One day last spring, I saw in a Google alert that the Consumer Financial Protection Bureau (CFPB) had announced that it was for the first time making public a consumer complaint database. At the time, I was teaching a course in Empirical Law & Economics at Yale and decided to call an audible. I came into class that day and projected the raw data (which you can see for yourself by clicking here) and asked the class how we might make use of the information.
With incredible dispatch, Jeff Lingwall and Sonia Steinway merged the complaint data with other datasets and together we started to put together an initial draft analyzing the complaint information. When the CFPB made the database public, they actively encouraged “the public, including consumers, analysts, developers, data scientists, civic hackers, and companies that serve consumers, to analyze, augment, and build on the public database to develop ways for consumers to access the complaint data or mash it up with other public data sets.” This paper is our attempt to respond to the Bureau’s call to action. Read More »
Season 4, Episode 5
The practice of tipping is one of the most irrational, un-economic behaviors we engage in. It’s not in our economic best-interest to tip; essentially we do it because it’s a social norm — a nicety. In this episode of Freakonomics Radio, Stephen Dubner looks at why we tip, what kinds of things can nudge tips upward, and what’s wrong with tipping overall. In the end, we wonder whether or not the practice of tipping should be eliminated altogether. Research shows that African American waiters make less in tips than people of other races, so tipping is a discriminatory practice. Later in the hour: if your parent has the gene for Huntington’s disease you have a 50% chance of getting it yourself. Huntington’s is a debilitating fatal disorder. People can do genetic testing to see if they will fall ill, yet only 5% of people choose to do so. Stephen Dubner talks to University of Chicago economist Emily Oster about her research on Huntington’s genetic testing, and the value of not knowing your fate.
If you want to remind yourself what a really good magazine article can be, check out Willy Staley‘s N.Y. Times Magazine piece “22 Hours in Balthazar.” Balthazar is a SoHo restaurant that’s been around long enough to be an institution but is still good enough to inspire devotion from scene-setters, tourists, and locals alike. How?
That’s the question the article (and photographs) answer, in an elegant and fact-filled manner. For instance:
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For now, everything is quiet at Balthazar. The last guests from the night before left just a few hours ago, and the nighttime porters are still finishing their thorough scrub of the restaurant. But the delivery trucks are starting to arrive all over again, idling on Crosby. Men in lifting belts wheel hand trucks stacked high with food from across the globe: 80 pounds of ground beef, 700 pounds of top butt, 175 shoulder tenders, 1 case of New York strips, all from the Midwest; 5 pounds of chicken livers, 6 cases of chicken bones, 120 chicken breast cutlets; 30 pounds of bacon; 300 littleneck clams, 110 pounds of mussels from Prince Edward Island, another 20 pounds from New Zealand, 50 trout, 25 pounds of U10 shrimp (fewer than 10 pieces per pound), 55 whole dorade, 3 cases of escargot, 360 Little Skookum oysters from Washington State, 3 whole tunas, 45 skates, 18 black sea bass, 2 bags of 100 to 120 whelks, 45 lobster culls. That’s just the fish and meat order.
Our latest podcast is called “Should Tipping Be Banned?” (You can download/subscribe at iTunes, get the RSS feed, or listen via the media player above. You can also read the transcript; it includes credits for the music you’ll hear in the episode.)
As we all know, the practice of tipping can be awkward, random, and confusing. This episode tries to offer some clarity. At its center is Cornell professor Michael Lynn, who has written 51 academic papers on tipping. A few examples:
“Are Christian/Religious People Poor Tippers?”
“Sweetening the Till: The Use of Candy to Increase Restaurant Tipping”
“Determinants and Consequences of Female Attractiveness and Sexiness: Realistic Tests with Restaurant Waitresses”
“National Personality and Tipping Customs”
Because Lynn has largely built his career around tipping, it came as a bit of a surprise when Stephen Dubner asked him what he would change about the practice:
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LYNN: You know, I think I would outlaw it.
At the opera last night we pre-ordered a glass of wine for the first intermission. We paid before the opera and the glass was at the prearranged place after Act 1. We’ve done this many times in Germany and increasingly in the U.S. Why do the opera houses do this?
Competitive pressure is absent—they have a monopoly on drink/food at intermission. Despite this absence, providing this opportunity raises the house’s profits. Without the usual long wait at intermission, more customers will buy food/drink—so revenue increases. This policy puts less pressure on workers—they don’t have to rush during intermission to serve people; in the long run this reduces the wage the opera house has to pay for equal-skilled labor—costs are reduced. Everybody wins—and I’m surprised this policy isn’t more widespread.
My Dutch friend walked into his bank for a short transaction and was kept waiting for 45 minutes. Infuriated, he told the manager that his time was too valuable for this. Ten days later a credit of €25 appeared on his account!
Why can’t service organizations that keep you waiting an overly long time all do this? Admittedly the proper price is not easy — Bill Gates’s time is more valuable than mine. But companies that offer a credit on your account if you have to wait more than some posted time would have a competitive advantage in attracting clients; and the threat of payment would provide lower-level managers an incentive to improve efficiency. The only example I know of this practice is our plumber, who advertises that if he is more than 30 minutes late, the cost of labor is waived. (HT to GAP) Read More »
Our latest Freakonomics Radio on Marketplace podcast is called “A Cheap Employee Is … a Cheap Employee.”
It’s about the question of whether low-paid employees are indeed a good deal for a retailer’s bottom line as the conventional wisdom states.
The piece begins with a couple of stories from blog readers, Eric M. Jones and Jamie Crouthamel, which were solicited earlier here. (One of the true pleasures of operating this blog is having a channel by which to turn readers into radio guests — thanks!) Read More »
We blogged a while back about how some retail firms succeed by hiring more, not fewer, floor employees, and by treating them particularly well. Among the examples: Trader Joe’s and Whole Foods; among the counterexamples: Michael’s.
This prompted an e-mail from Hal Varian, Google’s chief economist. (If you don’t know of Hal you should, as he’s an impressive and fascinating guy — check out the Q&A he did here a few years back.) His e-mail reads:
Saw your piece about Trader Joe’s et al. Here’s one reason to pay people more than their market wage (from my textbook):
Gabor Varszegi has made millions by providing high-quality service in his photo developing shops in Budapest. (See Steven Greenhouse, “A New Formula in Hungary: Speed Service and Grow Rich,” New York Times, June 5, 1990, A1.)
Varszegi says that he got his start as a businessman in the mid-sixties by playing bass guitar and managing a rock group. “Back then,” he says, “the only private businessmen in Eastern Europe were rock musicians.” He introduced one-hour film developing to Hungary in 1985; the next best alternative to his one-hour developing shops was the state-run agency that took one month.