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Archive for July, 2011

With the NFL Lockout Just About Over, a Sports Economist Weighs In

If there was any doubt as to how valuable the NFL is, all you had to do was flip to ESPN on Thursday night. The cable network ran an hours-long, special lockout edition of SportsCenter following news that the owners approved a proposed collective-bargaining agreement. From a ratings standpoint, it probably wasn’t that hard a call: the prime-time program the network broke into was a softball game between the U.S. and Czech Republic, which got bumped to ESPN2.
The NFL players still have to ratify the deal, and have until next Tuesday to do so. If they sign, free agency and training camp would begin on July 27, not soon enough to salvage the Hall of Fame game. One clear loser in this whole lockout situation is the city of Canton, Ohio, which according to Fox Sports Midwest, will lose out on millions of dollars of economic impact. As I thought about the broader implications that the four-month lockout has had on the country’s most lucrative professional sports league (the NFL brings in $9 billion of annual revenue), I fired off some questions to sports economist Dave Berri, who was kind enough to offer some quick responses.


FREAK-est Links

The economics of law schools (now more expensive than 4 years of college), a fake Apple store in China, what Carmageddon taught us about behavioral economics, JSTOR hacker gets indicted on felony charges, and an insect that’s survived for a million years without sex.


"I Never Said Most of the Things I Said"

I’m back to inviting readers to submit quotations whose origins they want me to try to trace, using my book, The Yale Book of Quotations, and my more recent researches.
BT asked:

“Yogi Berra has been quoted as having said, ‘I never said most of the things I said.’ Is this correct? How many of the famous quotations associated with him been incorrectly attributed to him?”


Do Results of Oregon's Medicaid Lottery Boost the Case for Obamacare?

One of the many debates over the new health care law is whether increased access to health insurance really improves the public’s overall health and financial security. Even though there are hundreds of studies comparing insured and uninsured groups of people, there’s nothing definitive so far that answers the question one way or the other. The problem is getting clean data which clearly demonstrates behavior before and after people have had access to health care, rather than comparing two separate groups of people.
But a new study by a group of economists and health care researchers may provide the first empirical evidence that shows expanding health care coverage to low-income individuals does result in better reported health, more preventative care, and improved financial well-being.


Advancements in Panhandling: Don't Forget to Feed the Meter

Back in 2006, I wrote a Newsweek article about the problems that warm-weather cities like Orlando and Las Vegas were having with their homeless populations, and the rather creative methods they were using to control them — namely banning public feedings and consigning all panhandling to 3-by-15-foot “panhandling zones” painted on sidewalks.
Turns out the solutions have only gotten more creative in the last few years. The newest innovation are “homeless meters,” repurposed parking meters — painted a different color and set back from the street — that people can deposit coins into rather than give spare change to panhandlers. Cities then donate the collected money to nonprofit groups, which in turn use the funds to buy things like bus tickets. Advocates say this cuts down on the abuse of funds, and ensures that donations are put to the best use.


Sensible Pricing at the Ballpark

When I was a kid, tickets for grandstand seats at Comiskey Park (where my team, the White Sox, used to play) cost the same regardless of who the opponent was (only 7 possible in those days), the time of day or day of week. At a recent Minnesota Twins game I learned that MLB has gotten smart, pricing differentially depending on the identity of the opponent and the date/time of the game.
For games in the same one-week period a home plate view grandstand seat in Target Field ranges from $36 to $45, with a higher price for night games, weekend games and, most important, for more attractive opponents (sadly, higher, other things equal, for the Red Sox than the White Sox). Probably aided by web technology, teams can do a better job of equilibrating demand and the (fixed) supply of seats, although the current price range and the partly-empty stadium in the game I saw (against the last-place Kansas City Royals) still doesn’t seem great enough to accomplish this completely.


Our Daily Bleg: What Economic Concepts Should Kids Know?

This bleg comes from reader Wayne Smith, who asks for suggestions on which economic concepts are the most important for kids to learn:

What topics do the Freakonomics readers feel are most important to teach kids 8-13 years old? Aside, of course, from the fact that the man keeps you down.
I was listening to The History of Sesame Street audio book the other day and thought that it would be nice to come up with a YouTube show with decent production value that outlines basic economic concepts in an entertaining way. Concepts like capital, value, supply/demand, trade, time value of money, interest, saving and borrowing, opportunity cost, taxation,and so on. This would be more narrative than something like Khan Academy. Naturally each concept can have an episode devoted to it and each concept can be addressed in different ways in different episodes, but in scenarios geared toward kids. What do the readers think about this as a concept?


Did Women's Lib Movement Increase Income Gap in the U.S.?

Reader Chris Fawcett writes in with an intriguing question: How did the women’s liberation movement affect the income gap in the U.S.?
Income inequality has been on the rise in the U.S. since the 1970s, roughly the same time that women began entering the workforce in large numbers. Considering the amount of attention the widening income gap gets these days as a source of our economic woes, it seemed like something worth posting.
Here’s how Chris sees the issue:

There are a number of ways I believe this has had a big impact (maybe the biggest impact of any single issue):
1. Women’s participation in the workplace has doubled in the past half century.
2. The divorce rate has increased steadily in the past half century.
3. It is more socially acceptable to not have children (through choice or abortion).
4. People are getting married later in life.
In relation to the commonly used CBO “household” income numbers, I think these issues may have had a huge effect on the perception of the widening income gap as follows:


Which City has the Most Dis-Honest Tea Drinkers?

According to an experiment by Honest Tea, it’s L.A.
The company has placed unattended racks of its cold bottled tea on street corners in a handful of cities. A sign asks people to pay $1 per bottle, a heavy discount already. Viewers then “watched people wrestle with their conscience.” Hidden cameras live-stream the action here.
So far, the citizens of Seattle are coming out as the most honest, with 97% of people paying. Atlanta, Boston, Dallas and Cincinnati are in second with 96%. L.A. is last with 87% — they were actually at 90% earlier today, but that fell as the day went on, and the temperature went up. Here are yesterday’s high temperatures for the handful of cities, in order of payment rates:


A Teaching Moment on Numeracy

It’s an embarrassing episode. The opening sentence of James B. Stewart’s Tangled Webs: How False Statements Are Undermining America is:
“We know how many murders are committed each year — 1,318,398 in 2009.”
But this is false. As Jeffrey Rosen notes in a savage New York Times review, there were 15,241 murders in 2009. The cited number isn’t just wrong, it’s wrong by two orders of magnitude. Where did the 1,318,398 come from? It’s the number of violent crimes, which includes robbery, rape and assault. And only a small proportion of all violent crimes — a little more than 1 in 100 — are murders.
And so this provides a useful teaching moment for thinking about numeracy. How can you avoid such errors?


Why Has There Been So Much Hacking Lately? Or Is It Just Reported More? A Freakonomics Quorum

You don’t have to be all that sharp to see that there’s a lot of hacking going on lately. As I type, Rupert Murdoch and his allies are testifying before British Parliament over the mushrooming News of the World disaster. It seems like everyone on earth is getting hacked: consultants and cops, Sony and the Senate, the IMF and Citi, and firms ranging from Lockheed Martin (China suspected) to Google (ditto) to dowdy old PBS. But is there really more hacking than usual of late, or are we just more observant?
To answer this question, we put together a Freakonomics Quorum of cyber-security and I.T. experts (see past Quorums here) and asked them the following:

Why has there been such a spike in hacking recently? Or is it merely a function of us paying closer attention and of institutions being more open about reporting security breaches?


What's a Good "Doomsday Currency"?

A reader named Marcus Kalka writes:

I have a weird question, but a good one. With all the talk about the value of the U.S. dollar falling and the U.S. dollar losing its status as the world’s reserve currency, I am curious to know your guys’ thoughts on what possible temporary alternative currency you believe would be the most optimal for us here in America in a hypothetical future doomsday scenario — i.e., what one should stock a lot of in his or her basement in the event of a [heaven forbid] total financial meltdown? Historically, cigarettes, alcohol, candy, and even packs of mackerel have been used as a bartering commodity currency where cash is not as useful or cannot be used. And so, my question for you is this: From an economic standpoint, which item do you think would make the most ideal “doomsday currency” in the U.S. for this time period? Perhaps cigarettes or wine? Gold or silver coins? Cans of tuna? Baseball cards? Bottles of water? Any thoughts? And any ideas on a potential makeshift currency sign?

Tough one. How about … gems (the old standby), cell phones, iPads, SIM cards, incandescent light bulbs, toolboxes, running shoes …


The Comparative Advantage Juice

We came close to overturning comparative advantage last night with our new juice-squeezer. Using it requires peeling the oranges, which involves rolling them around, making two circumferential cuts, and then stripping the flesh out. Only then can the flesh be thrown in the squeezer. After doing this together, my wife announced that I was so incompetent that the elapsed time in the first three steps would be less if she did everything and I watched. What she really meant was, “Daniel, your marginal productivity is very low! (But it wasn’t negative: I was able to put the oranges in the squeezer, but she could have done that too, and the “assembly line” would have moved faster.)
How many household production activities are there where even the second cook “spoils the broth”?


Our Daily Bleg: How to Fairly Divide an Estate?

A while back, we ran a bleg in which a reader needed help dividing up a loved one’s furniture and other property. Now a reader named M. writes with a trickier and more philosophical estate-dividing problem:

My grandmother is 93 and in decent health. She has 4 biological children, 10 grandchildren, 23 great-grandchildren and a great-great-grandchild is possible (the oldest great-grandchild is married.) She has a decent amount of assets; barring unforeseen circumstances her estate will be a few million dollars.
From the perspective of fairness, one might say the estate should be divided equally between the four children. From a purely biological perspective, an individual wants to see that his or her genetics be passed on to future generations. In our case, while one of the children produced two grandchildren who in turn have only one of the great-grandchildren, another child produced 5 grandchildren and they in turn 10 of the great-grandchildren.


A Corruption/Parking Tickets Map

Forbes‘s Jon Bruner has made a cool map of economists Raymond Fisman and Edward Miguel‘s paper “Cultures of Corruption: Evidence From Diplomatic Parking Tickets” (noted here earlier). The paper measured diplomats who used their immunity to dodge parking fines, resulting in a list of violations per U.N. diplomat. Kuwait tops the list at 246 violations per diplomat. The map is paired with corruption scores from Transparency International, Bruner notes:

Fisman and Miguel set out to use the parking data to understand the impact of social norms on official corruption. The idea is that diplomatic parking violations are essentially consequence free, except for any approbation that might come from the diplomat’s home state. A political culture that doesn’t mind its diplomats racking up parking tickets might not mind outright corruption.


Bad Karma-geddon? Conjecture, Construction and Congestion in L.A.

L.A.’s “Carmageddon” is over. For those in the rest of the country, or Angelenos who spent the last two months trekking in Bhutan or in monastic seclusion, Carmageddon was the result of the complete closure of a major Los Angeles freeway over the weekend. The results?
Carmageddon was predicted by almost all journalists and government officials to be a brewing traffic nightmare of unprecedented dimensions. Only a day before the event I was reading predictions by our transportation authorities stating that traffic as much as 50 miles away would reach nightmare-like proportions. Only a very few, including myself, predicted we would see a situation of unusually light traffic reminiscent of the last time a similar situation happened: the 1984 Los Angeles Olympics.
In fact, Carmageddon saw stunningly low traffic levels, with many who did venture out reporting they had never driven at such speeds in LA in their lifetimes. Moreover, fears that the project (which involved demolishing half of a bridge over the highway) would drag on into Monday’s rush hour proved totally unfounded, as the work was completed and the freeway reopened on Sunday afternoon, many hours ahead of schedule.


The "Solar Panel" Effect on Home Sales

Our recent podcast on “conspicuous conservation” looked at the “Prius Effect” — that is, how valuable it is for green-leaning consumers to signal their devotion to the environment by driving an obviously-hybrid Toyota Prius. (BTW, you can also fake it with an “instant hybrid conversion kit.”) The episode was based on an interesting paper by Alison and Steve Sexton called “Conspicuous Conservation: The Prius Effect and Willingness to Pay for Environmental Bona Fides.” It included some talk about solar panels as well, and how some people mount them on the street-facing side of their homes even though the sun shines more strongly on the rear.


Income Equality in Revolutionary America

A tad late for Independence Day, but interesting nevertheless: a new paper called “American Incomes Before and After the Revolution,” by Peter H. Lindert and Jeffrey G. Williamson. Couldn’t find an ungated copy; abstract below (emphasis is mine):

Building social tables in the tradition of Gregory King, we quantify the level and inequality of American incomes before and after the Revolutionary War. Our tentative estimates suggest that between 1774 and 1800 American incomes fell in real per capita terms. The colonial South was richer, and then suffered a greater Revolutionary decline, than suggested by previous estimates. Any rapid growth after 1790 seems to have just partially offset part of a very steep wartime decline. We also find that free American colonists had much more equal incomes than did households in England and Wales. Indeed, New England and the Middle Colonies appear to have been more egalitarian than anywhere else in the measurable world. The colonists also had greater purchasing power than their English counterparts over all of the income ranks except in the top few percent.


For Economic Growth, Does Penis Size Matter More Than Political System?

In SuperFreakonomics Illustrated, we published this penis-flag chart in the context of a discussion about how ill-fitting condoms failed to protect men and women alike in countries including India. The fact is that reliable penis-size data is notoriously hard difficult to come by get. Here’s one website that aggregates data from around the world, and here are its data sources.
Using those data, Tatu Westling of the University of Helsinki has written a paper called “Male Organ and Economic Growth: Does Size Matter”? Please do take this with a sizable grain of salt.


FREAK-est Links

Using science for art, and art for science. How much does it cost to go to Hogwarts? Stephen Hawking: If we can colonize space within 200 years, humans will survive. World map: 7 billion people and their income. Creating a market for cigarette butts: at $3 a pound, it’s well worth it. Monkeys and fair use: if a monkey takes . . .


Who Should Play Stephen Dubner in Turbulent Souls Film?

Stephen Dubner’s first book, Turbulent Souls, has been optioned by The Group Entertainment (Variety‘s report here), with writer Larry Gross (48 Hours, True Crime, We Don’t Live Here Anymore) to adapt the memoir for the big screen. Not that we have a say in this, but just for fun we’d like to find out which actor Freakonomics readers think should play the Dubner in the film.


A Picture's Worth a Thousand Words

I’m back to inviting readers to submit quotations whose origins they want me to try to trace, using my book, The Yale Book of Quotations, and my more recent researches.
Ed Catlett asked:

“People often say ‘A picture is worth a thousand words.’ I believe the original quote was actually ‘A picture is worth ten thousand words’ as stated by Fred R. Barnard, of Printers’ Ink, 10 March 1927. Which is correct?”


Not the Kind of Customer Review You Read Every Day

You never know what you’ll run across while reading Yelp. While sussing out Philadelphia hotels, I came across this review:

First of all, let me just say that, if you can get a room, this is an excellent hotel. Don’t let the fact that a transgendered prostitute was arrested for killing an occupant here and tried setting fire to his room in November 2010. As with any hotel, you should be careful who you let into your room anyway.

The reviewer gave the hotel four stars out of five. It wasn’t the murder (which, though I was skeptical, was for real) that led him to deduct a star, but rather the low water pressure and bad hours at the fitness center.
And you wonder why companies are still nervous about the whole customer-review concept?


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


Another Salvo in the Tenure Debate

Should professors have tenure? The question, debated recently on this blog, misses the mark—as do the usual answers, whether “yes,” “no,” or “maybe.”
On the “no” side, it is argued that tenure protects incompetent spongers. A very reliable (tenured) colleague, at a university that shall remain nameless, tells me of professors whose interests are no longer intellectual and who spend their time playing the real estate market. Their research productivity, measured in grant dollars or papers, is low; thus, the university is angry. Their teaching is also substandard, yet not quite abysmal enough to get them fired. To urge them to resign, the department punishes them… by assigning extra teaching!
On the “yes” side, it is argued that tenure protects academic freedom. That point is made by my colleague on this blog Dan Hamermesh. Ten years ago I agreed with him. I would not have imagined my future self happy as an associate professor at Olin College of Engineering: Olin offers six-year renewable contracts instead of tenure. Now I see Olin’s system as a reasonable alternative to tenure, for I no longer believe that tenure supports academic freedom.


The Texas Tax Holiday: A Business Subsidy Even a Kid Can See Through

The 13-year-old grandson and his 11-year-old sister are discussing the Texas tax holiday—for one weekend in August there will be no sales tax on school-related items. The grandson says stores will cut prices to compete for customers. The granddaughter, already an inveterate shopper, says no: With the tax holiday there will be so many customers that the stores will be able raise prices.
While prices won’t rise compared to the previous weekend, the granddaughter seems to understand that an inelastic demand means the incidence of (gain from) the tax cut will be on the sellers—the customers are unlikely to get much of a bargain. A subtle, Texas-style subsidy to business; but one that even an 11-year-old can see through!


Debt Ceiling Poll: To Raise or Not to Raise

According to a new poll from the Pew Research Center and the Washington Post, more people see raising the debt limit as a bigger risk than not raising it. Though it’s close, and the margin has shrunk over the last two months, 47% say they’re more concerned about the risks that raising the debt limit pose to the U.S. economy than they are over the fallout of failing to do so; 42% see it the other way around.
Sounds like a good time for a Freakonomics Poll:


A Twitter Experiment

I’m a long-time Twitter skeptic. It’s difficult for an economist to see a 140 char lmt as a ftr. My journalist friends tell me I’m dead wrong. And a recent long and boozy evening with co-founders Evan Williams and Jason Goldman convinced me to give it a try. Is Twitter worth the hype? Let’s find out.
Today I’m beginning my Twitter Experiment. I’m now tweeting @justinwolfers. I’m going to keep this up for a couple of weeks as a “burn in” period—basically so that I can learn the ecosystem before my experiment begins. Then on the morning of August 1, I’m going to wake up, and flip a coin. Heads, I’ll open Twitter; tails I won’t. And I’ll do the same on August 2, and then every day for three months. If the coin comes up heads, it doesn’t necessarily mean that I’ll tweet, just that it will be a Twitter-aware day; I’ll consume the stream, and tweet away if I feel the need. Tails, and I’ll simply tweet “Tails, goodbye,” close the stream (unless I need it for research) and then resist the urge to tweet for the rest of the day.


Dollar Coins for Airline Miles? Bon Voyage!

A few weeks ago, we wrote about the Fed’s $1 billion stash of unwanted coins, and the Federal government’s seemingly failed experiment to get us to trade in our dollar bills for dollar coins. The folks over at NPR’s Planet Money got inside access to see the pile of coins, which so far has cost $300 million to manufacture. Despite the clear failure to create demand, the program, authorized by Congress in 2005, won’t end until 2016.
Now it seems some folks have found an easy way to profit from all those unwanted coins. Planet Money reports that people have started buying the coins with their credit cards, thereby earning lots of airline reward miles. The coins are sent to them by the government for free. The buyers then deposit the coins in their bank accounts, pay off their credit card bill… et voila, a free plane ticket to Paris. While the U.S. Mint is a bit miffed by the scheme, a spokesman admits that there’s nothing illegal about it.