Americans love to gamble, as evidenced by the ubiquity of lotteries, the growing number of local casinos, and the remarkable success of Las Vegas.
One place Americans can’t legally gamble is online because, except in a few states, the current laws prohibit it. Right now, the closest legal substitute that exists for Americans is virtual gambling at sites like Zynga, where people pay literally billions of dollars a year in real money to buy tokens that allow them to play virtual slot machines and tables games. By virtual, I mean that even though the consumers pay real money, they can’t win cash prizes, but rather things like online trophies or more tokens that allow them to play the games longer. Read More »
I like Indian food more than sushi. And I like sushi more than Italian food. When going out for dinner and choosing which to eat, does this mean I always choose Indian? Of course not. I’d tire of Indian food.
On my savings account, I like earning 3% interest more than 2%. And I like earning 2% more than 1%. Suppose three banks offer accounts identical except for the interest rate: would I always choose the 3% account? Or might I say, “Hey, 3% is boring, I think I’ll try 2%?” Of course not. I’d stick with the bigger payoff.
Yet when it comes to charitable giving, most people spread their money around. Why is this? And is it an effective strategy for helping people, or just a way to make ourselves feel good?
I look at this three ways:
First, we might think that even the best charity can absorb and wisely spend only so much money — that the impact of our next dollar is lower than the impact of the first. So we give to several worthy causes. And this may be the prudent approach for huge givers like Bill & Melinda Gates, Mark Zuckerberg, and Warren Buffett — but most of us don’t have to worry about that. Read More »
John List and Uri Gneezy have appeared on our blog many times. This guest post is the last in a series adapted from their new book The Why Axis: Hidden Motives and the Undiscovered Economics of Everyday Life. List appeared in our recent podcast “How to Raise Money Without Killing a Kitten.”
Pay-what-you-want is a bit of an oxymoron for economists. After all, if you had the choice of how much to pay, wouldn’t you always pick $0? But as we’ve found time and again, people are a lot more complicated than typical economists have assumed.
Case-in-point: in 2007 Radiohead made their album In Rainbows downloadable online for whatever price customers wanted to pay. Precise statistics are hard to come by, but one thing is clear: a lot of people paid a good amount of cash for the album. In fact, it was so successful that other acts have followed suit. Heck, even corporations like Panera have gotten into the act, setting up cafes in St. Louis and Chicago where customers pay what they can for certain menu items.
What got us curious, though, was trying to answer why people were paying more than $0. In particular we wanted to know what sorts of levers could we pull that would induce people to pay more or pay less in an economic environment like Radiohead’s website? Luckily, right around this time we started working with Disney Research, and they were just as interested in these questions. Read More »
John List and Uri Gneezy have appeared on our blog many times. This guest post is part a series adapted from their new book The Why Axis: Hidden Motives and the Undiscovered Economics of Everyday Life. List appeared in our recent podcast “How to Raise Money Without Killing a Kitten“; the post below offers a fuller description of an experiment discussed in that podcast.
On a chilly Saturday afternoon in December, 2005, Jeanne, a bright, energetic junior at East Carolina University (ECU), trotted up the walk of a suburban home in Pitt County, N.C. Jeanne wore a shirt emblazoned with the name “ECU Natural Hazards Mitigation Research Center.” She also wore a badge with her photograph, name, and solicitation permit number on it. She knocked, and a middle-aged man opened the door.
“Yes?” he said, eyeing her.
“Hi,” she said, smiling brightly. “My name is Jeanne. I’m an ECU student visiting Pitt County households today on behalf of the newly formed ECU Natural Hazards Mitigation Research Center. Would you like to make a contribution today?” It’s probably safe to say that the last thing the middle-aged man had on his mind was the possibility of Jeanne being a double agent. Yes, she was really trying to raise money for the center. But she was also part of a bigger experiment involving dozens of college students knocking on the doors of 5,000 households in Pitt County. Read More »
We bought a box of Anzac biscuits — a very tasty cookie with no eggs or fat, thus not too many calories and easily preserved. The company, Unibic, states on the box that “4% of sales (revenue) go to the RSL (Returned and Services League).” This reminds me of Newman’s salad dressings, which advertise that all profit goes to charity.
It’s not clear which method would provide more money for charity generally, but I prefer the percent of revenue approach—it removes any incentive to raise costs (executive pay, for example). Either way, though, it’s nice that a few companies support charity so well and so openly. What other examples are there of products that support charity? And which method (percent of revenue or profit) is preferable?
Silicon Valley heavyweights like Facebook co-founder Chris Hughes and Google have a new favorite charity: GiveDirectly, an organization that makes direct transfers (via M-Pesa) to poor people in the developing world. From Forbes:
“Instead of building hospitals, why don’t we just give poor people money? Research shows it’s effective,” [Hughes] said. Hughes, who purchased The New Republic magazine in early 2012 and serves as publisher, also joined the board of GiveDirectly.
Backing up Hughes’s point was Jacquelline Fuller, Director of Giving at Google. She told the crowd Thursday night that one of her superiors at Google was extremely skeptical when Fuller first suggested that Google back GiveDirectly. “I was told, ‘You must be smoking crack,’ ” Fuller recalled. But GiveDirectly had exactly what Google wanted: lots of data on how the recipients of cash used it to improve their nutrition, their health and their children’s education. After looking at the data, Google donated $2.5 million to GiveDirectly.
GiveDirectly stems from economist Paul Niehaus‘s research in India, where to limit corruption the government makes direct cash transfers via mobile phones. “A typical poor person is poor not because he is irresponsible, but because he was born in Africa,” says Niehaus, adding that GiveDirectly’s transfers have had positive impacts on nutrition, education, land, and livestock — and haven’t increased alcohol consumption. The charity is also No. 2 on Givewell’s list of recommended charities.
(HT: Marginal Revolution)
We recently ran a listener survey for Freakonomics Radio. Among the interesting findings: only (or should that be “only”?) 18 percent of the respondents are members of a public-radio station. A reader named Steve Cebalt wrote in to ask about the nature of public-radio membership:
So it’s pledge week at my local public radio station, when they interrupt my favorite news programs with appeals for money. Funny, I used to be on the board of directors of this station, so I have a great appreciation for it.
But I am not a member. I don’t pay. I am supposed to feel guilty, but I don’t. You know why?
Because I am not really causing a negative externality on others — am I ?
Whether I listen or not, they’ll still broadcast right? And others contribute freely of their own volition. So is anyone harmed if I listen (or don’t listen) without donating?
I’d love to see your blog readers rip into this question from a Freakonomics perspective:
So go ahead, people. Rip. Remember everything you’ve ever thought about free-ridership, slippery slopes, and critical mass on issues like voting.
1. Do customs and postal service discriminate against “atheist” parcels?
2. Now there are wristbands to monitor whether doctors are washing their hands. (HT: R.E. Riker)
3. Dan Ariely is offering a free online course: “A Beginner’s Guide to Irrational Behavior.” Sign up here.
4. Dan Pallotta argues that non-profits should be run like real companies.
5. A new study of English literature finds that the use of mood words is steadily decreasing.