are] tens of thousands of users of the textbook.”

Frank’s ideas continue to gain currency partly because he is a master not only of writing about them in a way that’s clear, direct, and accessible to the layperson; he’s also adept at broadcasting his ideas in a variety of media. “Bob has had several big ideas in recent decades and he just hammered them in, like in his teaching,” says Heffetz. “He would write a book about them, then he would write about them in his New York Times column, then he would give interviews about them everywhere.”

Recently, Bob pushed for the next edition of Principles of Economics to include ten short, animated videos that illustrate the best of the economic naturalist examples, says Heffetz. “So the publisher hired animators and they are making a high-quality production of short videos that you can tweet and that can go viral.”

Context matters and relative wealth

“Speaking selfishly as a social psychologist, I will say that Bob is a social psychologist masquerading as an economist,” quips Gilovich, who is Frank’s longtime friend, research collaborator, and tennis partner. “The biggest lesson of social psychology is that everybody’s behavior is very finely tuned to the environment in which they find themselves. We’re very sophisticated beings with very sophisticated brains that pay attention to the tiniest details of our surrounding circumstances.

“That is to say, context really matters,” Gilovich says. “And almost all of Bob’s work has illustrated the importance of that idea in various ways.”

As an example, Gilovich points to one theme in Frank’s research: the idea that absolute wealth is important, but nowhere near as important as relative wealth. “How you’re doing relative to the people around you is more important to your happiness and is a more important driver of your behavior,” says Gilovich. “Bob illustrated this in his first and absolutely delightful book, Choosing the Right Pond . It continues through Luxury Fever and many of his New York Times columns. And it’s in his most recent book on context, Under the Influence.

“Someone who thinks about human behavior as attuned to the social context is a social psychologist,” says Gilovich jokes, summing up. “So for my field, I’m just going to claim Bob Frank.”

On a personal note, Gilovich adds, “Bob’s got a delightful, self-deprecating sense of humor, he’s tuned into all the amusing things that life offers, doesn’t miss a beat, and has a great wit in commenting on everything going on around him. He’s always giving other people credit, and he’s just a magnificent human being.”

(left to right) Dennis Regan, Robert H. Frank, and Tom Gilovich

Post-retirement plans include lectures, podcasts, and essays

While he may be retired from Cornell, Frank has “enthusiastically signed up” says Gilovich, to teach a BEDR class on decision making — a class that he and other BEDR co-directors have taught above and beyond their regular teaching load over the last two years.

Frank fully plans to continue publishing his ideas in The New York Times, the Washington Post, The Atlantic, and other outlets. He’s continuing to speak in video and podcast interviews. And he’ll continue to post to Twitter ( @econnaturalist ), a venue he has found to be effective for developing ideas that he later polishes and publishes as essays.

“A couple of pieces I published recently grew out of threads I first posed on Twitter,” Frank says, “just because that’s a place for getting started. The hardest part of any project is to get started. Once I get started on a book it’s all I can do to keep from working obsessively on it. The first thing I want to do in the morning is read what I wrote yesterday and then get going on it again.”

So stay tuned.

Books by Robert H. Frank

stack of books written by Robert H. Frank

Many of Robert H. Frank’s books are best-sellers around the world. Translated into 24 different languages, they are approachable and understandable for a general audience and have won multiple best book and notable book awards. They underscore the inequality inherent in our society and propose new tax structures that would address this. They clearly and vividly illustrate terms like expenditure cascades, positional goods, and behavioral contagion. And they discuss the role sheer luck plays in people’s lives. Here’s a list.

Under the Influence: Putting Peer Pressure to Work (Princeton University Press, 2020)

Success and Luck: Good Fortune and the Myth of Meritocracy (Princeton University Press, 2016)

The Darwin Economy: Liberty, Competition, and the Common Good (Princeton University Press, 2012)

  The Economic Naturalist’s Field Guide: Common-Sense Principles for Troubled Times (Basic Books, 2009)

  Falling Behind: How Rising Inequality Harms the Middle Class (University of California Press, 2007)

  The Economic Naturalist: In Search of Explanations for Everyday Enigmas (New York: Basic Books, 2007)

What Price The Moral High Ground? How to Succeed without Selling Your Soul (Princeton University Press, 2004)

  Principles of Economics , with Ben S. Bernanke, and with Kate Antonovics and Ori Heffetz in later editions (McGraw-Hill, first edition, 2001; eighth edition, 2021; brief edition, 2008; fourth brief edition, 2021)

  Luxury Fever: Money and Happiness in an Era of Excess (The Free Press, 1999; Princeton University Press paperback edition, 2000)

  The Winner-Take-All Society: Why the Few at the Top Get So Much More Than the Rest of Us , with Philip J. Cook (Martin Kessler Books at The Free Press, 1995)

  Microeconomics and Behavior (First Edition, McGraw-Hill, 1991; Tenth Edition, 2021)

  Passions Within Reason: The Strategic Role of the Emotions (W. W. Norton, 1988)

  Choosing the Right Pond: Human Behavior and the Quest for Status (Oxford University Press, 1985)

  The Distributional Consequences of Direct Foreign Investment , with Richard T. Freeman (Academic Press, 1978)

  • Enterprise Feature

Browse Econ Literature

  • Working papers
  • Software components
  • Book chapters
  • JEL classification

More features

  • Subscribe to new research

RePEc Biblio

Author registration.

  • Economics Virtual Seminar Calendar NEW!

IDEAS home

Evaluating Robert Frank’s ‘Economic Naturalist’ Writing Assignment

  • Author & abstract
  • Download & other version
  • 9 References
  • Most related
  • Related works & more


(Department of Economics and Finance, La Trobe University)

  • Wayne Geerling

Suggested Citation

Download full text from publisher, other versions of this item:, references listed on ideas.

Follow serials, authors, keywords & more

Public profiles for Economics researchers

Various research rankings in Economics

RePEc Genealogy

Who was a student of whom, using RePEc

Curated articles & papers on economics topics

Upload your paper to be listed on RePEc and IDEAS

New papers by email

Subscribe to new additions to RePEc


Blog aggregator for economics research

Cases of plagiarism in Economics

About RePEc

Initiative for open bibliographies in Economics

News about RePEc

Questions about IDEAS and RePEc

RePEc volunteers

Participating archives

Publishers indexing in RePEc

Privacy statement

Found an error or omission?

Opportunities to help RePEc

Get papers listed

Have your research listed on RePEc

Open a RePEc archive

Have your institution's/publisher's output listed on RePEc

Get RePEc data

Use data assembled by RePEc

Economics Essay Topics: 162 Practical Ideas & Useful Tips

economic naturalist essay

Essay writing is an inherent part of the economics studying process. Nevertheless, it is quite a challenging task. Are you a high school or college student who is struggling with an economic essay topic choice? Or maybe you are unsure about your writing skills?

We know how to help you .

The following article will guide you in choosing the best topic for your essay on economics. Here, you can find a variety of ideas for high school or college. The economic essay topics are divided into several categories that will help you with your research. And a pleasant bonus from our team! We have created a great guide on how to write an economics essay.

So, don’t miss your chance to write an outstanding economic paper! Check out our essay ideas, read our tips carefully, and be ready to receive your grade A!

  • ⭐ Best Economic Topics
  • 🤝 Socio-Economic
  • 🗺️ International Economics
  • 🛠️ Labor Economics
  • 🌆 Urban Economics
  • ⚽ Sports Economics
  • 💉 Health Economics
  • 💼 Business Economics
  • 🏤 Globalization
  • 🧮 Economic History
  • 💫 How to Write?

⭐ 15 Best Economic Essay Topics

  • 2008 Economic Crisis.
  • Socio-economic policy.
  • Economic systems – Singapore.
  • Racial pay gap.
  • Economic globalization.
  • History of online trading.
  • Child labor policies.
  • The Economic Naturalist.
  • Foundations of economic theory.
  • Impact of unemployment.
  • Universal Basic Income.
  • The role of consumerism.
  • Healthcare economics – Canada’s Medicare.
  • Reasons for recession.
  • Cryptocurrency & environmental issues.

✨ Excellent Economic Essay Topics

Has economics always been a subject of meticulous research? The question is quite controversial, right? There is no specific time when economics started its rapid progress. Generally, economics remains the topic of interest since the establishment of capitalism in the Western world.

Nowadays, the economy is the main engine that moves our world forward. The way we do business determines the geopolitical situation in the world. Moreover, it influences many other parts of our lives.

The skills developed through studying economics are incredibly versatile.

Economics studying is of utmost importance nowadays. It helps to gain a better understanding of processes that put everything in motion.

Economics is quite broad, so it has a great variety of subfields. And this is a fantastic opportunity for us to generate as many essay ideas as possible. Here, you will find great economic topics for your paper. As mentioned before, we have divided them into several sections to ease your selection process. There’s a wide selection of free college essays samples on economics in our database, too. So be sure to check that out.

🤝 Socio-Economic Essay Topics

  • The economic impact of racial segregation in America in the 1950s.
  • Designing a just socio-economic system.
  • Socio-economic status of Hong Kong in modern-day China. Explain how the city of Hong Kong gained a special status in China. Why did it emerge as one of the most important cities in its economy? Comment on the significance of Hong Kong in the international economic arena.
  • Economic growth in the United States in the post-World War 2 period.
  • Mobile banking in Saudi Arabia: towards understanding the factors that affect the sector.
  • The importance of Dior’s bar suit to the women’s fashion industry.
  • Economic problems in the 1980’s Soviet Union. Talk about the significant problems with the economy the USSR had in the 1980s. What role did they play in its collapse?
  • What socio-economic problems did segregation in South Africa cause?
  • History of economic development in the UAE. Discuss the economic miracle in the UAE and Dubai. Explain how the government could turn the city of Dubai into one of the most famous tourist destinations. What strategies were applied?
  • Gender inequality and socio-economic development .
  • The problem of poverty in Venezuela.
  • How the socio-economic and political position of women changed between 1880 and 1940.
  • The economic impact of COVID-19 on global trade.

World trade is expected to fall due to the Coronavirus pandemic.

  • How do the three main economic groups interact with each other? There are three critical economic groups: – Consumers – Producers – Government Analyze the interaction of these groups with each other.
  • Extended essay: how the study of economic data helped our society to advance?
  • Western industrialization socio-economic impacts.
  • Inequality at the top: not all billionaires have the same powers. Analyze billionaires’ net worth, liquidity, political power, and wealth security. Explain why they have unequal social status. What factors determine the influence of billionaires?
  • An analysis of systems that help us measure agricultural development in a country.
  • Is social media a useful tool for brand promotion?
  • The phenomenon of dualism in economic development.

🗺️ International Economics Essay Topics

  • Globalization and its impact on international economic relations. Define the term globalization. What role does globalization play in international economic relations? Provide specific examples of globalization’s impact on the global political economy.
  • The lack of justice for the cheap international labor market. Discuss the issue of cheap labor in various countries. Why do some workers often lack fundamental human rights while others abuse moral norms? Analyze the causes and effects of inequality in the workplace.
  • Japan macroeconomics: problems and possible solutions.
  • The issue of mercantilism in the history of Great Britain. Analyze the rise and development of mercantilism in the history of Great Britain. To solidify your ideas, provide persuasive arguments, and appropriate examples of mercantilism.
  • Why does the problem of environmental protection remain unresolved among global economies?
  • Nissan Motor company’s international business.
  • International environmental concerns in economics: the case of China .
  • The issue of international criminal justice in industry. Explain why international businesses often avoid criminal justice after wrongdoings. Select one case of unethical behavior of a company’s CEO or regular employee. Briefly introduce the problem. What were the causes and effects? How was the issue resolved? Express your own opinion regarding the lack of criminal justice in business.
  • The economy of Singapore and its role in international trade.
  • International microeconomics trade dispute case study: US-China dispute on the exportation of raw materials.
  • The phenomenon of the “gig economy” and its impact on the global economy.
  • The effect of population growth in the international economy.
  • International economics in the context of globalization.

Technological and political changes have chipped away at the barriers separating nations.

  • How does Brexit affect the economy of the European Union? Analyze the immediate impact of Brexit on the EU’s economy. Predict future advantages and disadvantages of Brexit for both: Great Britain and the EU.
  • South Africa: international agribusiness, trade, and financing.
  • Historical essay: the economy of the Dutch East India company.
  • The issue of Mozambique’s economy and possible solutions. Investigate the issue of extreme poverty in Mozambique. What are some possible solutions to the problem of poverty? Base your suggestions on the country’s cultural, historical, and geographical aspects.
  • Imbalances in the global economy. Discuss the imbalances between trading countries on the scale of the global economy. What solutions would you suggest to deal with this issue?
  • How will global economies adapt to China’s growing power?
  • Etihad Airways company managerial economics.

🛠️ Labor Economics Essay Topics

  • Ford Motor company’s labor economics.
  • Labor economics: child labor.
  • The UPS firm perspective: the labor market.
  • Gender inequality of wage rate in modern business. Research how and why gender inequality is still an issue in the modern world of economics. What are some ways to deal with the problem? Present your ideas accurately and effectively. Provide solid arguments and appropriate examples to prove your position.
  • What are the best ways to increase labor productivity in business?
  • Labor unions adverse effects on economics.
  • The decrease of the labor force in modern industries. Talk about the rising rates of robotization in the majority of industries. How will it affect the traditional labor force? Comment on the problem of unemployment caused by labor automatization.
  • Violations of labor rights of workers.
  • Modern labor essay: how can an entrepreneur guarantee the minimum wage to their workers?
  • How can labor geography help develop a special economic zone? Talk about labor geography and its effects on developing an exclusive economic zone. How does the geopolitical location of a particular country influence its level of economic development?
  • Entrepreneurship in the organic cosmetics sphere.
  • Gender-oriented labor trade unions. A case study. Discuss the gender-oriented trade unions and analyze their impact on our society.
  • Child labor in the Turkish cotton industry.

The Syrian refugee crisis increased the risks of child labor in Turkey.

  • The connection between economic growth and demography. Analyze the connection between economic growth and its demographic context. Investigate both sides: – The issue of overpopulation – The problem of low birth rate. From an economic perspective, what problem is more dangerous?
  • The issue of sex discrimination in the workplace.
  • The effects of Landrum-Griffin Labor Act. Explore the labor Act of Landrum-Griffin that was passed in the US Congress in 1959. Discuss its implications and consequences. Discuss its implications and consequences.

🌆 Urban Economics Essay Topics

  • Cities and their role in aggregate economics.
  • Urbanization in Hong Kong and its effects on citizens.
  • The urban planning of the city of New York: a critical analysis. Analyze the urban history of NY. How has the city been developing? Discuss revolutionary solutions to the past and problems of modern times.
  • The impact of a city’s design on the local traffic.
  • Dubai’s spatial planning: creative solutions for building a city in the desert.
  • Globalization, urban political economy, and economic restructuring.
  • How do urban areas affect local wildlife? Comment on how modern production technologies in urban areas impact the natural diversity of wildlife. What impact does the rapid economic progress have on the environment? Suggest possible solutions.
  • Urban sociology: does the city make us better people?
  • Why should people be more careful about investing in real estate? Discuss the issues of overinvestment into real estate. Consider the economic crisis of 2008 as an example.
  • How can regional authorities help improve a city?
  • Urban life and its effects on education.
  • The economic development of a city’s metropolitan area: challenges and solutions.
  • Main factors for the emergence of cities in the Middle Ages.
  • The ethics of relocation: is it justified? Talk about the case of relocating locals when building projects of great magnitude. To what extent can it be justified? Mention its economic and ethical side.
  • The difficulties behind the construction of “green” buildings. Discuss the relatively new phenomenon of environmentally friendly buildings. Analyze both sides: the pros and cons. What obstacles lie behind the “green” building? What opportunities do the “green” buildings offer? Elaborate on your ideas by providing clear arguments or counterarguments.
  • What factors play a critical role in the success of retail productivity in cities?

⚽ Sports Economics Essay Topics

  • Do teams with higher budgets perform better on the field?
  • Corruption in European football leagues: a critical analysis. Investigate the corruption issue in the European football leagues. State reasons and solutions for the problem.
  • The managerial catastrophe of Arsenal F.C.

Discuss the football club of Arsenal.

  • The NextG sports company’s communication planning.
  • Roger D. Blair’s Sports Economics literary review. Write a literary analysis of Sports Economics by Roger D. Blair. Discuss his opinion on the economy of sports. Do you agree or disagree with his position? Provide compelling supportive arguments or strong counterarguments.
  • How significant is the impact factor of a local team on a city’s economy?
  • Kinsmen Sports Centre: marketing metrics innovation.
  • What role does statistical data play in sports? Analyze the part of economic statistical data in different sports organizations. How can statistics help to develop an effective financing plan? Comment on the impact of financing on the performance of a sports club.
  • Sports and energy drinks marketing analysis.
  • Is there a connection between the lack of money and any contemporary issues in a sports team?
  • Performance-enhancing drugs in sports.
  • The business of FIFA: a financial analysis. Investigate the finances of FIFA. What economic factors make them so influential in the modern world of football?
  • The global sports retail industry.
  • The Olympics: logistics and economy. Discuss the logistics behind the Olympics Games event. How the Olympic Games impact the economy of the host country?

💉 Health Economics Essay Topics

  • Is bioprinting the new future of medicine? Analyze the new market of organ printing and discuss its challenges. Investigate bioprinting from an economic perspective. Will the outputs cover the inputs? How will bioprinting impact the financial aspect of the health care sector?
  • Cost-effectiveness of pharmaceutical products in the United States. Comment on the immense cost-effectiveness of pharmaceuticals. What do you think is the price of pharmaceutical products reasonable? Is it ethical to set extremely high prices on the medicals?
  • An economic evaluation of the antibiotics market.
  • Health economics-SIC and NAICS.
  • The financial side of cancer treatment: is it too expensive? Analyze the market for cancer treatment programs in various countries. Explore its costs and complications. What are some possible ways to reduce the price of cancer treatment and make it more affordable?
  • The issue of fast food consumption: a multibillion-dollar market . Fast food has always been one of the notable causes of obesity, diabetes, and other illnesses. Investigate the economic aspect of the issue. Are high profits from fast food production worth peoples’ health conditions?
  • History and evolution of healthcare economics.

Health has become a dominant economic and political issue over the past years.

  • The financial management of a hospital: a case study.
  • The issue of public healthcare in the USA. Write about the long-standing issue of medical sector operation in the USA. Analyze its history, financial, and social aspects.
  • Demand in healthcare economics.
  • What are the economic outcomes of a global pandemic? Taking the COVID-19 outbreak as an example, conduct research on the effects of a pandemic on the economy. How does it affect local economies? What impact does the quarantine have on the international economy? Provide appropriate examples to support your ideas.

💼 Business Economics Essay Topics

  • When does an advertising campaign become unnecessary?
  • Sustainable development of a nation’s economic stability. Discuss how a country can create a sustainable economy. Provide bright examples to solidify your position.
  • How can a small business compete with monopolies?
  • What are the limitations of the Lewis Model?
  • The phenomenon of inflation: inevitable liability or a land of opportunity for our economies? Explore the process of inflation in modern economies. Does it only have adverse effects on the countries’ economies? Are there any advantages of inflation? Analyze it from a positive perspective.
  • Economics, business, and sugar in the UK.
  • The shadow economy of the finance sector. Dive into the backstage of the finance sector and research various “grey” areas where business can be done.
  • Chinese and Japanese business systems comparison.
  • Oil demand and its changes in the XXI century: a critical analysis. Analyze the oil sector and write about its fluctuation in the XXI century. How did the changes in oil demand affect the global economy?
  • The social and economic impact of mass emigration.

🌠 40 More Good Economic Essay Topics

Scrolled through our ideas, but can’t find a suitable topic for yourself? No worries! We have more issues to share with you.

So, don’t stress out. Take a look at our list of economical essay topics. Here are 40 more ideas focusing on globalization and the history of economics.

🏤 Economic Globalization Essay Topics

  • The impact of globalization on the tourist industry in the Caribbean . Analyze both: the positive and negative effects of globalization on the Caribbean. To make your paper well-structured, explore two advantages and two disadvantages. Don’t forget to improve your essay with strong evidence and appropriate examples!
  • Toyota Motor Corporation: impacts of globalization.
  • What are the effects of globalization on developing countries? To what extent do developing countries profit from globalization? Research the subject by comparing various examples.
  • Defining globalization and its effects on current trade.
  • Economic growth as a result of globalization: proper financial strategies. How can a country successfully achieve prosperity with globalization? Discuss proper economic strategies.
  • The socio-political significance of the IT industry’s globalization.
  • Human trafficking in developing nations as a result of globalization.

Modern-day trafficking of humans has become more rewarding for traffickers due to globalization.

  • Globalization and criminal justice policy.
  • What are the advantages and disadvantages of globalization?
  • Globalization challenges and countermeasures.
  • The effect of globalization on worldwide trade and employment rates.
  • Economic integration within the European Union: a critical analysis. Talk about the history of economic integration within the EU. What are the negative and positive outcomes of economic integration?
  • Globalization and food in Japan.
  • Does globalization bring negative effects to cultural heritage and identity?
  • The Industrial Revolution as the first step towards globalization. Focus on the Industrial Revolution in Europe. Discuss its precursors and consequences. Why is the revolution considered to be a starting point of globalization? Provide specific examples of globalization processes that occurred in the economic sector after the Industrial revolution.
  • Globalization 2.0 an analysis of a book by David Rieff.
  • Globalization effects on fundamentalism growth.
  • Does direct investment by foreign businesses come with strings attached? Dive into the shady area of globalization and discuss how to direct foreign investment can bring problems of geopolitical scale.
  • Effects of globalization on sexuality.
  • Alibaba’s globalization strategy: an economic analysis.

🧮 Economic History Essay Topics

  • The rapid economic growth of Europe during the Age of Discovery. Analyze the factors that brought economic growth to Europe during the Age of Discovery. What factors contributed to the dynamic economic progress of that time?
  • Brazil’s economic history.
  • History of capitalism: from the Renaissance to the United States of America. Discuss the origins of capitalism and its centuries-long path towards XXth century America. How the establishment of capitalism impacted the economy of the USA?
  • Max Weber: economic history, the theory of bureaucracy, and politics as a vocation.
  • 2008 Economic Crisis: origins and fallout. Talk about the 2008 Financial Crisis. Discuss its causes and outcomes. What should have been done differently to avoid the global crisis? Comment on the economic strategies countries used to recover from it.
  • The economic marvel of Communist China: from rags to riches.
  • What made world economic growth of the Renaissance possible?

Renaissance Europe had a very diverse economy.

  • The economic history of Canada: how did the settlers facilitate economic growth?
  • What did the major powers of the XIXth century base their economies on?
  • The Rothschilds: political and financial role in the Industrial Revolution. Research the dynasty of Rothschilds and how they came to power. What was their role in Europe’s Industrial Revolution?
  • The link between the “oil curse” and the economic history of Latin America.
  • Roman Empire’s monetary policy: a socio-economic analysis.
  • How did the demand for different goods change their value in the 2000s years? Analyze the demand for goods in the 2000s years and their change in value. Why do these fluctuations in demand for products and services occur?
  • The history of economic thought.
  • Soviet Union’s economic timeline: from the new Economic Policy to Reformation. Discuss the economic issues of the Soviet Union from the historical perspective. Why did the Soviet Union collapse? What improvements in the financial sector should have been done?
  • History of France economics over the past 20 years.
  • The history of economic analysis.
  • The concept of serfdom and slavery as the main economic engine of the past. Dive into the idea of feudalism and serfdom. Discuss its social and economic aspects.
  • The World Bank’s structure, history, activities.
  • The history of Islamic banking: concepts and ideas.

💫 How to Write an Economics Essay?

Generally, essay writing on economics has the same structure as any other essay. However, there are some distinctive features of economic papers. Thus, it is essential to figure them out from the very beginning of your work.

You might be wondering what those aspects of the economic paper are. Well, we have an answer.

An economic essay usually relies on the common essay structure.

Below, you will find a detailed plan that explains the fundamental concepts of the essay writing process. So, don’t hesitate to use our tips! They are indeed helpful.

Pick a topic and dissect it. Picking the right topic is the very basis of writing a successful essay. Think of something that you will be interested in and make sure you understand the issue clearly. Also, don’t forget to check our ultimate economics essay topics and samples list!

Research it. After selecting the right idea from our economical essay topics, research your subject thoroughly. Try to find every fascinating and intriguing detail about it. Remember that you can always ask your fellow students, friends, or a teacher for help.

Come up with a thesis statement. A thesis statement is an essential element of your essay. It will determine your focus and guide the readers throughout your paper. Make your thesis secure and try to catch the reader’s attention using context and word choice.

Outline your essay. Never underestimate the power of a well-structured outline! Creating an essay outline can significantly help you to determine your general plan. Evaluate which economic framework you will be using to address the issue. State the main points of your thesis and antithesis. Make sure that they answer the central question of your work.

Write your introduction. First and foremost, a practical introduction should capture the readers’ attention and state the essay’s key topic. So, put enough effort to develop an outstanding introduction. It will create the first impression of your paper.

Moreover, an introduction should include a thesis statement. As we have mentioned above, a thesis plays a crucial role. Thus, make sure it is clearly stated.

Another significant feature of the introduction is its coherence with the body of your essay. Consequently, the introductory paragraph’s last statement has to present the subject of the next section, generically. Also, keep in mind that no more than three key points can be discussed in a paper, even if it is an extended essay.

Thoroughly work on the body paragraphs. Usually, the body of the essay contains several paragraphs. The number of these paragraphs will depend on the nature of your question. Be sure to create one section for every critical point that you make. This will make your paper properly-structured, and the reader will quickly get your ideas. For your convenience, we created a plan to develop your ideas in each paragraph, So, use it and make your writing process easier!

  • Argument. Present your argument in the topic sentence of the paragraph in a way that directly answers the question. A hint: the most effective way to introduce the critical point is to place the topic sentence at the beginning of the paragraph. This will help the readers to concentrate their attention on a specific idea.
  • Comment and discussion. Explain the meaning of your argument and provide an economic analysis. Present clear evidence and persuasive arguments to solidify your position.
  • Connection. Link your comments with the vital point of the paragraph. Demonstrate the coherence of your evidence with the point.
  • Diagrams, tables, charts. If necessary, provide the reader with visual aids. Sometimes, an appropriate diagram or a suitable chart can say more than words. Besides, your paper will look more professional if you use any kind of visual aids.

Conclude your essay. In your conclusion, summarize and synthesize your work by restating your thesis. Also, it is crucial to strengthen it by mentioning the practical value of your findings. Remember to make your essay readable by choosing appropriate wording and avoiding too complex grammar constructions.

Create a reference list at the bottom of your economic essay if you referred to sources.

Thank you for visiting our page! Did you enjoy our article and learned something new? We are glad to help you. Don’t forget to leave a comment and share the article with others!

🔗 References

  • High School Economics Topics: Econlib, The Library of Economics and Liberty
  • Guide to Writing an Economics Essay: The Economics Tutor
  • How to Write the Introduction of Your Development Economics Paper: David Evans, Center For Global Development
  • Senior Essay: Department of Economics, Yale University
  • Developing A Thesis: Maxine Rodburg and The Tutors of the Writing Center at Harvard University
  • Academic Essay Writing, Some Guidelines: Department of Economics, Carleton University
  • The Writing Process: Writing Centre Resource Guide, LibGuides at Dalhousie University
  • Research Papers: KU Writing Center, the University of Kansas
  • Unpacking the Topic: University of Southern Queensland
  • Economic Issues: PIIE, Peterson Institute for International Economics
  • Areas of Research: EPI, Economic Policy Institute
  • Top 100 Economics Blogs Of 2023: Prateek Agarwal, Intelligent Economist
  • Current Environmental Economic Topics, Environmental Economics: US EPA, United States Environmental Protection Agency
  • Hot Topics in the U.S. Economy: The Balance
  • Share via Facebook
  • Share via Twitter
  • Share via LinkedIn
  • Share via email

(Stanford users can avoid this Captcha by logging in.)

  • Send to text email RefWorks EndNote printer

The economic naturalist : in search of explanations for everyday enigmas

Available online, at the library.

economic naturalist essay

Business Library

More options.

  • Find it at other libraries via WorldCat
  • Contributors


Creators/contributors, contents/summary.

  • 1. Rectangular milk cartons and cylindrical soda cans : the economics of product design
  • 2. Free peanuts and expensive batteries : supply and demand in action
  • 3. Why equally talented workers often earn different salaries and other mysteries of the world of work
  • 4. Why some buyers pay more than others : the economics of discount pricing
  • 5. Arms races and the tragedy of the commons
  • 6. The myth of ownership
  • 7. Decoding marketplace signals
  • 8. The economic naturalist hits the road
  • 9. Psychology meets economics
  • 10. The informal market for personal relationships
  • 11. Two originals.

Bibliographic information

Browse related items.

Stanford University

  • Stanford Home
  • Maps & Directions
  • Search Stanford
  • Emergency Info
  • Terms of Use
  • Non-Discrimination
  • Accessibility

© Stanford University , Stanford , California 94305 .

The Economic Naturalist


Download Citation Data

More from NBER

In addition to working papers , the NBER disseminates affiliates’ latest findings through a range of free periodicals — the NBER Reporter , the NBER Digest , the Bulletin on Retirement and Disability , the Bulletin on Health , and the Bulletin on Entrepreneurship  — as well as online conference reports , video lectures , and interviews .

15th Annual Feldstein Lecture, Mario Draghi, "The Next Flight of the Bumblebee: The Path to Common Fiscal Policy in the Eurozone cover slide

Freakonomics logo

Search the Site

More from the “economic naturalist” robert frank.

We recently posted a series of excerpts from The Economic Naturalist , a new book by the Cornell economist Robert Frank (who has another new book out this week, Falling Behind , a brief treatise on income inequality). Because the Economic Naturalist excerpts were well received and vigorously debated , we asked Frank if he would reply to some of the feedback. Kindly, he has obliged:

Guest Blog: Robert H. Frank

When I describe my “economic naturalist” writing assignment to students, I stress that it is not important that the answers to the questions they pose be correct beyond doubt. Far more important is that the questions themselves be interesting and the proposed answers economically plausible. The learning stimulated by this assignment stems less, I think, from the writing of the papers themselves than from the animated discussions provoked by the questions.

I was therefore extremely encouraged by the lively reader responses to the examples from The Economic Naturalist on this blog recently . I was encouraged, too, that a Google search a few days after the post ran turned up over 100 other web sites that had linked to it. To my eye, that’s the real beauty of the writing assignment: Once students manage to pose an interesting question, they immediately want to discuss it with others. And in the process, they find endless opportunities to refine their thinking about what a sensible answer might look like. In short, they learn a lot from these conversations, just as I did from reading your comments.

Such exchanges also provide valuable opportunities to push back, to probe the power of opposing views. So I am pleased to take advantage of an invitation to respond to some of the criticisms of my students’ explanations.

McMansions for Retirees : Several respondents objected that the phenomenon to be explained – that retirees are increasingly buying large houses close to home rather than smaller condominiums in the Sun Belt – was a statistical artifact. In the book, I cited studies purporting to confirm the trend in question, but I’m quick to concede that the practice may not be widespread in many areas. It does seem clear, however, that supply and demand in the retirees’ housing market have shifted in precisely the way my student Tobin Schilke described. Because the number of births per adult American woman has remained roughly the same for several decades, the number of children is no greater now than in the past. Yet because of the secular rise in divorce and remarriage, each child now has more grandparents than in the past (on the plausible assumption that we count the parents of step-parents as grandparents).

The upshot is that the demand for visits by grandchildren has increased relative to the supply of such visits. If we grant Mr. Schilke’s plausible assumption that having a large, conveniently located house makes visits more likely, it follows that retirees are more likely to demand such houses.

Of course, there may have been other offsetting changes in the retirees’ housing market. Rising energy costs, for example, may have reduced the demand for large houses. But that wouldn’t challenge Mr. Shilke’s interesting observations about how demographic changes appear to have altered the demand for grandchild visits.

Square Milk Containers : Regarding the proposed explanation that milk containers have square cross-sections in order to minimize the amount of costly shelf space they occupy in refrigerated storage units (in contrast to the cylindrical containers of soft drinks, which are typically stored on unrefrigerated shelves), several respondents pointed out that containers with square cross-sections could not contain the pressurized contents of carbonated soft drinks unless their walls were so thick as to make them prohibitively costly. It’s a fair point.

But a milk container of given volume could also be produced at lower cost if it were cylindrical in cross-section rather than square. Relative to a container with square cross-section, however, a cylindrical design would definitely increase the cost of storing milk on refrigerated shelves. So it seems fair to conclude that the cross-section of milk containers is dictated at least in part by a desire to minimize the cost of refrigerated storage.

Premium Prices for Black MacBooks : When its newly introduced black iPods quickly sold out in 2005, Apple discovered that customers would be willing to pay premium prices for a machine in a previously unavailable color. So when it brought out its new MacBook models the next year, it posted a higher price for the black version and had no difficulty selling them.

Many respondents apparently mistook me to be saying that Apple was somehow exploiting its customers by charging the premium. But the central point of the example was exactly the contrary. Whenever a seller produces under economies of scale, it is always possible to create additional economic surplus for all parties -buyers and seller alike – by using what I call the “hurdle” method of price discrimination.

The basic idea is that the seller offers a discount only to buyers who are willing to jump some sort of hurdle, such as mailing in a rebate coupon or settling for a machine in a less desired color. These discounts increase the number of units sold, in the process reducing the average production cost per unit. The resulting cost savings often make it possible for even buyers who pay full list price to end up paying less than they would have if the product were sold to the same price to everyone.

Although some complain that it is unfair to charge some buyers more than others for essentially the same product, in The Economic Naturalist I argue that Apple’s pricing scheme actually appears to mete out a certain rough economic justice. This will be true if, as appears plausible, the buyers who are willing to pay extra for the black machines are also the ones who value the company’s innovative design features most highly. After all, somebody has to pay for Apple’s prodigious research and development costs. Why shouldn’t these costs fall more heavily on those consumers who care most about cutting edge design?

Gas Caps on the Right and Left Side of Cars: In response to her question about why fuel filler doors are sometimes on the left, sometimes on the right (causing confusion for rental car drivers), my student Patty Yu argued that if filler doors were all on the same side (say, the driver’s side), lines at the gas pumps would be much longer during peak periods. Numerous respondents suggested other possible reasons for filler door placement. One pointed out, for example, that manufacturers tend to put the filler door on the side opposite the muffler and tail pipe, perhaps to minimize the odds of gasoline spilling onto a hot pipe during an accident. Click and Clack discussed this hypothesis on Car Talk recently, noting that, although the correlation exists, it is far from perfect.

They also mentioned a variant of another respondent’s observation that European manufacturers tend to put the filler door on the passenger’s side, perhaps to minimize the danger to a driver who runs out of gas and must add fuel to his tank while stopped at the side of a highway. Their variant was that manufacturers in countries that drive on the right tend to put filler doors on the passenger’s side, thereby to keep them farther away from shearing forces in head-on collisions. And indeed, Japanese cars do tend to have their filler doors on the left (drivers in Japan, like those in the U.K. and Australia, drive on the left side of the road). Here again, though, there are many exceptions. (My Miata’s filler door is on the left, but my son’s Subaru’s is on the right.)

By far the most common objection to Ms. Yu’s explanation was that it seemed to presume a conscious attempt on the part of manufacturers to coordinate their fuel-filler door placements – something for which there is no evidence. It is this objection that I find most interesting from a methodological perspective. Suppose manufacturers had not, in fact, coordinated their efforts in an explicit attempt to minimize the queues at gas pumps. Would that make Ms. Yu’s explanation any less plausible?

If one views product design features in an evolutionary perspective, the answer is clearly no. Darwinians argue that useful features evolve from random mutations. The eye, for example, developed from a sequence of random mutations because light-sensitive organisms were better able to locate valued objects and avoid harmful ones. The whole point of the theory is to explain how eyes came to exist without anyone having consciously planned them.

A similar point applies to evolutionary explanations in economics. If all manufacturers had happened to place fuel filler doors on, say, the left side of the car, one consequence would have been long gas lines during peak hours, because drivers in most countries would pull up on the right side of the pump. And in that case, manufacturers would have had a problem worth addressing. Ms. Yu’s explanation thus helps explain why the observed distribution of filler door placements is evolutionarily stable. Evolution, as Richard Dawkins once observed, is less aptly described as “the survival of the fittest” than as “the survival of the stable.”

In Summary: In telling my students that their answers don’t have to be the final word, I’m not saying that it’s not a good thing to be right. Rather, my point is that students are more likely to engage with our subject if we demonstrate that it can stimulate them to think about the world in interesting new ways.

I’ll mention another piece of evidence that the questions they pose meet that test with flying colors. Several hours after I had discussed a couple of examples from The Economic Naturalist in a brief interview on NPR earlier this week (“ Econo-reasoning behind everyday things ,” Marketplace Morning Report) a listener copied me on this e-mail in which he posed a long list of economic naturalist questions of his own. Some examples:

1. Why do phones and calculators/computers have different number pads? To wit: Phone: 123 456 789 0 Calculator/Computer: 789 456 123 0 2. Why do hockey games have 3 periods rather than 2 halves or 4 quarters? And why are points used to determine standings, rather than straight won-loss percentages? 3. How are railroads able to use freight cars that belong to other railroads? United doesn’t fly jets belonging to Southwest — so why should Burlington Northern let Norfolk Southern use its freight cars? 4. Why is whiskey sold in fifths? 5. There’s a metric scale for measuring just about everything — weight, distance, volume, even temperature (Celsius is derived from the metric system) — except for one thing — time. How come there’s never been a metric calendar/time system, with, say, 10 metric months of 10 metric days each, each metric day composed of 10 metric hours, each metric hour composed of 100 metric minutes, and each metric minute composed of 100 metric seconds (which would be different from the seconds currently used)? (I’m surprised that countries that use the metric system have no problem with the “non-metric” way we measure time). 6. Why is Newfoundland a half hour different from other time zones? 7. Why don’t doctors dispense medicine or employ pharmacists in their offices, so we can have one-stop health care and save a trip to the drugstore? 8. Why don’t cell phones have dial tones?

We have updated our Privacy Policy to clarify how we collect and process your personal data. By continuing to use this website, you acknowledge that you have read and agree to the updated Privacy Policy .

  • How It Works
  • All Projects
  • Top-rated Pages
  • Admission essay writing
  • Book report writing
  • Coursework writing
  • Dissertation writing
  • Essay editing
  • MBA essay writing
  • Scholarship essay writing
  • Write my essay
  • Free sample essays
  • Writing blog

Best Economics Essay Examples

Economic naturalist essay.

626 words | 3 page(s)

As a corporation, Disney has a significant economic impact in three main areas in the United States: The Western entertainment industry, Orlando tourism, and Anaheim tourism. In fact, Disney World in Orlando alone impacted Florida’s gross domestic product (GDP) by 10 billion dollars just from gate admissions and theme park sales in 2014, accounting for 2.4 percent of Florida’s GDP (Sevigny, 2017). The presence of this one company creates a ripple effect throughout southern Florida, creating jobs and additionally positively adding to the economy of the area. With an oligopoly such as Disney having such a huge effect on the economies of the areas it serves, there is one question that has not been fully explored and might give even more insight into why this company is so successful: why does Mickey Mouse wear pants but no shirt while Donald Duck wears a shirt but no pants?

Clothing manufacturers understand that their products must meet several needs for their customers. Style, comfort, durability, practicality, color, fabric, and other considerations must be carefully weighed when making clothing, However, one of the most important questions to be answered when designing and making clothing is the purpose of the clothing. Is it to be used to make a fashion statement? As a uniform? For a functional purpose (such as a hospital gown or a maternity garment)? As a personal statement? In order to be successful, clothing manufactures must anticipate who their customers are and what they want so that they can supply what their customers demand. In Disney’s case, company uniforms are worn by many employees, and as a uniform consumer, Disney needs specific uniforms for specific positions. The clothing manufacturers who provide uniforms for Disney must meet Disney’s requirements for price and value, execution, and quality.

Use your promo and get a custom paper on "Economic Naturalist Essay".

The uniform for Mickey Mouse consists of shorts and suspenders. There is no need for Mickey to wear a shirt as part of his uniform for several reasons: it is hot in Southern Florida and Southern California, and there is nothing on his chest to cover. It would be fiscally irresponsible for Disney to invest uniform expenditures on shirts for Mickey when they are not needed. On the other hand, Donald has plenty of feathers to cover his nether regions and therefore needs no pants; again, Disney does not need to budget for these. He does, though, need a shirt and a hat to help Disney customers recognize him as an employee of Disney. He also needs them to protect his skin where his feathers are more sparse than they are on the bottom half of his body.

Of course, there is an opportunity cost of Mickey not wearing a shirt and Donald not wearing pants. If Mickey suddenly sported a stylish T-shirt with a Disney logo, it is likely that this shirt could be replicated and sold in Disney gift shops, generating more revenue for the company. Additionally, with the choice to have Donald roam pants-free, Disney is giving up the opportunity to develop what could be the next hot fashion trend – duck britches. However, Disney must feel that the comparative advantage of leaving Donald pantless and Mickey naked from the waist up is, in itself, a “good” with a low opportunity cost.

Adam Smith would likely agree that Disney has specialized in what it has an absolute advantage in – mice with no shirts and ducks with no pants. Disney is absolutely more productive in this than any other company in the world, and the ongoing cost-benefit analysis that Disney undergoes regarding the shirt/no shirt, pants/no pants decision must come out in favor of the current wardrobe for each employee.

  • Sevigny, J. Disney’s economic impact. The Economics of Disney. Retrieved from

Have a team of vetted experts take you to the top, with professionally written papers in every area of study.

Economic Naturalist Essay Resources for Economics! (Distance Learning!)

economic naturalist essay

  • Google Apps™

Also included in

economic naturalist essay


If you love Economics as much as I do, you'll love including this eye-opening essay for your Econ students! It's based off the book The Economic Naturalist by Robert H. Frank (and created with his permission) where he asks his students to look at the world around them, ask a compelling question, and answer it using economics. I ask my students to also include a (very) small amount of research to supplement their arguments. However, the point is for students to explore the question on their own and deepen their understanding of economics at work in the world around them.

I ask my students to read Ch. 1 of the book first. More on that in this blog post . However, there are plenty of examples of this process online and I include a real student example in this resource if you don't have the resources or time to have your students read this awesome book.

The essay is meant to be short yet demonstrate students' critical thinking and ability to think as an economist does! And the grading process is not only enjoyable when you get a variety of student questions, but it's easy with the (editable) rubric I've included.

The best part is that you can use this entire lesson for distance or digital learning! Student Instructions & Rubric come in a printable PDF version AND a Google Docs version. Students can write their essays on their own Google Doc and submit it digitally.

What to Expect:

  • Student Instructions (PDF, Editable in MS Word & Google Docs)
  • Student Sample (PDF)
  • Rubric (PDF, Editable in MS Word & Google Docs)
  • MLA Works Cited Instructions (PDF)
  • Lesson Plan (PDF)

To reduce tech issues, please be sure to have the most recent free version of Adobe Reader downloaded. More help linked here .

Materials Needed:

  • Suggested: Ch. 1 of the Economic Naturalist
  • Student access to computers for typing the essay and researching

You might enjoy:

  • Economics Shark Tank Project for the Supply and Demand Unit
  • Supply and Demand Unit Bundle including Shark Tank Project
  • The Economics Personal Finance Budgeting Project
  • Consumerism & Ethics Economics Lesson
  • Socratic Seminar Materials for the Econ Classroom

For freebies, teaching tips, and more, check out my blog and sign up for my weekly newsletter ! When you sign up, your first email will come with FREE supply and demand warm ups!

Questions & Answers

Mrs p's interactive classroom.

  • We're hiring
  • Help & FAQ
  • Privacy policy
  • Student privacy
  • Terms of service
  • Tell us what you think


  1. Economic naturalist Essay Example

    economic naturalist essay

  2. Econ 201 Economic Naturalist Assignment2.pdf

    economic naturalist essay

  3. Solved Instructions on writing the "Economic Naturalist"

    economic naturalist essay

  4. The Economic Naturalist: Why Economics Explains Almost Everything

    economic naturalist essay

  5. Econ 101- Economic Naturalist Essay Draft 1.pdf

    economic naturalist essay

  6. PPT

    economic naturalist essay


  1. Among the Pond People by Clara Dillingham Pierson

  2. Presentasi Essay 'Culture And Economic Promotion Efforts' ||Universitas Peradaban Bumiayu||

  3. Essay On "Economic Crisis" In English || Handwritings ||

  4. A Girl of the Limberlost by Gene Stratton-Porter

  5. Henry D. Thoreau by Franklin Benjamin Sanborn

  6. CSS essay on @socio-economic issues : a video mnemonic to remember key points


  1. Student essays from the Economic Naturalist writing assignment

    The costs of purchasing a fixie bike include the purchase of a bike (ranging from $600-$2000) and the modifications (a further $60-$2,000). The consumer's marginal willingness to pay plays a major role here. According to the laws of economics, a consumer cannot be duped into spending too much money on their bike of choice, as they will only ...

  2. PDF The Economic Naturalist Writing Assignment

    It is called the "economic naturalist writing assignment," an essay in which students must pose an interesting question about something they have personally observed and then use basic economic principles to answer it in no more than 500 words. The author gives examples of questions and answers. Key words: critical thinking, economic ...

  3. Economic Naturalist, Essay Example

    Most of the recent growth and income in the United States occurred among the nation's highest earners. For example, although median inflation adjusted, family income grew by less than 14% between 1979 and 2007. The corresponding growth for the top 1 percent of earners was over 200 percent.

  4. An exploration of Robert Frank's 'The Economic Naturalist' in the

    Seventy-three students took 'Economics of Everyday Life', providing me with a source of 140 essays over the semester. For each essay, students were given the option of framing their own question in line with Frank's 'Economic Naturalist' (Frank) or using a question from an interactive website (Assigned).

  5. The Economic Naturalist Writing Assignment

    It is called the "economic naturalist writing assignment," an essay in which students must pose an interesting question about something they have personally observed and then use basic economic principles to answer it in no more than 500 words. The author gives examples of questions and answers.

  6. PDF The Economic Naturalist

    The emphasis upon. Mitchell as a naturalist is necessary; it is the key to this work, though nOt to all his work, for he knew eco-nomic theory and economic history and had a reasonable experi. ence in the affairs of government. I recall that, when Mitchell andl were discussing his material and its treatment, the question of how to handle such of

  7. The Economic Naturalist Writing Assignment

    It is called the "economic naturalist writing assignment," an essay in which students must pose an interesting question about something they have personally observed and then use basic economic principles to answer it in no more than 500 words. The author gives examples of questions and answers.

  8. The Economic Naturalist Writing Assignment

    It is called the "economic naturalist writing assignment," an essay in which students must pose an interesting question about something they have personally observed and then use basic economic principles to answer it in no more than 500 words. The author gives examples of questions and answers. Date: 2006. References: Add references at CitEc.

  9. The Economic Naturalist Writing Assignment

    It is called the "economic naturalist writing assignment," an essay in which students must pose an interesting question about something they have personally observed and then use basic economic principles to answer it in no more than 500 words. The author gives examples of questions and answers.

  10. The Economic Naturalist: In Search of Explanations for Everyday Enigmas

    The point of the "economic naturalist" exercise behind the essays that became this book was to teach students how to UNDERSTAND basic principles of economics by applying those principles to real-world examples. Of course students (and the author himself) might get some of the answers wrong. ... The Economic Naturalist, on the other hand ...

  11. The Economic Naturalist Writing Assignment

    The author describes a simple pedagogical device that has proven effective in this effort. It is called the "economic naturalist writing assignment," an essay in which students must pose an interesting question about something they have personally observed and then use basic economic principles to answer it in no more than 500 words.

  12. Naturalist Assignment

    In this assignment, you are to play economic naturalist and find some economic phenomenon, pose a question about it that you think is interesting, then try to answer that question the best you can using the theories we have developed in the class. ... Essays may be submitted electronically or on paper. They are due at class time on Wednesday ...

  13. An exploration of Robert Frank's 'The Economic Naturalist' in the

    For each essay, students were given the option of framing their own question in line with Frank's 'Economic Naturalist' (Frank) or using a question from an interactive website (Assigned). The four tables in this section provide basic statistical data on: gender, residency, degree type and mean of the essay result (Table 1, Table 2, Table 3 ...

  14. Teacher, behavioral economist, economic naturalist, and author: Robert

    Ori Heffetz, associate professor of economics at Johnson, points out that Frank's textbook, Principles of Economics, co-authored with Ben S. Bernanke and first published in 2001, is full of economic naturalist examples. In fact, as a co-author of the textbook since 2016 (it's revised with new data and examples every year or two), Heffetz ...

  15. Evaluating Robert Frank's 'Economic Naturalist' Writing Assi

    Another issue is the way Economics is taught and assessed. I will evaluate an alternative pedagogical device pioneered by Robert Frank: 'The Economic Naturalist Writing Assignment', in which students are asked to pose an interesting question about some pattern of events or behaviour they have personally observed (a real life event) and to ...

  16. PDF Economic Naturalist Assignment

    Uses economic th eor yto an l z and answer the selected question. Mentions some econom ith ory bu s missing adequate detail. Au th or d es n include any economic theory into the essay. Grammar and Structure Well-constructed sentences with no errors in grammar or spelling. A few grammar or spelling mistakes that do not interfere with the essay ...

  17. Economics Essay Topics: 162 Practical Ideas & Useful Tips

    ⭐ 15 Best Economic Essay Topics. 2008 Economic Crisis. Socio-economic policy. Economic systems - Singapore. Racial pay gap. Economic globalization. History of online trading. Child labor policies. The Economic Naturalist. Foundations of economic theory. Impact of unemployment. Universal Basic Income. The role of consumerism.

  18. The economic naturalist : in search of explanations for everyday

    The Economic Naturalist employs basic economic principles to answer scores of intriguing questions from everyday life, and, along the way, introduces key ideas such as the cost benefit principle, the "no cash left on the table" principle, and the law of one price. There is no more delightful and painless way of learning these fundamental ...

  19. The Economic Naturalist

    Founded in 1920, the NBER is a private, non-profit, non-partisan organization dedicated to conducting economic research and to disseminating ... The Economic Naturalist. Share. X LinkedIn Email. ... More from NBER. In addition to working papers, the NBER disseminates affiliates' latest findings through a range of free ...

  20. More From the "Economic Naturalist" Robert Frank

    The learning stimulated by this assignment stems less, I think, from the writing of the papers themselves than from the animated discussions provoked by the questions. I was therefore extremely encouraged by the lively reader responses to the examples from The Economic Naturalist on this blog recently. I was encouraged, too, that a Google ...

  21. Economic Naturalist Essay

    Economic Naturalist Essay. As a corporation, Disney has a significant economic impact in three main areas in the United States: The Western entertainment industry, Orlando tourism, and Anaheim tourism. In fact, Disney World in Orlando alone impacted Florida's gross domestic product (GDP) by 10 billion dollars just from gate admissions and ...

  22. Economic Naturalist Essay Resources for Economics! (Distance ...

    If you love Economics as much as I do, you'll love including this eye-opening essay for your Econ students! It's based off the book The Economic Naturalist by Robert H. Frank (and created with his permission) where he asks his students to look at the world around them, ask a compelling question, and answer it using economics. I ask my students to also include a (very) small amount of research ...