Speaker 1: Hello, and welcome to another edition of Odd Thoughts. I'm
Speaker 1: Tracy Alloway, Executive editor of Bloomberg Markets, and I'm Joe
Speaker 1: wi isn't All Managing editor of Bloomberg Markets. So, Joe,
Speaker 1: did you ever watch Seinfeld? Of course I wasn't a
Speaker 1: mega fan like a lot of people I knew then.
Speaker 1: But of course by now I've probably seen all that
Speaker 1: most of the episodes, at least one who hasn't, Right, So,
Speaker 1: I think almost anytime you flick on the TV there
Speaker 1: seemed to be some sort of reruns running. It was
Speaker 1: a hugely, hugely popular show of famously about nothing. Um,
Speaker 1: but you do like economics, right? Wait? Is today's podcast
Speaker 1: is going to be about nothing? No? No, today's podcast
Speaker 1: is I guess going to be about the economics of nothing.
Speaker 1: I'm looking That sounds really uh, that sounds really good
Speaker 1: and I'm excited about that. All right, Well, what I'm
Speaker 1: referring to is there's a website that's actually called Seinfeld Economics,
Speaker 1: and we are going to speak with one of the
Speaker 1: guys behind it. He is Alan Grant. He is an
Speaker 1: associate professor of economics at Baker University and this site, Joe,
Speaker 1: if you hadn't had a chance to look yet. It's
Speaker 1: pretty great. I think it kind of cuts all these
Speaker 1: clips from Seinfeld and then uh relates them to a
Speaker 1: certain economic concept. So, for instance, they're little clips that
Speaker 1: are tied into game theory, clips about common resources, demand, substitutes,
Speaker 1: all that good economic stuff. I was browsing through the
Speaker 1: site earlier and I saw and I thought it was
Speaker 1: hilarious and brilliant, and I'm very excited about talking talking
Speaker 1: with Alan. Alright, well, let's let's not wait any longer.
Speaker 1: Let's bring him in. So Alan, I suppose the first
Speaker 1: question is why Seinfeld? And how did this actually get started?
Speaker 1: The economics of Seinfeld. Uh, this got started probably in
Speaker 1: two thousand six or two thousand seven, And at that
Speaker 1: time pop culture really wasn't a big deal in economics. UM.
Speaker 1: But in two thousand and six a guy named Dirk Mateer,
Speaker 1: who is now a professor at the University of Arizona,
Speaker 1: published a book called Economics in the Movies, and that
Speaker 1: really kind of got people thinking about what can we
Speaker 1: bring from the things that our students know into the
Speaker 1: classroom so that we can make economics more relevant to them.
Speaker 1: And so my my co workers at Eastern Illinois, and
Speaker 1: I kicked around ideas and we were using clips in
Speaker 1: the classroom, and I kind of thought to myself, what's
Speaker 1: more popular, what's a more common touch point than the
Speaker 1: TV series Seinfeld? And so I did my wife called
Speaker 1: research for the next couple of months, um digging through
Speaker 1: all of the back episodes on DVD. Seinfeld was off
Speaker 1: the air by this time, looking for compiling a database
Speaker 1: of Seinfeld clips that would be useful for economics instructors.
Speaker 1: Did you literally watch every episode on your on your jag?
Speaker 1: I did watch every single episode on my jag. I
Speaker 1: start the morning with two or three episodes when I
Speaker 1: got into the office, and I finished the day with
Speaker 1: a few more episodes. And I got lots and lots
Speaker 1: of mocking for my wife about this. So one of
Speaker 1: the things I love about the fact that you chose
Speaker 1: Seinfeld is it is the show again about nothing. It's
Speaker 1: just a sort of group of friends living in New York.
Speaker 1: Not that much happens to them, and it just goes
Speaker 1: through their daily life, which means that you end up
Speaker 1: getting to relate some really banal, ordinary events to economics.
Speaker 1: Can you maybe give us some examples? Absolutely, I'd be
Speaker 1: happy to. One of my favorite episodes for what It's
Speaker 1: Worth is an episode about Jerry and Elaine, who rekindled
Speaker 1: their romance. The episode is called The Deal, and Elaine
Speaker 1: is very into the romance and Jerry is kind of
Speaker 1: like lots of guys who don't understand exactly what it
Speaker 1: is that women want to appreciate, and he decides that
Speaker 1: instead of giving her a gift that she won't like,
Speaker 1: he decides to give her some cash instead. Cash. You
Speaker 1: got me cash, Well, that's right for you need to
Speaker 1: go out and get yourself whatever you want. No good
Speaker 1: you might uncle might come on talking about two dollars there.
Speaker 1: I don't think that's a I think this NASA. We
Speaker 1: have a thread in the literature, in the economics literature
Speaker 1: about the deadweight loss of Christmas, about how people give
Speaker 1: gifts and spend far more money on gifts than the
Speaker 1: recipients would actually actually spend for themselves. And it turns
Speaker 1: out the conclusion from that threat of the literature is
Speaker 1: cash is a really great gift. But the conclusion from
Speaker 1: Seinfeld is, oh, yeah, there are feelings involved, and people
Speaker 1: want to feel appreciated, and it's sometimes it really is
Speaker 1: the thought that counts. I like that you've immediately homed
Speaker 1: in on this episode because this whole question of gift
Speaker 1: giving and the utility of gift giving, this is always
Speaker 1: this always comes up among economists, doesn't it in terms
Speaker 1: of this sort of classic example where economists say that
Speaker 1: people do something irrational and that there's a better way
Speaker 1: to do this. Um uh, this common everyday thing. Agreed,
Speaker 1: we spend a lot of time, and over the past
Speaker 1: five or six years, we spent a lot of time
Speaker 1: debating whether gift giving is a rational thing or whether
Speaker 1: it's just better to give the gift of cash and
Speaker 1: let the recipient pick what they really want for themselves
Speaker 1: on the flip side, And I don't want to delve
Speaker 1: too much into this question because I want to talk
Speaker 1: about the Seinfeld episodes. But this is also an example
Speaker 1: of why people say that economists don't really understand human nature,
Speaker 1: and so an economist might look it a perfectly rational
Speaker 1: person and say you should appreciate the cash and get
Speaker 1: what you want. But maybe rather than that being an
Speaker 1: example of humans being irrational, it's economists thinking of humans
Speaker 1: as these perfect homo economical ASTs as opposed to what
Speaker 1: makes this human absolutely, And this is an important lesson
Speaker 1: for our students, I think too, because we spend a
Speaker 1: lot of time on the blackboard, and we developed these
Speaker 1: sort of models that assume everybody behaves rationally, and that
Speaker 1: works pretty well most of the time, but a significant
Speaker 1: amount of the time your students sort of raised their
Speaker 1: hands and go, yeah, but what if, um have you
Speaker 1: considered this? And the Seinfeld episode that I just spoke
Speaker 1: about the deal really brings in one of those what ifs,
Speaker 1: what if the thought really does count, what if it
Speaker 1: really matters? And so it helps us take these blackboard
Speaker 1: ideas and say they work a lot of the time,
Speaker 1: but not always. So is it that TV shows like
Speaker 1: Seinfeld are good at illustrating the concepts, or that they're
Speaker 1: good at illustrating the limitations of the concepts, Because a
Speaker 1: lot of the examples that you do have up on
Speaker 1: the site are about economics not working up perfectly as envisioned.
Speaker 1: I think there is a lot to be said about
Speaker 1: that that economics does not always work perfectly. It's very
Speaker 1: good at explaining the behavior of groups, but less useful
Speaker 1: in explaining the behavior of individuals. But that's an extra
Speaker 1: layer of complexity that we try, at least in the
Speaker 1: classroom for freshman sophomores, we try to filter out those complexities.
Speaker 1: And I think there's a lot to be found in
Speaker 1: Seinfeld that really does illustrate sort of classical economic theory
Speaker 1: that people do most of the time behave in a
Speaker 1: self interested fashion. Seinfeld is wonderful for that, by the way,
Speaker 1: because your four characters, George, Jerry, Elaine, and Cramer, they
Speaker 1: are very self interested individuals. Yeah, I'm looking at another
Speaker 1: one on your website, the episode The Big Salad, which
Speaker 1: I actually don't remember having seen before, but I like
Speaker 1: the concept and it talks about the sort of fallacy
Speaker 1: or of pure altruism. I guess tell us about this
Speaker 1: episode because I think this, uh, the description on your
Speaker 1: website really gets at kind of how flawed humans, and
Speaker 1: in particular the Seinfeld characters are. Yes so so. In
Speaker 1: The Big Salad, Elaine is hungry and she asks George
Speaker 1: to go out and get her a big salad from
Speaker 1: monkst the cafeteria downstairs. And so George at this time
Speaker 1: is dating somebody and his girlfriend pops down and picks
Speaker 1: up the salad, but takes credit for getting the salad
Speaker 1: when really it was George that sort of put the
Speaker 1: bill for that, and George gets really crazy about this problem.
Speaker 1: Here's your big salad. Thank you, Julie. Oh you're very welcome.
Speaker 1: Did you see what just happened? Well, that all depends
Speaker 1: happened to notice that Julie handed the big salad to
Speaker 1: a lane. Yeah, so, well she didn't buy the big salad.
Speaker 1: I bought the big seal, Yes it is. She just
Speaker 1: took credit from my selling. That's not right, No, it don't.
Speaker 1: I mean I'm the one that bought it. Yes, you did.
Speaker 1: Don't you think she should have said something? She could not.
Speaker 1: So he's happy to get the salad free Lane, but
Speaker 1: he wants some of the credit for it as well.
Speaker 1: He gets some satisfaction out of knowing that not only
Speaker 1: did I give the gift, but I'm being appreciated for it. So,
Speaker 1: you know, perfectly rational context, you should be able to
Speaker 1: give a gift, you should feel good about giving the gift,
Speaker 1: but but to be truthful about it. A lot of
Speaker 1: the times, and we see this at the university all
Speaker 1: the time, people want their name attached to their gift.
Speaker 1: They get some satisfaction from getting credit for those things, right,
Speaker 1: ego driven people. You see it in the workplace all
Speaker 1: the time. I think that things that seem like they
Speaker 1: should be arbitrary end up mattering quite a bit too
Speaker 1: people they do. UM. I mentioned that we have this
Speaker 1: at the university. This is a trend in university giving
Speaker 1: across the country is that we have donors that want
Speaker 1: their names attached to new buildings and donors that want
Speaker 1: their names attached to new facilities. And it's gotten down
Speaker 1: to the level that if you visit the right campuses,
Speaker 1: you can find donors who have donated urinals and toilets
Speaker 1: with a little plaque above every time you go to
Speaker 1: the party. That's amazing. I would do that. I think
Speaker 1: that'd be great. What are some episodes or particular episode
Speaker 1: that teaches about game theory. My favorite episode about game
Speaker 1: theory as an episode called the pees Dispenser. And I
Speaker 1: don't know if you remember the Peest Dispenser episode or not, um,
Speaker 1: but in that episode, George is dating a concert pianist
Speaker 1: and he's worried because George is horribly neurotic and insecure,
Speaker 1: and Noel, the concert pianist is very confident, poised, self assured,
Speaker 1: and George is just certain that he's going to get dumped,
Speaker 1: and Kramer convinces him to do something that's very strategic.
Speaker 1: He convinces George to stage a preemptive breakup. But he's
Speaker 1: going to break up with Noel, and if she accepts that,
Speaker 1: then the relationship was probably going to go down the
Speaker 1: tubes anyway. But it also has the possibility of evoking
Speaker 1: a response where Noel could say, oh my gosh, you
Speaker 1: want to break up with me, I better step up
Speaker 1: my game and take better care of you. And so
Speaker 1: in game theory, we have something called a dominant strategy.
Speaker 1: It's always the best response to whatever your opponent might
Speaker 1: be doing. I've got nothing to lose. Will you the
Speaker 1: break up, which she would do anyway, but at least
Speaker 1: I go out with some dignity or I completely turned
Speaker 1: the tables. This is absolutely brilliant, and Kramer convinces George
Speaker 1: that this preemptive breakup is a dominant strategy that no
Speaker 1: matter where the relationship has headed, whether it's going fine
Speaker 1: or going poorly, George needs to break up with Noel.
Speaker 1: He can't make himself any worse off. He can make
Speaker 1: himself better off. You're breaking up with me, I really
Speaker 1: am ever expected this? Did you? I thought Everything's fine.
Speaker 1: Let learn. So I don't want to give the impression
Speaker 1: that you're only about Seinfeld episodes and economics, because Joe
Speaker 1: and I have also heard that you're into other TV
Speaker 1: shows as illustrations of economic concepts. Tell us which ones
Speaker 1: you think lend themselves well to the serena. So I
Speaker 1: use lots of movie clips from old movies. I use
Speaker 1: lots of television shows. Um, there are some outstanding resources
Speaker 1: available for economists that want to bring this into the classroom.
Speaker 1: I use a few clips from the Wire, which is
Speaker 1: about the drug market in Baltimore. Um. Always good to right,
Speaker 1: be exploring at a market that is largely unregulated because
Speaker 1: it's an illicit market. Sorry, I seem to remember in
Speaker 1: one of the first season's a main character actually takes
Speaker 1: an economics course, right, a drug dealer. Yes, this is
Speaker 1: a wonderful clip. Um, Stringer Bell drug kingpin in training,
Speaker 1: is going back to college to get a business degree
Speaker 1: so that he can run his drug empire like a
Speaker 1: business instead of like a right sort of streethood and uh,
Speaker 1: and they have a wonderful clip in there about the
Speaker 1: elasticity of demand, about consumers price sensitivity um T changes
Speaker 1: in price, and the things that may consumers more or
Speaker 1: less price sensitive. Look, you're not gonna go in that corner.
Speaker 1: Bullsto up in here, you hear me. You know what
Speaker 1: we got here? We got an elastic product. You know
Speaker 1: what that means. That means when people can go elsewhere
Speaker 1: and get their print in and copy and done, they're
Speaker 1: going to do it. You acting like we got an
Speaker 1: an elastic products and we don't know. I won't because
Speaker 1: to the truth the business, not no front, not no bulls.
Speaker 1: It's a terrific clip. It's one that I continue to
Speaker 1: show semester after semester, and students continue to respond well
Speaker 1: to it. Are there any other particular I mean that
Speaker 1: that show is filled with lessons I imagine about the
Speaker 1: economics and how economics applies to unregulated criminal um industries.
Speaker 1: But are there any other particular episodes of that show
Speaker 1: that really strike you as stating something profound um that
Speaker 1: about economics. So one of the things that is really
Speaker 1: profound about that episode is the idea, and this is
Speaker 1: a first day lesson for most students of economics. The
Speaker 1: idea of opportunity cost is that when you have a
Speaker 1: group of individuals, or when you have an individual who
Speaker 1: has little outside opportunity, UM, they will gravitate towards their
Speaker 1: best opportunity. Right. And so, as it turns out, I
Speaker 1: have this choice of dealing drugs, and the only thing
Speaker 1: that I really lose when I choose to join the
Speaker 1: drug gang is the opportunity to work at McDonald's because
Speaker 1: of a lack of education, a lack of job training.
Speaker 1: In fact, season four of The Wire is devoted to
Speaker 1: sort of the deplorable condition of Baltimore inner city schools.
Speaker 1: That helps explain, I think, in large part, why exactly
Speaker 1: these individuals choose to join the drug gang and deal drugs. So, Alan,
Speaker 1: you've obviously been doing this for a long time, and
Speaker 1: over the past dec eight or so, we have seen
Speaker 1: the rise of economics being entwined with pop culture, and
Speaker 1: we've seen the freakonomics phenomenon and lots of imitators based
Speaker 1: off of that. How useful is it? How useful have
Speaker 1: you found it in practice to show economics through the
Speaker 1: prism of pop culture and specifically television and movies. I
Speaker 1: think it's been very useful. Um. Economics has been a
Speaker 1: blackboard science at the undergraduate level with lots of graphs,
Speaker 1: and it turns out that lots of students aren't very
Speaker 1: good in graphs. Um. There are lots of really restrictive models,
Speaker 1: and they're abstract, and the typical student really doesn't glom
Speaker 1: onto the subtle points as well as we would like
Speaker 1: them too. And so if you want to keep your
Speaker 1: students sort of passionate about the subject, you have to
Speaker 1: make it useful to them. And starting with Dirk Mateers
Speaker 1: book on Economics in the Movies in two thousand and six,
Speaker 1: we've had a group of really an economists devote themselves
Speaker 1: to taking blackboard economics and making it useful to students. UH.
Speaker 1: If I can give an anecdotal example of that, I
Speaker 1: talked earlier about the clip from the Wire, Uh, and
Speaker 1: you had actually mentioned the clip where Stringer Bell goes
Speaker 1: back to college to learn how to run a business.
Speaker 1: So I had a lower tail student. She was not
Speaker 1: a very good student. UM. She ended up dropping the
Speaker 1: class about halfway through and moving to Morocco. She was
Speaker 1: a little bit flaky and Wright wanted to travel the
Speaker 1: world instead of going to college. But when she came back,
Speaker 1: she asked if she could get into my overlea full class,
Speaker 1: and she said, you know what, it really made an
Speaker 1: impression on me when you showed the clip from the
Speaker 1: wire in class about the elasticity of demand. And here's
Speaker 1: a student that is a d student and she remembers
Speaker 1: not only the clip, but she remembers the concept the
Speaker 1: clip was supposed to illustrate. And so I think the
Speaker 1: idea of pop culture is that if you choose your
Speaker 1: resources really carefully, you can make an impact on students
Speaker 1: who might otherwise just sit in the background and be lost.
Speaker 1: That is cool that that actually works and resonates. I
Speaker 1: was gonna ask, to some extent, can you find an
Speaker 1: economics lesson in any television show period, any episode of
Speaker 1: any television show, just because all dramas essentially about human
Speaker 1: decision making, and all human decision making can be boiled
Speaker 1: down to economics. I think that you probably can find
Speaker 1: economic content and almost in a show that you want
Speaker 1: to watch. But I think the economic content that comes
Speaker 1: out and reaches to your undergraduates and just sort of
Speaker 1: slaps them in the face and says, oh, this is
Speaker 1: a very clear illustration of what we've been doing. That's
Speaker 1: a little bit harder to search for um. So Seinfeld
Speaker 1: was on for how many seasons? Nine seasons? And out
Speaker 1: of nine season and several hundred episodes, I think we
Speaker 1: have about one hundred short to the point um concise
Speaker 1: clips that fairly clearly illustrate general economic principles. So you know,
Speaker 1: about one out of every two episodes of Seinfeld. Other
Speaker 1: shows maybe not so much. All right, well, I personally
Speaker 1: can't wait for the economics of Game of Thrones. That'll
Speaker 1: be that'll be a good one. That'll be fantastic. It's
Speaker 1: a great show and a great series of books. Alan Grant,
Speaker 1: thank you so much for joining us today. It's been
Speaker 1: my pleasure. Thank you for the chance to to talk today, Tracy.
Speaker 1: I really loved that episode. I want to go back
Speaker 1: and watch a bunch of old seinfelds now through the
Speaker 1: prism of economics. Will you be taking like economics notes
Speaker 1: while you do it? No, I probably we won't. But
Speaker 1: I really I do think that Seinfeld probably is one
Speaker 1: of the perfect shows to teach these lessons. As he
Speaker 1: pointed out, you could probably find economics lessons in almost
Speaker 1: any item of pop culture. But because of the varied
Speaker 1: situations that the four friends find themselves in, and because
Speaker 1: of their selfish personalities and the negative ramifications that that
Speaker 1: often creates. Um, it does seem like kind of the
Speaker 1: perfect show to teach, as he put it, chuckboard economics. Right,
Speaker 1: But it's not just the characters. It's the fact that
Speaker 1: there isn't this sort of dramatic, overarching plot. Right, It's
Speaker 1: just these four people in New York and they're doing
Speaker 1: day to day, everyday things, and through that we get
Speaker 1: to learn about some pretty important economics concepts. I really
Speaker 1: really like that, right, Going to pick up a salad,
Speaker 1: getting people gifts, going to whatever. It is a series
Speaker 1: of events and decisions that are all um, yeah, all
Speaker 1: can be tied to economics. A lot of fun. People
Speaker 1: should visit the website YadA YadA YadA econ dot com
Speaker 1: and follow Ellen Grant on Twitter at Baker Echo. All Right,
Speaker 1: thanks everyone for listening. I'm Tracy Alloway. You can follow
Speaker 1: me on Twitter at Tracy Alloway. And I'm Joseph Why
Speaker 1: Isn't Thought? You can follow me on Twitter at the Stalwart.
Speaker 1: Thanks for listening.