Planet Money - Seinfeld-onomics

Episode Date: March 3, 2023

The 90s sit-com Seinfeld is often called "a show about nothing." Lauded for its observational humor, this quick-witted show focussed on four hapless New Yorkers navigating work, relationships...yada yada yada.Jerry, George, Elaine & Kramer set themselves apart from the characters who populated shows like Friends or Cheers, by being the exact opposite of the characters audiences would normally root for. These four New Yorkers were overly analytical, calculating, and above all, selfish.In other words, they had all the makings of a fascinating case study in economics.Economics professors Linda Ghent and Alan Grant went so far as to write an entire book on the subject, Seinfeld & Economics. The book points readers to economic principles that appear throughout the show, ideas like economic utility, game theory, and the best way to allocate resources in the face of scarcity.On today's show, we make the case that Seinfeld is, at its heart, not a show about nothing, but a show about economics. And that understanding Seinfeld can change the way you understand economics itself.This episode was produced by Alyssa Jeong Perry with help from Emma Peaslee. It was edited by Keith Romer. It was mastered by Robert Rodriguez and fact-checked by Sierra Juarez. Jess Jiang is our acting executive producer.Help support Planet Money and get bonus episodes by subscribing to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoney.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

This is Planet Money from NPR. Just a heads up for parents, part of this episode talks, quite mathematically, about contraception. There are two sides to Professor Linda Ghent. There is the side that worries about social norms, and then there is the side that is an economist. I always joke with my students about wanting to pay the person who sits in front of me on an airplane to not lean back their seat if I want to work on my computer. Linda teaches economics at Eastern Illinois University. But I'm always worried to make that offer because they might look at me like I'm absolutely crazy. And I've never done it because I'm just always worried about what reaction I would get.

Even though as an economist, I know it's the right way to deal with that situation. And do you know what show that scenario would be right at home on? I can think of one. Seinfeld. Absolutely Seinfeld. Seinfeld! There is a case to be made that the very popular 90s sitcom was actually

full of economics. Yeah, yeah. Hear us out here. So, Seinfeld was famously called a show about nothing. Because it's about comedian Jerry Seinfeld and his three friends, George, Elaine, and Kramer, just living in New York City, dealing with the dilemmas

of everyday life. Like, what gift to give your friend? Cash? What do you think? You got me cash? Well, that's right. You can go out and get yourself whatever you want. No good?

Are you my uncle? Giving cash as a gift is something that we at Planet Money talk about a lot, as it is a very efficient gift. However, we also know that society does not often give cash as a gift, largely because of social norms. Yeah, Seinfeld is kind of a world populated by characters who are A, constantly weighing the costs and benefits of every mundane decision, and B, not really afraid to break those social norms, to make the optimal and sometimes selfish decision. Very economics-y.

And Professor Linda Ghent and her colleague, Alan Grant, have in fact written a whole book on Seinfeld and economics titled Seinfeld and Economics. And Linda says perhaps no character represents this connection more than George Costanza. He is probably the most diligent user of cost-benefit analysis I've ever seen. I go to drop a buck in the tip jar, and just as I'm about to drop it in, he looks the other way. So then as I'm leaving, he gives me a look like, thanks for nothing. You got no credit. Exactly. It's like I'm leaving, he gives me a look like, thanks for nothing. You got no credit. Exactly. It's like I'm throwing a buck away. And I mean, he will not do anything if it doesn't benefit him. And so, you know, in some ways he really is the true economic man. Right. The

homo economicus, the mythological economic rational actor. Yes. And when you start watching Seinfeld as a sort of economics wonderland populated by these homo economici, the show about nothing does become a show about something. Economics. Yeah, it becomes about economics. Hello and welcome to Planet Money. I'm Kenny Malone. And I'm Sam Yellowhorse-Kessler. Today on the show, Economicus for the rest of us, the new way to watch Seinfeld.

Would you at this point describe yourself as a Seinfeld scholar? I'm a scholar, comma, Seinfeld enthusiast. How's that? Aha. Again, Linda Ghent, professor, comma, Seinfeld enthusiast. How's that? Aha. Again, Linda Gent, professor, comma, Seinfeld and economics author. It's funny because I like the show so much more now than I did in the 90s, which is interesting, but I think it's the economics in it that makes me like it even more. Today, with Linda's help, we are going to walk through three episodes of Seinfeld that demonstrate how the show is not just about economics, but perhaps reveals the

very essence of economics. Now, one way to think about economics is that it just kind of comes down to studying how people make decisions. Certainly a good chunk of economics is about people making decisions, and so too is our first Seinfeld and economics moment. So, okay, here we go. A little bit of setup for this first episode. So the character, George Costanza, we see him in a job interview, and we hear the person interviewing George talking. We have a small but prestigious group of clients. Well, a lot of people consider me small and prestigious. So George is sitting in the interview, and he thinks it's going really well. And then, right as it sounds like this employer is about to make a hiring decision.

I want you to have this job. Of course. Stu Zimmer's online too. Great, thanks. He's interrupted. And he never finishes that sentence. And then they send George on his way. So all George has heard is, I want you to have this job, of course, and that's it.

He doesn't actually know if he has the job or not. And this is the moment, Linda says, the episode gets very econ-y, because George, along with his friends Elaine and Jerry, now have to figure out, how can George make the best decision despite not knowing how this other person, the hiring guy, is going to act?

Why don't you just go ahead and call him? Because he made a big deal about how I understand everything immediately. That's what impressed him. So if you call to ask if you have the job, you might lose the job. And if I don't call... You might have the job, but you'll never know it. And so he's trying to do this cost-benefit analysis in his head about, well, what if I just show up and just pretend like he hired me?

What if I don't show up and they're expecting me? Then that's going to look bad. Getting to hear George and the old Seinfeld gang talk through all the different ways this could go, I mean, that is sort of the joke here. But in fact, it is also the most economics-y thing here, too. Because whether they know it or not, they seem to be using a decision-making device straight from the pages of economics textbooks, a payoff matrix. Now, a payoff matrix is a tool from the world of game theory that kind of forces you to work through all the different scenarios to see how you can optimize your outcome. So for example, let's say George assumes the worst and does not show up to work. Well, that is fine if the hiring manager had not hired George.

Like that outcome is a small win for George. He doesn't go to work. He saves himself some time and some embarrassment by not showing up in that case. On the other hand, if George does not show up for work, but it turns out he actually did have the job, that is a huge loss for George because he could have had the job and he missed out. Working through the various scenarios this way allows anybody using a payoff matrix, but, you know, George in this case, to figure out what is optimal, what is the winning strategy.

And George believes he has found one. I show up. I pretend I have the job. The guy's on vacation. If I have the job, it's fine. If I don't have the job, by the time he comes back, I'm ensconced. Hmm, that's not bad. What's the worst thing that can happen? So is there any other times in which this sort of calculation,

this kind of payoff matrix is used? Well, we see it a lot in discussions of political policies across countries. So like the highest stakes things possible? Is that what you're saying? Absolutely. You can think about the Cold War, the buildup of all of these weapons between the U.S. and the Soviet Union happening because of a situation that you can describe easily in a payoff matrix. The payoff matrix. Useful for people trying to make rational decisions when they don't know what exactly another person is thinking, whether that be Georgian the hiring guy or Kennedy and Khrushchev.

the hiring guy, or Kennedy and Khrushchev. Okay, so that last bit was about decision-making. This next Seinfeld idea is more about the way economics helps us think about the problem of scarce resources. And for this idea, we're going to leave Linda for a second, because she is not the only econ professor who has noticed the econ stuff in the show. Would you like to read the opening line, I guess the abstract? Abstract, obviously, says this is a paper about nothing. Avinash Dixit is a retired professor of economics at Princeton.

He's written very serious books and papers about investment and uncertainty. But then, also, in 2011, he published the paper we're going to be talking about today. A paper about this one particular episode of Seinfeld. The sponge. Sponge. Okay. The Today sponge. Okay. So the conceit of this episode is that the character Elaine uses a very specific form of contraceptive, the sponge. The sponge is a single-use item, and that is a problem because it's going off the market, leaving her with a finite supply, and so she starts to worry about whether potential partners are worthy of these few remaining sponges. I just couldn't decide if he

was really sponge-worthy. Sponge-worthy? Yeah, Jerry, I have to conserve these sponges. But you like this guy. Isn't that what the sponges are for? Yes, yes. Before they went off the market. But I mean, now I've got to reevaluate my whole screening process. I can't afford to waste any of them. Now, Avinash saw this episode and thought to himself,

you know what? I bet I could write a formula for sponge worthiness. A formula that would tell Elaine if a potential partner is worthy of one of her scarce sponges. Here's a taste of that formula. So vm minus one is the total value of having m minus one sponges used in the best possible way. It is a beautiful, but also quite elaborate formula. Discounted by beta, that's less than one. That's like one over one. Okay, just to walk through this.

There are three basic components in Avinash's formula. There's the number of sponges Elaine has remaining, which Avinash calls m. Then there's the particular partner that Elaine is considering at the moment. And so Elaine would need to put a number on how much she expects to value, how might Avinash put it, the value of moving from M to M minus one sponges with that particular partner. Definitely handled. But then you also have to factor in beta, which Avinash describes as Elaine's impatience factor.

It's a number that quantifies how much Elaine values having something today versus waiting until tomorrow. So take this scene with Elaine and a guy she's dating named Joel. So you think you're sponge worthy? Yes, I think I'm sponge worthy. I think I'm very sponge worthy. Run down your case for me again. Well, we've gone out several times. We obviously have a good rapport. Now, what Avinash's formula does is it takes into account the idea that as sponges become more scarce, Elaine will have higher and higher standards for who counts as

sponge worthy. Yeah. So if we set Elaine's impatience at, let's say, moderate, and we set her sponge supply to 100 sponges, then Avinash's formula says, eh, as long as Joel is in the top 38% of people Elaine might meet, then she's not going to regret using a sponge on Joel. But if she only has 10 sponges left, Joel had better be in the top 13%. And if she only has one sponge left? Close to the top. Quite close to perfect. Basically in the top 5% of the distribution of qualities. Avinash says this formula of his, it can be used for more than just sponge worthiness, because these kinds of situations happen all the time.

Situations where changes in scarcity change what we expect or want. Yeah, like deciding who is worthy of one of your fanciest bottles of wine. And you have people over to dinner from time to time. When should you open it? To when your boss is coming or when the president of the United States is coming. It's exactly the same kind of mathematical problem. We often think of the economic value of something as being fixed. But Elaine's calculus in the Spongebob episode reminds us that value changes based on everything from patience to scarcity.

What would you tell Elaine now that you've done all this math? Like what conversation would you have with her? Simplest, I'll say, hire me as a consultant and I'll do the calculation for you. After the break, our final Seinfeld episode and lesson, we go in search of a rare economic phenomenon, the bad. Okay, we've talked about econ as decision-making and as the study of scarcity. Our last Seinfeld stop is about utility. Utility is a useful econ shorthand for like, you know, what you get from something. How useful is a thing or profitable or satisfying? And typically we talk about this stuff in terms of gaining utility. We can ask questions like, how much does a good or service make our lives employee notices that there is a half a muffin sitting in the free pile,

as if someone just took the bottom half of the muffin and left it behind. I can't believe somebody pulled the top off this muffin. That was me. I'm sorry. I don't like the stumps. So you just eat the tops? Oh, yeah.

It's the best part. To walk us through this example, we have brought back Professor Linda Ghent. They realized that everybody, when they're eating a muffin, really enjoys the top and the stems. That little part that's down under the wrapper just is not nearly as enjoyable as the fluffy goodness at the top. So Elaine comes up with an idea to have a bakery, make muffins, cut the bottoms off, and just sell the muffin tops. And then they discovered a problem because they didn't know what to do with the muffin stems. They ended up with all these muffin stems. And even when they tried to give them away, they were talking about taking them to a homeless shelter.

They were turned down. We've never gotten so many complaints. Every two minutes, where's the top of this muffin? Who ate the rest of this? We were just trying to help. Why don't you just drop off some chicken skins and lobster shells? Nobody seems to want them. They don't seem to have a value. Or more specifically, the muffin stumps seem to have a negative value.

The utility of the muffin stump is less than zero. This means that in the world of Seinfeld, at least, they seem to be the opposite of an economic good. They are what's known as an economic bad. And a bad is something that you would actually pay people to take rather than you would pay to get it from them. And once you know how to look for economic bads, you'll start to notice them everywhere. Yeah, just look at boneless versus bone-in chicken.

Like a same chicken costs more when they take something away, the bones. Bones appear to have negative value. Bones are a bad. Yeah. Or to use another example, broccoli. If you want just the tasty broccoli tops, the florets, and not the stumps, you can buy just those broccoli tops, but they'll cost you a little bit more. Yeah.

And when you start to look at the world this way, with a lens of value and utility, it becomes helpful at a place like the grocery store. You can stop and say, okay, what is my utility function here? Because the grocery store is kind of offering me a couple of bucks or whatever, if I'm willing to spend the time and energy to deal with those broccoli stumps or those chicken bones. Or you can decide, eh, I'll pay more. Let someone else do that. I honestly have never deboned a chicken breast in my life, so I would have no idea how to do that. So I'd gladly pay someone else to do it for me, right?

Well, you have been, it turns out. You have been. Oh, all the time. Just like people would, in theory, pay Elaine to remove the bad part of the muffin. You gotta make the whole muffin. Then you pop the top, toss the stuff. Listen, you know, muffin tops, interrupted job offers, sponge worthiness. Like, the whole thing about Seinfeld being a show about nothing, really Seinfeld was a show about nothing special. It was a TV show that depicted unusually mundane parts of life and then people making decisions about those mundane things. But that, Linda says, is basically what the economy is. Probably my favorite definition of economics came from 19th century economist Alfred Marshall, who says that economics is the

study of mankind in the business of ordinary life. And I love that because I like to teach economics as a class about or a discipline about making decisions and making choices. We can't have everything we want. We have unlimited wants, but we can't satisfy all those wants. And so how do we go about making ourselves as best off as we can in those situations? In other words, what if the economy is just a million little Seinfeld episodes happening all at once? And once you look at it that way, you start to see that we've all got a little bit of that relentlessly self-interested homo economicus energy that is George Costanza. Why can't there be some things just for me? Is that so selfish?

Actually, that's the definition of selfish. This episode was produced by Alyssa Jong-Perry with an assist from Emma Peasley and edited by Keith Romer. It was mastered by Robert Rodriguez. This episode was fact-checked by Sierra Juarez. Jess Jang is our acting executive producer. I'm Kenny Malone. I'm Samuel Ahors-Kessler.

This is NPR. Thanks for listening. And a special thanks to our funder, the Alfred P. Sloan Foundation, for helping to support this podcast.