Archives for credit



How to Think About Money, Choose Your Hometown, and Buy an Electric Toothbrush: A New Freakonomics Radio Podcast

Our latest podcast is called “How to Think About Money, Choose Your Hometown, and Buy an Electric Toothbrush.” (You can download/subscribe at iTunes, get the RSS feed, or listen via the media player in the post. You can also read the transcript below; it includes credits for the music you’ll hear in the episode.) It’s another installment of our FREAK-quently Asked Questions, in which Stephen Dubner and Steve Levitt answer questions from you, our readers and listeners. 

Steve Reda, a 22-year-old in the Washington, D.C., area, asks if kids today are more careful using credit as opposed to cash. (It’s a question that makes Dubner recall his salad days, back when he fell in love with economics and the “mental accounting” research done by Richard Thaler, Daniel Kahneman and Amos Tversky.) This leads to a conversation about spending in general, which leads to Levitt’s counterintuitive advice for the youth of today (advice passed down from Milton Friedman to José Scheinkman and on to Levitt): Read More »



Credit Scores: Do Nice Guys Finish Last?

A new study takes advantage of the increasing (and somewhat controversial) use of credit scores as a tool for evaluating job candidates to examine whether scores are affected by how nice you are. Jeremy Bernerth, Daniel Whitman, Shannon Taylor and H. Jack Walker found that while there is a positive relationship between “conscientiousness and FICO scores, there is a negative relationship between agreeableness and FICO scores”:

The finding that credit scores accounted for a substantial proportion of variance in externally rated performance variables gives some credence to the practice of using credit scores as a screening tool. However, null findings between credit scores and workplace deviance call into question claims that employees with poor credit will engage in behaviors intended to harm the organization (Gallagher, 2006; Oppler et al., 2008).

Read More »



Prediction Markets on the Debt Ceiling, U.S. Credit Downgrade

Over at Intrade, there are two “hot” markets involving the odds that Congress will raise the U.S. debt ceiling.

- Congress to approve increase in U.S. debt ceiling before midnight on July 31, 2011: 40% (It was 65% a month ago)

- Congress to approve increase in U.S. debt ceiling before midnight Aug. 31, 2011: 75% (It was 85% a month ago)

And at Irish bookmaker PaddyPower.com, here is the line on a Moody’s downgrade:

Will Moody’s downgrade the U.S.?

-Yes: 9/2

-No: 1/8



Dueling for Your Supper

Was dueling actually a rational act? Read More »



Do You Owe $23 Quadrillion?

An unidentified computer glitch has led Visa to overcharge several of its cardholders for routine purchases at drug stores, gas stations, and restaurants, to the tune of $23,148,855,308,184,500.00 each. These charges, as far as we can tell, exceed the sum total of wealth accumulated in human history. Read More »



When Credit Card Companies Compete, You Win

Barry Nalebuff and I have a new column in Forbes (“A Market Test for Credit Cards”) which criticizes some aspects of the recent credit-card legislation as being too anti-market. Read More »



Who Needs Banks?

In the face of a difficult credit squeeze, more and more borrowers are turning to peer-to-peer lending networks, which directly connect lenders and borrowers. These networks have recently financed nearly half a billion dollars in lending. Ray Fisman examines these new networks and discusses the conflicting economic research on them. While economists have found some evidence of “human frailty and bias” in lending decisions, one recent study of a specific network concluded that the, “…credit market operates quite efficiently and without a bank pocketing a slice of the proceeds.” Read More »



Is Untrustworthy the New Ugly?

| A Rice University study found that lenders may judge your creditworthiness based on how trustworthy they think you look. The researchers didn’t pinpoint which physical characteristics look most or least trustworthy, but if they do in the future, might plastic surgery go from a luxury good to a financially necessity? [%comments] Read More »