Archives for money



Some Evidence on Whether Money Buys Political Influence

A new paper by graduate students David Broockman and Josh Kalla tackles an eternal, oft-debated question: does money buy influence? Here’s the abstract:

Concern that lawmakers grant preferential treatment to individuals because they have contributed to political campaigns has long occupied jurists, scholars, and the public. However, the effects of campaign contributions on legislators’ behavior have proven notoriously difficult to assess. We report the first randomized field experiment on the topic. In the experiment, a political organization attempted to schedule meetings between 191 Members of Congress and their constituents who had contributed to political campaigns. However, the organization randomly assigned whether it informed legislators’ offices that individuals who would attend the meetings were contributors. Congressional offices made considerably more senior officials available for meetings when offices were informed the attendees were donors, with senior officials attending such meetings more than three times as often (p < 0.01). Influential policymakers thus appear to make themselves much more accessible to individuals because they have contributed to campaigns, even in the absence of quid pro quo arrangements. These findings have significant implications for ongoing legal and legislative debates. The hypothesis that individuals can command greater attention from influential policymakers by contributing to campaigns has been among the most contested explanations for how financial resources translate into political power. The simple but revealing experiment presented here elevates this hypothesis from extensively contested to scientifically supported.

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The Undercover Economist Is Back

Tim Harford, who writes the Financial Times‘s “Undercover Economist” column, has appeared on our blog many times. This guest post is adapted from his new book The Undercover Economist Strikes Back: How to Run or Ruin an Economy. Harford also appeared in our podcast “Hey Baby, Is That a Prius You’re Driving?

Perhaps the strangest currency in the world can be found on the island of Yap, in Micronesia in the West Pacific. This coin, the rai, is a stone wheel with a hole in the middle. Some rai are fairly portable—a handspan or less across, and the weight of a couple of bags of sugar. But the most valued stones are far bigger—one British sailor wrote in the late nineteenth century of a stone wheel that was four and a half tons in weight and more than nine feet in diameter. In other words, it was almost completely immovable.

Yap’s stone money used to be a serious business. The stones were quarried and carved on the island of Palau, 250 miles away. One Victorian naturalist witnessed four hundred men from Yap, a tenth of the adult male population, at work in the quarries of Palau. Getting the stones from Palau to Yap on a little bamboo boat was a difficult and sometimes lethal affair—some of the stones weighed as much as two cars. (And rai were especially valuable if someone had died on the expedition to fetch them.) The biggest stones might have been used for major transactions such as buying land or wives; more modest-size stones—a couple of feet across—were exchangeable for a pig. Even then, it would have been a lot easier to move the pig than to move the stone. Read More »



Charity “Shoppers” vs. Charity Investors

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 »



What Makes People Do What They Do?

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.”

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.  Read More »



Money Didn’t Buy Happiness in Baseball in 2012

If you wish to win in baseball, your team has to spend money. Just look at the New York Yankees. USA Today reports that in 2012 the Yankees led the American League in spending.  And the Yankees finished with the best record in the American League.

Of course, one data point doesn’t a trend make. What do we see when we look past the Yankees? Read More »



Soul Possession: A New Freakonomics Radio Podcast

Our latest Freakonomics Radio podcast is called “Soul Possession.” (You can download/subscribe at iTunes, get the RSS feed, listen via the media player above, or read the transcript below.) This kicks off a new season of original podcasts, marking the end of the hour-long “mashupdates” we’ve recently released.

This episode grew out of something that happened on this blog a while back. We had run a Q&A with Michael Shermer, the founding publisher of Skeptic magazine. In the comments section, a reader named Caleb B. wrote:

Caleb B: What is it about the idea of a soul that even people who confess to not have one are hesitant to sell it? I have been trying, for the better part of ten years, to buy a soul. I’ve offered a dollar amount, between $10 and $50, for someone to sign a sheet of paper that says that I own their soul. Despite multiple debates with confessed atheists, no one has signed the contract. I have been able to buy several people’s Sense of Humor and one guy’s Dignity, but no souls. Additionally, will any Freakonomics reader take me up on this? I’m willing to spend $50 on souls.

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Does Money Really Buy Elections? A New Marketplace Podcast

Mitt Romney won big in New Hampshire, but his opponents are vowing to push on in South Carolina. Which means stepping up their pleas for cash. In an e-mail to supporters, Rick Santorum wrote:

We must show real progress tonight and redouble our efforts … That’s why my campaign launched the “Game On” Moneybomb, and why we need your help right now. As you already know, we are facing serious and well-funded opposition for the nomination.

That’s the kind of language that confirms one of the biggest truisms in politics: money buys elections.

But how true is that truism? Read More »



FREAK-est Links

This week, does eating fish reduce the risk of Alzheimer’s? How to use Google to pick your baby’s name; the brains of psychopaths are structurally different; impatient people have lower credit scores, and an interactive chart of all the money in the world. Read More »