I often find that many people conflate economics and financial transactions. However, in my opinion the most interesting parts of economics are not explicitly financial. Analyzing the bizarre side of human behavior using the logic of economics is one of Tyler Cowen’s fortes and it’s the subject matter of his book Discover Your Inner Economist. I think it is chicken soup for the economist’s soul.
In the book, Cowen tackles the following questions (and more). How can you motivate your kids to do the dishes (hint: don’t try to pay them)? How can you find the best ethnic restaurants (hint: they’re not necessarily the most expensive ones)? How can you be a cultural billionaire? The answer to these questions, in short, is to become in tune with your inner economist! Be forewarned though, the logic of economic reasoning can often lead to strange conclusions.
Aside from the Marginal Revolution blog, Cowen also maintains a blog called Tyler Cowen’s Ethnic Dining Guide. One chapter I found particularly interesting in the book was about food. So what are some practical foodie tips?
Let’s start with restaurant selection. The key lesson here is that relative rents matter. According to Cowen, the best place to look for restaurants is in low-rent neighborhoods that are near high-rent neighborhoods. Cowen’s inner economist informs us that these types of restaurants still try to cater to the nearby foodies. The result — good eats on the cheap. Restaurants in high-traffic areas (and thus high rent areas) don’t have as strong of an incentive to serve amazing food because they will likely attract enough walk-ins to make up for serving mediocre food. Conversely, restaurants slightly off the beaten path in low-rent areas have a strong incentive to serve amazing food in order to attract repeat customers from the high-rent foodie neighborhoods, which keep their businesses afloat.
How about entree selection? Cowen writes, “In a fancy restaurant, order the item you are least likely to think you want.” The reason, in short, is because fancy restaurants don’t put bad things on the menu. Think about it this way, entrees that are familiar (think roast chicken) will appeal to the masses, thus retaining their place on the menu by simply attracting many orders from first-time visitors and those who aren’t adventurous eaters. The stuff that is less popular must be especially good otherwise it wouldn’t be on the menu. Also, roast chicken is fairly easy to make at home, so Cowen suggests that we order dishes in which the restaurant has a comparative advantage. For instance, do you know how to make the Cantonese dish of “Frog with Special Sauce Hot Pot”? I sure don’t and this item is on the menu of my favorite Cantonese restaurant in Denver, which reminds me that I should order it on my next visit there.
Cowen doesn’t mention it, but this logic can backfire on you. For one, he assumes you are an adventurous foodie. Secondly, one also has to assume that other restaurant patrons aren’t rational. If all people chose their entrees based on this line of thinking, then it wouldn’t work. Since I like culinary adventures and since I don’t think most people behave this way, I cannot help but conclude that this way of thinking works.
So is it better to beware your inner economist or embrace him? Well, it depends. My inner economist tends to have a knack for getting me into trouble. Sometimes he just can’t resist urging me to say something I later regret, even if it’s true. I realize that not everyone wants to get in touch with their inner economist and they may be appalled by some of the things their inner economist tells them. For example, my inner economist tells me that voting is irrational. There is an explicit cost to me with virtually no benefit (an extremely low likelihood of affecting the outcome.)
In the end, Cowen reminds us that things like happiness and love cannot be purchased, but that doesn’t mean they’re immune from economic logic. If we know what we are doing (hint: we don’t), we can often incentivize the outcomes we want. One definition of wisdom, then, is knowing when to tell your inner economist to shut up.