The Economic Naturalist | Robert Frank | Talks at Google

The speaker introduces Robert Frank, an accomplished economist and author, who will be discussing his book 'The Economic Naturalist.' Frank humorously notes the mixed perceptions people have of economists and emphasizes the ineffectiveness of traditional economic teaching methods, particularly highlighting the oversaturation of complex graphics in introductory courses which fail to impart foundational concepts.

Frank argues that introductory economics courses overwhelm students with content, leading to poor knowledge retention. He illustrates this with a study on 'opportunity cost,' revealing a significant number of students and even PhD economists fail to understand it. Frank posits that focusing on fewer economic concepts in depth would enhance learning.

Opportunities for better learning, as Frank showcases, lie in directly engaging students with practical examples. He recounts his own experience learning Nepali through repetitive, practical drills. This immersive method of learning contrasts sharply with the ineffective, traditional approach of overwhelming students with theory rather than practical engagement.

The speaker highlights the simplicity and effectiveness of learning through examples and narratives, suggesting that students retain ideas better this way. Frank uses the theory of opportunity cost to explain behaviors and phenomena in various contexts—from the attitudes of New Yorkers to externalities affecting wildlife—to emphasize the power of practical examples in learning.

Frank introduces the 'cost-benefit principle,' simplifying the decision-making process by weighing actions' benefits against their costs. He uses everyday analogies—such as choosing between buying an alarm clock or a laptop at different prices and locations—to drive home the point that economic decisions should be consistent regardless of context.

Frank employs the concept of 'hurdle pricing,' using practical examples from everyday life to explain how businesses use psychological pricing strategies to target different consumer groups. He explains that people are often incentivized to overcome trivial obstacles in order to secure discounts, illustrating concepts like price discrimination through tangible instances.

The narrative shifts to biological examples to elucidate economic principles. Frank discusses how male physical traits in certain species result from evolutionary arms races, leading to inefficiencies, analogous to economic markets. He links these examples back to economic principles, suggesting that market forces sometimes push behaviors and strategies beyond rational limits.

Frank critiques the rational choice model in economics through real-world analogies, arguing against unregulated individual choices that lead to suboptimal group outcomes. He illustrates this with examples, such as helmet regulations in hockey, to show that individual pursuits can conflict with collective well-being, demanding sensible regulations.

Frank reflects on institutional regulations and their conflict with individual liberties, using sports analogies to illustrate how common interests govern individual behavior for greater societal benefit. He argues that regulations often aim to curb excessive competitive behaviors, improving outcomes for the group over individual advantage.