I’m so sorry to have to write that Gary Becker passed away on Saturday, at the age of 83. Gary was not only the most creative and influential economist of the last 50 years, but also a kind and gentle person, a mentor, and a close friend.
Others will write at length about Gary’s contributions to economics. I want to say just a few things in that regard. About ten years ago, Pierre-Andre Chiappori and I analyzed which economic theorists have had the greatest impact on empirical research by looking at the key motivating citations in papers published in top journals in recent years. Becker was by far the most influential theorist by our metric. What was most remarkable was that thirteen different works of his were cited; no one else had more than three or four. He published influential research in every decade from the 1950s to the present – incredible longevity. No one else had longevity like that. Read More »
I make public predictions about anything exactly three times a year: who will win each of the three Triple Crown thoroughbred horse races. Other than that, I predict nothing.
The nice thing about making so few predictions is that by the time next year’s predictions roll around, no one can remember how last year’s predictions turned out. My very worst year, I named with confidence the horse that I believed would finish dead last, when in fact that horse won the race! Nonetheless, people still asked me for my picks the next year.
This year, I even got invited to do a live Q&A on the Kentucky Derby, which you can check out at Deadspin.
So who do I like this year in the Kentucky Derby? Read More »
My twenty-five year college reunion is right around the corner. In advance of the event, my classmates were asked to write a short summary of their post college life. Next to each write-up was the picture from our graduating yearbook twenty-five years ago. Many of the entries also include current pictures.
Flipping casually through the book, I noticed two things. First, it is amazing how old we all look. Time really takes its toll, that’s for sure. Second, men were much more likely than women to submit pictures of what they look like now.
There was a third thing that also seemed to be true. Many of the people who were really attractive twenty-five years ago don’t look so good now. And even more interesting, there were a surprising number of people who were unattractive in college, but look great (relative to the rest of us geriatrics) now. If I had been asked to guess, I would have estimated that the correlation between attractiveness twenty-five years ago and today was zero or even negative for women. For men I would have guessed a small positive correlation.
I was so struck by the pattern that I decided to do a more systematic data analysis. Read More »
Psychologists have long argued about the power of priming, i.e the power of subtle cues and reminders to influence behavior. For instance, there are a number of academic papers that find that if you make a woman write down her name and circle her gender before taking a math test, she will do substantially worse than if she just writes her name. The idea is that women perceive that they are not good at math, and circling their gender reminds them that they are women and therefore should be bad at math. I’ve always been skeptical of these results (and indeed failed to replicate them in one study I did with Roland Fryer and John List) because gender is such a powerful part of our identities that it’s hard for me to believe that we need to remind women that they are women!
In an interesting new study, “Bad Boys: The Effect of Criminal Identity on Dishonesty,” Alain Cohn, Michel Andre Marechal, and Thomas Noll find some fascinating priming effects. They went into a maximum security prison and had prisoners privately flip coins and then report how many times the coin came up “heads.” The more “heads” they got, the more money they received. While the authors can’t tell if any one prisoner is honest or not, they know that on average “heads” comes up half the time, so they can measure in aggregate how much lying there is. Before the study, they had half the prisoners answer the question “What were you convicted for?” and the other half “How many hours per week do you watch television on average?” The result: 66 percent “heads” in the treatment where they ask about convictions and “only” 60 percent “heads” in the TV treatment. Read More »
That is what the headline of this fascinating article says. Here is a quote from the news report:
In lay language,” [Samah] El-Tantawy said in a U of T news release, “the [traffic lights] act as a team of players cooperating to win a game — much like players in a soccer match, where each player endeavors to score, but at the same time considers the ultimate goal of the entire team which is winning the match.
According to the article, travel times were reduced by 26 percent, which is fantastic, and which is what matters.
This doesn’t, however, seem to have much to do with game theory. Game theory is about one of two things: strategic behavior or finding sustainable equilbria. But the traffic lights don’t care about their own private utility. There is no sense in which they are actors at all, as traffic lights just do what you tell them to do. In economic terms, there is a central planner who sets the rules which the traffic lights obey. This new scheme provides a new and better set of rules (which, again, I emphasize is great), but I don’t think game theory should get the credit!
(Related: see our “Jane Austen, Game Theorist” podcast.)
Seven years ago, I blogged about how nonsensical many airline rules and regulations seemed to be.
At the very top of my list was the prohibition on the use of electronics before takeoff and landing. The FAA finally gave into logic on this one, and airlines have been remarkably speedy in instituting the change.
(If you go back and look at the post, you will see that another thing I railed against was the announcement about “in the unlikely event of a water landing.” There is no doubt this announcement is a complete waste of time, but not long after the post went up, Captain Sullenberger pulled off a water landing. Thanks for nothing, Sully!)
I awoke yesterday to the happy news that two of my friends won the Nobel Prize in economics.*
Gene Fama was one of the three recipients. He and I share two important beliefs about the world. First, we value empirical research in economics — i.e., getting deep into the data to understand what is going on. Second, we both believe that golf should be played quickly! So every weekend, at least once, Gene and I get up before the sun rises and get in 18 holes (walking) in about 2.5 hours. Gene is 74 years old — he didn’t take up golf until his sixties, and I’ve seen him post a scorecard with multiple birdies on it.
Gene believes deeply and fundamentally in markets, which is why pairing his prize with Robert Shiller, a market skeptic, is quite odd. But Shiller is a wonderful economist — someone whose work I read a lot and was inspired by early in my own career — and I’m glad he was chosen. Read More »
University of Arizona economist Price Fishback, who has been on this blog before, is one of the leading scholars of the economics of the New Deal. He has a great new set of insights to share on the U.S. mortgage mess. He’s also the co-author of the forthcoming book Well Worth Saving: How the New Deal Safeguarded Home Ownership, with Jonathan Rose and Kenneth Snowden.
The Folly of Eminent Domain Takings of Failing Mortgage Loans
By Price Fishback
Several cities around the country are considering using eminent domain to take control of troubled mortgages in their cities. An Associated Press example of how the proposal will work calls for the city to use eminent domain to force the lender to accept $150,000 for a $300,000 mortgage on a home that has a current market value of $200,000. The city would then refinance the loan while cutting the principal owed by the borrower to $190,000.
Eminent domain requires a public purpose for the taking of an asset. The public purpose claimed here is that property values and property tax revenues can be boosted by preventing a mass of foreclosure sales. Real estate studies do show that increasing numbers of foreclosure sales are associated with lower housing values in nearby neighborhoods. However, the spillover benefits of preventing foreclosures, tend to be focused on houses in nearby neighborhoods. Read More »