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Investing in Human Capital, One Person at a Time

Last week, we got an email from Freakonomics reader Paul Gu, a Thiel 20under20 fellow and founding team member of Upstart, a startup from former Googler Dave Girouard aimed at matching promising young students with financial backers. Here’s how it works:

Upstart aims to help you with the most important part of pursuing your dreams — taking the first step. It may be as simple as applying for an internship, relocating to another city, or spending a few months in a garage working on your idea. Your Upstart backers will provide you with a modest amount of capital, combined with the support and guidance you’ll need. In return, you share a small portion of your income for 10 years. By matching you with the right backers and by providing just a slice of economic freedom – where repayment is based on your future success — we help you get started on the right path.

In addition to being an Upstart employee, Gu is also a participant.  We were curious about why someone with such high potential future earnings was willing to give away a percentage of his hypothetical millions … here’s how he explained his decision:

For me, becoming an upstart is good economics. I’m stepping away from the hedge fund path to build a startup. That’s a much higher risk, higher volatility path, and most of the income potential is concentrated years into the future. Taking an Upstart investment makes it possible for me to access the educational and long-term benefits of working on a startup I’m passionate about without the loss of financial security or flexibility to make efficient consumption choices today (e.g. choosing housing with a shorter commute). Since Upstart determines each upstart’s funding rate offer based on his or her academic and career achievements, it makes economic sense for individuals all along the talent distribution.

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The Busara Center

Behavioral economics has a new testing ground: the Busara Center for Behavioral Economics in Nairobi, Kenya. The lab, which will be open to researchers and students from around the world, is hosted by Innovations for Poverty Action (IPA).  Here’s its website blurb:

Busara is a state-of-the-art facility for experimental studies in behavioral economics and other social sciences, located in Nairobi, Kenya. The core of Busara is a pool of participants from the Nairobi slums, combined with a cluster of 20 networked computers with which researchers can investigate economic behavior and preferences. A central feature of the computer setup is that all computers have touchscreen monitors; together with specially developed paradigms, this allows for the participation of not only computer-illiterate, but entirely illiterate populations.

Johannes Haushofer, the Scientific Director of the Center, gave us a little more information: Read More »



Circling the Drain: Can the Euro Be Saved, Or Is It Doomed? A Freakonomics Quorum

On Jan. 1, 1999, the euro was launched in electronic form. A few years later, amidst much fanfare, 12 European countries began replacing beloved national currencies with the euro, and the currency rapidly became the tender of choice across Europe. Wim Duisenberg, the then-president of the European Central Bank applauded the new currency: “By using the euro notes and coins we give a clear signal of the confidence and hope we have in tomorrow’s Europe.”

Almost ten years later, things look a little different. The financial crisis that has brought much of the developed world to its knees looks poised to bring down Europe’s single currency as well. The cover of this week‘s Economist reads “Is this really the end?” Inside, the magazine offers the following observation:

The chances of the euro zone being smashed apart have risen alarmingly, thanks to financial panic, a rapidly weakening economic outlook and pigheaded brinkmanship. The odds of a safe landing are dwindling fast.

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International Aid and Mobile Cash Transfers

We’ve blogged before about the many applications of mobile phone technology in developing countries, especially when it comes to mobile banking. In much of the developing world, particularly in Africa, mobile phones are thriving in remote villages, while access to electricity, clean water, schools and government services is weak at best; yet cellular service is strong.

A new research paper by Jenny C. Aker, Rachid Boumnijel, Amanda McClelland and Niall Tierney analyzes the effectiveness of yet another mobile application gaining strength in the developing world: cash transfer programs. After a drought in Niger in 2009 and 2010, Concern Worldwide, an international NGO, provided “unconditional cash transfers to approximately 10,000 households during the ‘hungry season,’ the five-month period before the harvest and typically the time of increased malnutrition.”

Instead of distributing cash in the usual way, the NGO conducted a randomized experiment: one-third of targeted villages received a monthly cash transfer through a mobile system called zap; another third received manual cash transfers, and the remaining third received manual cash transfers plus a mobile phone. Read More »



The Mystery of the Boston Marathon

The Boston Marathon filled up in just eight hours — that’s 65 times faster than last year. Self-fulfilling prophecy or athletes outrunning the qualifying times? Read More »



Churches Versus Synagogues: Voluntary Donations Versus Dues

Christian churches and Jewish synagogues rely on very different financing models, yet both “appear to raise about the same amount per member,” according to a survey conducted by the Jewish newspaper The Forward (article by Josh Nathan-Kazis). While synagogue members pay annual dues, churches rely primarily on voluntary donations from members. Read More »



Betsey Stevenson Answers Your Questions

We recently solicited your questions for Betsey Stevenson, a sometimes Freakonomics contributor and newly minted Chief Economist of the Department of Labor. Your questions were excellent and varied, and Betsey’s responses cover everything from persistent unemployment to parental leave. Thanks to Betsey and everyone who participated. Read More »



A Labor Economist Goes to Washington: Bring Your Questions for Betsey Stevenson

The Freakonomics blog will have to do without Betsey Stevenson for the next year as she’ll be serving as the Chief Economist of the Department of Labor (DOL). Betsey has agreed to answer your questions about her new position. Read More »