My good friend and colleague John List has very ambitious summer plans.
We’ve both believed for a long time that the combination of creative economic thinking and randomized experiments has the potential to revolutionize business and the non-profit sector. John and I have worked to foment that revolution through both academic partnerships with firms as well as a project of John's called the Science of Philanthropy Initiative (SPI), whose mission is "evidence-based research on charitable giving."
We once wrote about reasons to not vote, at least from an economist's perspective. Since a single vote almost never alters an outcome, what's in it for the voter?
If a given citizen doesn't stand a chance of having her vote affect the outcome, why does she bother? In Switzerland, as in the U.S., "there exists a fairly strong social norm that a good citizen should go to the polls," [Patricia] Funk writes. "As long as poll-voting was the only option, there was an incentive (or pressure) to go to the polls only to be seen handing in the vote. The motivation could be hope for social esteem, benefits from being perceived as a cooperator or just the avoidance of informal sanctions. Since in small communities, people know each other better and gossip about who fulfills civic duties and who doesn't, the benefits of norm adherence were particularly high in this type of community."
The past 60 years in the U.S. has seen dramatic policy changes to the public-education system. The ‘50s, ‘60s, and ‘70s saw desegregation and affirmative action, and since the ‘80s there have been efforts to increase school funding, the introduction of voucher systems, and the creation of countless charter schools. In between we’ve seen efforts to reduce class sizes, introduce technology into classrooms, improve teacher credentialing, and a massive attempt to leave No Child Left Behind.
What do we have to show for all this? That’s hard to say. Even though many programs have a high price tag, they were never implemented with an eye towards assessment. The data we do have shows that not much has changed over the past 30 years. The figure attached shows how the racial achievement gap in test scores has persisted for white and black Americans since the late 1970s.
If you don’t like the breakdown by race, then consider that the high school dropout rate among high-income families in 1972 was 2% and in 2008 it was still at 2%. For low-income families, though? In 1972 it was 14% and in 2008 it was still at 9%. This sort of trend (or lack thereof) is manifested in dozens of measures of academic achievement, all of which suggest that the past 60 years of educational reform has very little to show for itself.
Money is important. For a long time, economists thought that it was the only thing that mattered. And, in fact, if you want people to do what you want, money can be incredibly useful. Out to entice the best workers? Pay more. Want to sell a product? Discount it, a lot. Want to discourage a bad behavior? Impose a monetary fine.
It seemed a little silly to us though (as well as to other behavioral economists doing work back in the 1990s) to think that money was the only thing that mattered. So we set out to learn exactly when and how monetary incentives work. Along the way, we discovered some environments where incentives don’t work at all.
The passage of the Americans with Disabilities Act was a landmark civil rights bill. It afforded the disabled protections against discrimination that were similar to earlier landmark civil rights bills. In particular, the bill targeted two types of discrimination. One type was the discrimination against the disabled motivated by hatred or disgust. For example, one provision targeted employers that denied employment opportunities to those that truly qualified. Other parts of the bill focused on ensuring a level playing field for the disabled, like one requirement for businesses to make readily achievable retrofits to their businesses to afford the disabled access.
When economists think about the causes of discrimination, they tend to lump them into these two categories. The first is called animus discrimination, which is the type of discrimination we tend to associate with the treatment of African-Americans in the early 20th century. The second is called statistical discrimination, which is discrimination motivated by statistical trends associated with groups. For example, women tend to pay less for auto insurance because they are safer drivers.
When it comes to the year 1991, history books will undoubtedly focus on the first Gulf War and the dissolution of the Soviet Union, but at least domestically, the biggest change was one you probably never heard about: 1991 was the first year that women overtook men in college attainment, a trend that has only gained steam since. Today 37.2% of women between the ages of 25 to 29 have a four-year college degree or higher versus just 29.8% for men.
Yet for all the academic achievement by women, men still earn a higher wage for equivalent jobs and continue to dominate the highest ranks of society. Senior management positions? Only one in five are held by women. Fortune 500 CEOs? Just 4% and fewer than 17% of the seats in Congress are held by women.
Scholars have long theorized about the reasons why women haven’t made faster progress in breaking through the glass ceiling. Personally, we think that much of it boils down to this: men and women have different preferences for competitiveness, and at least part of the wage gaps we see are a result of men and women responding differently to incentives.
It’s a late-September afternoon in 2009 and the students of Fenger High School on Chicago’s South Side are crossing a vacant concrete lot. Some live in the Altgeld Greens housing project. Others live in a part of Chicago’s rough Roseland neighborhood (also called “The Ville”). Some of the students from these areas have developed fierce antipathies toward each other, though the groups are more like cliques than gangs.
As the teenagers cross the lot, a fight breaks out. Someone pulls out a cell phone and starts recording a video of 15 to 20 kids fighting. Around a minute into the video, someone discovers a couple of two-by-fours lying in the empty lot. Eugene Riley, sporting a red motorcycle jacket, takes one of the big pieces of wood from a pal and swings it like a baseball bat into the back of 16-year-old honor student Derrion Albert’s head.
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.
What can a Ball and Bucket Teach Us About Why Women Earn Less than Men? By Uri Gneezy and John List
The sign on the road leading to the city of Shilong in the Khasi hills of northeast India had a puzzling message: “Equitable distribution of self-acquired property rights.” Later we’d find out that the sign was part of a nascent men’s movement, as the men in the Khasi society were not allowed to own property. We’d traveled across the world in search of such a parallel universe—one where men felt like “breeding bulls and babysitters”—because evidence in the U.S. was starting to point to a massive gap in preferences towards competition between the genders and we wanted to understand the reason why.
Our plan was to take a simple game to a matrilineal society (the Khasi) and patrilineal society (the Masai in Tanzania) and give participants just one choice: Earn a small certain payment for their performance in the game or earn a much bigger payment for their performance, but only if they also bested a randomly chosen competitor. The game we settled on? Tossing tennis balls into a bucket 3 meters away. The experiment was conducted with Kenneth Leonard as a coauthor.
A while back we held a contest for the new popular economics book written by Uri Gneezy and John List. The authors and their publishers picked some of their favorite title suggestions and then we ran a beauty contest to determine which title was most popular among blog readers. The deal was that the person who proposed the winning title would get $1,000. Another $1,000 was to be split between randomly selected beauty contest participants.
Before I tell you which title won, let me tell you about the naming of Freakonomics. We had such an impossibly hard time coming up with a good name until my sister Linda came up with "Freakonomics." To make a long story short, the publishers hated that name for a long time, but finally gave in. The rest is history. Of course we were all just guessing -- it would have been nice to have data, the way Uri and John did.
So what do the data say? The winner of the beauty contest, with 33 percent of the votes, was The Carrot that Moved A Mountain: How the Right Incentives Shape the Economics of Everyday Life. Congratulations to Ivy Tantuco who proposed that title and collected the $1,000 prize.(Congratulations also to Jenna Dargie and Melinda Reiss, who were the randomly chosen beauty contest winners and pocketed $500 each.)