Our latest Freakonomics Radio on Marketplace podcast is called “Sure, I Remember That.” (You can download/subscribe at iTunes, get the RSS feed, listen via the media player in the post, or read the transcript below.) It’s about false memory, particularly in the political realm, and how we are more capable of “remembering” an event that never happened if the event happens to synch up with our political ideology.
A new working paper (PDF; abstract) from economists Michael F. Lovenheim and Emily G. Owens examines the effects of federal financial aid, a somewhat controversial issue during last fall’s campaign, on the college attendance of students with drug convictions. From the abstract:
In 2001, amendments to the Higher Education Act made people convicted of drug offenses ineligible for federal financial aid for up to two years after their conviction. Using rich data on educational outcomes and drug charges in the NLSY 1997, we show that this law change had a large negative impact on the college attendance of students with drug convictions. On average, the temporary ban on federal financial aid increased the amount of time between high school graduation and college enrollment by about two years, and we also present suggestive evidence that affected students were less likely to ever enroll in college. Students living in urban areas and those whose mothers did not attend college appear to be the most affected by these amendments.
Yesterday we passed 500,000 in Twitter followers. Thank you! The person who put us over the top was Dan Kreitz (@dankreitz). We’ll send some Freakonomics swag to Dan, along with five randomly selected followers who have been with us for much longer. (And no, we didn’t make the same mistake as last time.)
We once made a podcast about Twitter in which we discussed that we didn’t (and still don’t) follow anyone. Maybe we’d be at 1 million followers by now if we did — who knows?
We don’t really Tweet in the classic sense; we mainly post links to things we’ve written, radio pieces we’ve made, etc. So let me ask you this: is there anything you’d like to see more of in our Twitter feed?
George Peterson, writing from North Carolina:
I thought you might like to hear this: I am an artist who works with wood and I listen to a lot of podcasts and music during the work day. I was listening to the “Upside of Quitting” episode and at the beginning you say something about how perfect radio is for multitasking except maybe when you are running a chainsaw, and then there is a little chainsaw sound effect.
Well, I was running a chainsaw at that moment and thought it was funny because I listen to podcasts all the time while using a chainsaw. I made up some custom headphones out of those noise-reduction earmuffs. They keep out the noise and channel in the news and music.
So, thanks for keeping me company while I work!
We did a kayak/hike/swim tour with Kayak Wailua in Kauai, Hawaii, mainly because our guidebook said it was as good as other tours and less expensive. I think the book was correct, so I asked the guide: “How do you guys charge a lower price and still survive?”
He answered that they are larger (because they have more permits for river trips), enabling the owner to do his own booking directly, thus saving expenses. Fine, but implicitly the opportunity cost of his time must be less than the cost of contracting out, or he is not profit-maximizing. If he is profit-maximizing, then implicitly he has taken advantage of economies of scale in this “industry,” while his competitors haven’t. If that is so, I would expect some consolidation among his competitors as they understand the shape of long-run average costs. (HT: KY)
Elena Malik, communications chair of the 12th annual Carroll Round at Georgetown, writes to solicit applications for a worthwhile event:
The Carroll Round is an annual undergraduate international economics conference at Georgetown University that provides a unique forum for research and discussion among the world’s top undergraduates. Each year, we invite applications from students to present and discuss their work with peers, professors, and policy-makers invited to participate. This year we are honored to host guest speakers including Dr. John B. Taylor and Dr. Janet Currie. We are still recruiting applications from students.
This year’s Carroll Round will be held from April 18-21; more info here.
In the New Republic, Nate Cohn explores the small but growing role of advanced statistics in football. Projects like Football Freakonomics notwithstanding, the NFL isn’t usually thought of as a realm where stats hold all that much sway, in part because the game is so much more of a complex-dynamic system than, say, baseball. Here’s Cohn on one big change fans might notice if more coaches start relying on statistics:
The one place where fans could see analytics at work is in play calling, which also happens to be the place where analytics could impact the average fan’s experience of the game. The numbers suggest, for instance, that teams should be aggressive on fourth down, and that it’s better to go for first down with a lead in a game’s final minutes than to run the ball on third down to run out the clock. Yet even the teams with well-regarded analytics departments, including San Francisco and Baltimore, largely adhere to a conservative and traditional play calling approach: the coaches “just aren’t listening to them yet,” [Brian] Burke says. And the few coaches with a reputation for following the statistics, like New England Patriots coach Bill Belichick, aren’t even close to as aggressive as the numbers would advise.
Answer: pretty bad! From a 1999 Journal of Business paper by Chris Avery and Judy Chevalier …
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.
A working paper (PDF; abstract) from economists Resul Cesur, Erdal Tekin, and Aydogan Ulker explores the effects of increased natural gas use on infant mortality:
In this paper, we use the variation across space and time in the expansion of natural gas infrastructure in Turkish provinces using data between 2001 and 2011. Our results indicate that the rate of increase in the use of natural gas has resulted in a significant reduction in the rate of infant mortality in Turkey. In particular, a one-percentage point increase in the rate of subscriptions to natural gas services would cause the infant mortality rate to decline by 4 percent, which could result in 348 infant lives saved in 2011 alone. These results are robust to a large number of specifications.
The authors outline two ways through which the effect may occur:
Hollywood is abuzz with reports that the tiny islands of Antigua and Barbuda may begin operating their own national versions of the Pirate Bay, where individuals can cheaply, or even freely, download the latest films and TV shows. The clincher: this will all be legal.
How is that possible? Because the World Trade Organization says so. Let us explain.
When the U.S. helped create the WTO back in the early 1990s, it had a few main goals. One was to create a serious world trade court. The WTO has a lot of complex rules on trade, and the idea was to build a legal system that could neutrally adjudicate allegations of rule breaking. And it would work by allowing the winning country to retaliate against the loser by “suspending obligations.”
In other words, if the U.S. takes Japan to trade court and wins, Japan has to stop doing whatever bad thing it was doing. And if it doesn’t, the U.S. gets to retaliate–by, for example, increasing tariffs on Japanese goods up to the amount of harm Japan was causing.
1. You too can outsource your job to China.
2. What are all those bacteria doing in the troposphere? (academic paper/press summary)
3. How much of your state’s road budget is funded by the government?
4. North Korea gets the Google Maps treatment.
We’ve made periodic attempts to explain the massive spike in college tuition in recent decades. There are many viable explanations: rising labor costs (more non-faculty staff and professors who cannot be cloned), shrinking federal and state funding, increased demand, etc.
On that last point — the demand side — we should especially consider “consumption amenities,” as Brian Jacob, Brian McCall, and Kevin M. Stange label them in a new working paper called “College as Country Club: Do Colleges Cater to Students’ Preferences for Consumption?” (abstract; pdf). I find the passage that I’ve bolded, below, to be especially fascinating:
This paper investigates whether demand-side market pressure explains colleges’ decisions to provide consumption amenities to their students. We estimate a discrete choice model of college demand using micro data from the high school classes of 1992 and 2004, matched to extensive information on all four-year colleges in the U.S. We find that most students do appear to value college consumption amenities, including spending on student activities, sports, and dormitories. While this taste for amenities is broad-based, the taste for academic quality is confined to high-achieving students. The heterogeneity in student preferences implies that colleges face very different incentives depending on their current student body and the students who the institution hopes to attract. We estimate that the elasticities implied by our demand model can account for 16 percent of the total variation across colleges in the ratio of amenity to academic spending, and including them on top of key observable characteristics (sector, state, size, selectivity) increases the explained variation by twenty percent.
It would be great news if this meant that high-achieving students craving high academic quality will be rewarded with cheaper tuition in the future, but somehow I don’t see that happening. Do you?
The Texas Legislature is back in session, providing its usual cookie jar of absurd economic proposals. A real winner is House Bill 649, which would provide compensatory tax reductions to companies that become taxed under the Affordable Care Act because their employer-provided health insurance fails to cover employees’ emergency contraception. Such a bill means Texas would be giving firms incentives to thwart federal law. It also opens up the possibility of much broader tax offsets. I’m certain that our governor and legislature dislike the recent imposition of higher federal income tax rates on high-income families. Why not take the logic of this bill one step further and offer tax reductions (sales tax, since we have no income tax) to very high-income families? Indeed, the reductio ad absurdum would construct all state tax policy to offset to the extent possible any incentives provided by federal tax policy.
A new paper (abstract; PDF) by Gustavo J. Bobonis, Melissa González-Brenes, and Roberto Castro examines the effects the Mexican welfare program Oportunidades on spousal abuse:
Beneficiary women are 40 percent less likely to be victims of physical abuse, but are more likely to receive violent threats with no associated abuse. This evidence is consistent with a model of decision-makers’ interactions with asymmetric information in the male partner’s gains to marriage, who can then use threats of violence to extract rents from their female partners.
“The article may have important implications for policy, since it provide a mixed view of conditional cash transfer programs’ effectiveness in improving women’s empowerment within the household,” the authors wrote in an earlier draft. “The program may increase the likelihood of violent threats, which may in turn compromise women’s emotional health and other aspects of their wellbeing.”
In SuperFreakonomics
Yes, it’s an n=1 story but I thought it was worth passing along:
Hi Dubner and Levitt,
I was interested by your recent podcast about the value of a good boss [based on this research] and wanted to share with you my own boss story.
I am a software engineer, and used to have a job writing software for scientists. I was hired by Good Boss, and thoroughly enjoyed my job. One year later, Good Boss accepted a position at another institution, and was replaced by Bad Boss. I worked for Bad Boss for another two-and-a-half years before resigning because I couldn’t stand it any longer.
Keep in mind the following occurred at the same institution, the same project, the same grant, the same team, the same office; the single difference was the boss.
From a reader named Stephane:
Very recently I drove through a couple of small villages in the northwestern part of Belgium (near the border with France). A couple of road signs caught my attention. When you reach a village there’s a sign (in Dutch) saying “here, X percent of the drivers stay within the speed limit.” Then when you reach the next village there’s the same sign except that the percentage is different. Usually it’s around 90% (87% in one village, 91% in another, etc.).
I don’t know how they collect the data or even if the numbers are real. I also wish I knew the trends, how often they change the signs, how many villages participate in this safety initiative, etc. Then I wondered: where does this idea come from? Have you heard of anything like this before? If yes, is this effective to slow cars down?
When you are a transportation professor, it is your privilege to hear a lot of zany ideas. I have heard about a scheme to create a fleet of intercontinental freight zeppelins (actually, this may not be quite as zany as it sounds). Fifty years after The Jetsons, there are still dogged advocates of flying cars. The most common thing I hear is that we should attack congestion by building monorails down the medians of the freeways. I have no idea how the monorail has bewitched our citizenry (too many trips to Disneyland?), or what precisely is so offensive about the idea of trains that run on two rails, but it’s amazing how beloved the monorail is, so much so that an episode of the Simpsons parodied it. Monorail! Monorail!
Because I love hearing people’s ideas and have no desire to be rude, I engage in an exacting regimen of meditation, yoga, and deep breathing so I can exhibit the equanimity of a lama when hearing goofy ideas. But occasionally something comes up that none of my mantras or self-hypnosis can handle.
To my mind, Governor Bob McDonnell has fashioned one such idea. He is proposing eliminating the state’s gas tax.
Our latest Freakonomics Radio on Marketplace podcast is called “Introducing ‘Freakonomics Experiments.'” (You can download/subscribe at iTunes, get the RSS feed, listen via the media player in the post, or read the transcript below.)
In it, Steve Levitt tells Kai Ryssdal about a new website we’ve just launched that will help you make tough decisions in life while also taking part in academic research. And there’s Freakonomics swag to be had, too.
So if you or someone you know has a tough decision to make, head over to FreakonomicsExperiments.com. You can read about the experimental design and check out the FAQ. For instance:
Q: Just what is Freakonomics Experiments?
A: Freakonomics Experiments is a set of simple experiments about complex issues — whether to break up with your significant other, quit your job, or start a diet, just to name a few.
Sometimes in life you face one of these decisions, and you just don’t know what to do. In the end, whatever you decide will essentially be a flip of a coin. Freakonomics Experiments helps you make the decision by flipping that coin for you. Over the next few months, we’ll then check in with you with surveys and other materials. In turn, you’ll help further scientific research. Unlike most games of chance, participating in this experiment is win-win.
Tim Harford, a.k.a. the Undercover Economist (also a Financial Times columnist) has a new radio series on the BBC called Pop-Up Economics:
The show is all about storytelling – and the stories are of remarkable lives or surprising ideas in economics. We’ll learn about the impromptu engineering genius Bill Phillips, the cold war guru Thomas Schelling, and life-saving market designer Al Roth. We’ll discover how the geeks took over poker, and what happened to them.
And the series begins with the innovation lessons from the London Olympics – or as we’ve called it, “Hot Pants vs. the Knockout Mouse.”
We’ll be tuning in.
We all face big choices from time to time. Which college to choose? Should I break up with my girlfriend? Should I quit my job? Should I dye my hair blond?
Sometimes the decisions are easy and obvious. Other times, no matter how much you think about it, no clear answer emerges. Your life might be very different depending on what path you take, but you just can’t tell which choice will leave you better off.
If you find yourself in that kind of bind, we are launching a new website today, www.FreakonomicsExperiments.com, that just might be your savior.
From a podcast listener named Ed Morgan, in response to our recent episode called “Who Owns the Words That Come Out of Your Mouth?”:
While listening to your podcast on British copyright laws I was thinking you missed an important point. If you want to keep content providers producing, you can’t pay them too much. It’s what I call the “one-hit-wonder” rule. If a single piece of copyrighted work is so popular that fair compensation to the creator eliminates the incentive for the copyright owner to ever produce anything else. The same could apply to the creator’s heirs. Would Churchill’s descendants produce new and more content if they were not getting paid for the work their ancestor did?
I think Ed’s observation is more relevant for the heirs than the creator him/herself. Thoughts?
My son, who does downhill skiing, noticed that the resort he usually visits has changed its pricing policy. It used to offer free lift tickets to skiers ages 70+; now it only gives them a 20 percent discount off the regular rates. This change makes sense. My guess is that in times past, fewer older seniors even thought of skiing; and those few who did were somewhat marginal—had a fairly high demand elasticity. Today’s older seniors are healthier, have more skiing experience, and thus probably have a lower demand elasticity. It thus makes sense for the resort to reduce the extent of discrimination favoring old folks in its pricing scheme. (HT: MAH)
For Americans who rarely get a look at a multi-party (make that multi-multi-party?) election.
Here is one preview of the outcome. This was the first I’ve heard of a Pirate Party, but it is hardly unique to Israel: Wikipedia tells us that more than 40 countries have a version, including the U.S.
A frequent response to the dysfunctions of American air travel is technological: namely, self-driving cars (also see this article). In a self-driving car, you can relax, even sleep, while being driven safely to your destination at 60 mph. We once had such a system. It’s called a train network.
Compared to air or car travel, a decent train network is cheaper, more environmentally friendly, and quicker. As an example, I’ll compare two door-to-door, city-center-to-city-center journeys.
Steven Levy of Wired provides the “inside story” of Facebook’s new search engine, Graph Search:
For years now, Facebook watchers have wondered when the company would unleash the potential of its underpowered search bar. (Nobody has feared this day more than Google, which suddenly faces a competitor able to index tons of data that Google’s own search engine can’t access.) They have also wondered how a Facebook search product might work. Now we know. Graph Search is fundamentally different from web search. Instead of a Google-like effort to help users find answers from a stitched-together corpus of all the world’s information, Facebook is helping them tap its vast, monolithic database to make better use of their “social graph,” the term Zuckerberg uses to describe the network of one’s relationships with friends, acquaintances, favorite celebrities, and preferred brands.
The statistician Andrew Gelman has asked us to publicize what sounds like a nifty project: a Year-in-the-Life look at what data hounds and statisticians actually do:
So here’s the plan. 365 of you write vignettes about your statistical lives. Get into the nitty gritty—tell me what you do, and why you’re doing it. I’ll collect these and then post them at the Statistics Forum, one a day for a year. I think that could be great, truly a unique resource into what statistics and quantitative research is really like. Also it will be perfect for the Statistics Forum: people will want to tune in everyday to see what comes next.
In an e-mail, he adds:
I think it would be a great service to the professions of quantitative research to get vignettes from a wide variety of statistical practitioners. (I’d be interested in hearing what empirical economists do during their days too!) So I’d like to spread the net wide and get lots of stories from people.
And yes, for those of you who read the agate type, this post goes in the Bygones Being Bygones file.
1. Austin tries to incentivize employees to leave their cars at home, but it doesn’t work.
2. Are 60 percent of New York State’s cigarettes smuggled in?
3. Freakonomics movie trailer in Italian.
4. Sunk costs and Mark Sanchez.
5. Garlic smugglers in the E.U. dodge high import duties. (HT: Rich)
Last week, we solicited your questions for Ray Fisman and Tim Sullivan, authors of The Org: The Underlying Logic of the Office. Below you will find their very interesting answers. Thanks to all for playing along, and especially to Fisman and Sullivan.
Q. I work in an office with stark contrasts in the cultures of different departments. Has there been research on the success/failures of forcing departments to assimilate/work together more? –Drew
A. A 2003 experiment by economists Colin Camerer and Roberto Weber was designed to speak to exactly the question you’re asking: What are the challenges of cross-cultural interaction, and what difficulties present themselves when two distinct cultures are forced together?
Each participant in their experiment viewed a matrix of sixteen office scenes on a computer screen. The participants were randomly paired up and put in the roles of “manager” and “employee.” Managers’ screens highlighted and numbered eight of the pictures. Their job was to communicate to the employee, through instant messaging, the eight highlighted scenes in order. The employee had to identify the picture the manager was describing. Simple enough.
We’ve blogged and podcasted about the value (or lack thereof?) of a college education. A new paper (summarized here) by sociologist Laura Hamilton suggests one way parents can help their kids get more out of college: help them a little less — with tuition, at least. Here’s the abstract:
Evidence shows that parental financial investments increase college attendance, but we know little about how these investments shape postsecondary achievement. Two theoretical frameworks suggest diametric conclusions. Some studies operate from amore-is-more perspective in which children use calculated parental allocations to make academic progress. In contrast, a more-is-less perspective, rooted in a different model of rational behavior, suggests that parental investments create a disincentive for student achievement. I adjudicate between these frameworks, using data from nationally representative postsecondary datasets to determine what effect financial parental investments have on student GPA and degree completion. The findings suggest seemingly contradictory processes. Parental aid decreases student GPA, but it increases the odds of graduating—net of explanatory variables and accounting for alternative funding. Rather than strategically using resources in accordance with parental goals, or maximizing on their ability to avoid academic work, students are satisficing: they meet the criteria for adequacy on multiple fronts, rather than optimizing their chances for a particular outcome. As a result, students with parental funding often perform well enough to stay in school but dial down their academic efforts. I conclude by highlighting the importance of life stage and institutional context for parental investment.