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Archive for September, 2011

Diplomatic Parking Tickets

Usually, it’s New York City that complains bitterly about its diplomat parking ticket situation. The U.N. may be a beacon of hope and peaceful negotiation around the world, but it brings with it workers who use their immunity to park in front of fire hydrants, red zones, and anywhere else they please – it’s the stuff of urban legends and West Wing episodes.
Washington, D.C. is getting in on this complaining game. According to a new article on WTOP.com. D.C. takes the #2 spot with a diplomat ticket total of more than $500,000. New York City is owed a grand total of $17.2 million.
In 2003, the state department issued dire warnings to embassies in New York and D.C. threatening to withhold foreign assistance if parking tickets were not paid. So far though, it seems no foreign assistance has been withheld.


Am I Good Enough to Compete In a Prediction Tournament?

Last spring, we posted on Phil Tetlock’s massive prediction tournament: Good Judgment. You might remember Tetlock from our latest Freakonomics Radio podcast, “The Folly of Prediction.” (You can download/subscribe at iTunes, get the RSS feed, or read the transcript here.)
Tetlock is a psychologist at the University of Pennsylvania, well-known for his book Expert Political Judgment, in which he tracked 80,000 predictions over the course of 20 years. Turns out that humans are not great at predicting the future, and experts do just a bit better than a random guessing strategy.


Operation Twist 101

Given the confusion about Operation Twist, here’s an explanation.
What is Operation Twist? Basically the Fed can’t reduce short-term interest rates any further—they’re already at zero. So they want to reduce long-term interest rates instead. They do this by buying long-term bonds. When you buy more of something, you raise the price. And when you raise the price of a bond, you lower the interest rate. So what the Fed is doing, is lowering long-term interest rates.
How does the Fed pay for these bonds? With QE1 and QE2, the Fed effectively just printed the money. (They “expanded their balanced sheet.”) Instead, they are selling short-term bonds, and using the proceeds to buy the long-term bonds. Now selling a bunch of short-term bonds will—usually—lower their price, raising short-term interest rates. That’s why people call this “Operation Twist”—it should “twist” the yield curve—lowering long-term interest rates (which is what matters when you buy a house, or when a firm borrows to buy new machinery), but it also raises short-term interest rates.
Raising short-term interest rates is a bug, not a feature. But fortunately, this time, the effect on short-term interest rates will be small. Why? The Fed has already committed to keeping short-term interest rates near zero for the next couple of years. And so given this commitment, the 2-year bond will also be close to zero.


Follow the Money

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.
Jay K asked:

A friend recently quoted the Washington Post as saying ‘Follow the money’ during the Watergate days. I thought it was just a line from the movie ‘All the President’s Men’. But is the phrase older than that?

This is usually said to have originated in William Goldman‘s screenplay for the 1976 film All the President’s Men, uttered by the source called “Deep Throat.” (It does not appear in the earlier book by Carl Bernstein and Bob Woodward.)


When Demand is Sluggish, Tax the Savers

People in the very upper tail of earnings distribution have seen their incomes rise far more rapidly than even the well-off folks in the top decile. That makes it hard to argue against President Obama’s proposed tax on millionaires, which just restores some progressivity to the tax structure. Nonetheless, we’ve seen arguments against it on grounds that it will reduce job creation (presumably because the rich have a higher marginal propensity to save than others). I’m always amazed at how concerned rich people and their apologists are about job creation (although their concerns are loudest at times when proposals are made to raise their taxes). It reminds me of arguments that got the short-lived tax on yachts in the 1990s repealed.
I don’t believe most macroeconomic arguments; but if one wants to argue on macro grounds, at a time of sluggish demand, if you want to balance budgets surely taxes should be raised on those with high propensities to save (arguably the well-to-do) and reduced on the rest of society, so as to stimulate consumer demand. You can’t have macro arguments both ways!


FREAK-est Links

Is loud sex a billion dollar problem? A town in Brazil creates their own currency to boost local economy. Yawning might not mean you’re bored, but that your brain needs cooling. Bonus for your employees: gifts are more effective than money. Video gamers beat scientist at enzyme structuring; could lead to new AIDS drug. Pricing the atmosphere: worth 100 times . . .


Picking the NFL Playoffs: How the Experts Fumble the Snap

Our latest Freakonomics Radio podcast, “The Folly of Prediction,” is built around the premise that humans love to predict the future, but are generally terrible at it. (You can download/subscribe at iTunes, get the RSS feed, or read the transcript here.) But predictions about world politics and the economy are hard — there are so many moving parts.
In the podcast, you’ll hear from Freakonomics researcher Hayes Davenport, who ran the numbers for us on how accurate expert NFL pickings have been for the last 3 years. He put together a guest post for us on football predictions.
Picking the NFL Playoffs: How the Experts Fumble the Snap
As careers in journalism go, making preseason NFL predictions is about as safe as they come these days. The picks you make in August can’t be reviewed for four months, and by that time almost nobody remembers or cares what any individual picker predicted. So when Stephen asked me to look at the success rate of NFL experts in predicting division winners at the beginning of the season, I was excited to look back at the last few years of picks and help offer this industry one of its first brushes with accountability.


The Latest from the Brookings Panel

I’m back from my favorite conference of the year—the Brookings Papers on Economic Activity. It was a terrific line-up of papers. And to call the discussion lively would be an understatement. (Full disclosure: David Romer and I are the co-editors.)
While a close reading of technical research papers is my idea of a good time, I’m told not everyone is wired this way. So I went into the studio to record a very simple summary of my thoughts on the papers. You won’t quite get the whole two days of economic policy wonk-ery, but this video is a start:


The Authors of Willpower Answer Your Questions

Last week, we solicited your questions for John Tierney and Roy Baumeister, authors of the new book Willpower: Rediscovering the Greatest Human Strength . You responded with a variety of interesting questions, and now Tierney and Baumeister return with some in-depth answers.
Thanks to everyone for participating.
 
Q. Is willpower a single commodity (so to speak), or is there, as I suspect, a one type of willpower for, say, dieting, another one for academic study, another for this, another for that? –AaronS
A. No, there’s just one single resource (or commodity). There’s one source of mental energy for resisting temptation and performing other acts of self-control, and this willpower is also depleted by making decisions. What you experience may reflect the fact that willpower is limited and so people have to allocate it: they use it at the office to work effectively and diligently, but have messy homes and are short-tempered in the evening. Or people who show wonderful self-control at dealing with personal relationships but can’t seem to meet their deadlines.


Deforestation, and the Incentivized Eco-Crime of Indonesia

There are books that governments keep officially, and then there are the other books – accounts of what people are actually doing and profiting from that are never mentioned in any legal context. A team of researchers from MIT, the University of Maryland, the London School of Economics and the World Bank cleverly used MODIS satellite imagery to uncover this kind of discrepancy as they investigated deforestation in Indonesia.
The satellite pictures allowed for comparison of legal and illegal logging operations. What they found (and write about in a new paper for NBER) shows how an increasingly decentralized government, coupled with very real monetary incentives for local officials, leads to eco-crime.
Indonesia contains one of the largest pieces of tropical forest in the world, rivaled only by Brazil and the Democratic Republic of the Congo. It’s also the third largest producer of greenhouse gases behind the U.S. and China, due largely to its “forest extraction” practices. The paper examines three main forces that affect the decision-making and corruption of bureaucrats and government officials in charge of the logging-heavy jurisdictions of Indonesia.


Should There Be a Hitchhiking Renaissance?

One of the greatest transportation resources out there is… your backseat. According to a U.S. Department of Transportation report, the average vehicle commuting to and from work has only 1.1 people it. This means that about 80 percent of car capacity goes unused. In a moment when we’re worrying about gas consumption and carbon emissions, this is a lamentable inefficiency. . . .


Wednesday's Crash

So, we crashed yesterday because reddit picked up our story on Japanese adult adoptions, and it caught internet fire. Which is great! Except that we weren’t ready to handle more than double a normal day’s traffic in a matter of hours.
We’re not the first site to be crashed by reddit, which hails itself as the “Front page of the internet,” and sometimes organizes crashes on purpose. But that wasn’t us, their users liked our story: for a moment on Wednesday, ours was the top story on the site’s Today I Learned page.
Ultimately, this is good news, and gives us a great reason to expand. In the meantime, the problem is being addressed. We apologize for the inconvenience and, as always, thanks for reading.


Freakonomics Friends in the News, for Better and Worse

It was great to see some familiar names on this year’s list of MacArthur “genius” awards. They include Roland Fryer of Harvard, who has shown up many times on this blog as well as in Freakonomics and in the New York Times. His work on everything from the black-white baby-name gap to education incentives is well-deserving of MacArthur recognition, and I’m sure this is hardly the last award he’ll win. Another winner was Jad Abumrad of the wonderful radio show RadioLab. If you don’t know this show, you should. I was also very pleased to see Kevin Guskiewicz on the MacArthur list; he’s at the forefront of research into sports injuries, especially the kind of helmet-induced football injuries we’ve discussed in the past.
On the other side of the ledger is the very disturbing news that the online poker site Full Tilt Poker has been operating, in the words of the U.S. Attorney in Manhattan, as “a Ponzi scheme,” siphoning off customers’ money to make multi-million dollar payments to Full Tilt’s owners, who include Chris “Jesus” Ferguson, Howard Lederer, and Rafe Furst, who has appeared on this blog multiple times. Yes, we live in a world of presumed innocence; but this Journal article and the lawsuit highlights don’t paint a pretty picture. FWIW, here’s Rafe’s public response.


The Debate over Teacher Merit Pay: A Freakonomics Quorum

The term “merit pay” has gained a prominent place in the debate over education reform. First it was former D.C. schools chancellor Michelle Rhee trumpeting it as a key to fixing D.C.’s ailing public schools. Then a handful of other districts gave it a go, including Denver, New York City, and Nashville. Merit pay is a big plank in Education Secretary Arne Duncan‘s platform; and Chicago mayor Rahm Emanuel has just launched his own version of merit pay that focuses incentives toward principals.
There’s just one problem: educators almost universally hate merit pay, and have been adamantly opposed to it from day one. Simply, teachers say merit pay won’t work.
In the last year, there’s been some pretty damning evidence proving them right; research showing that merit pay, in a variety of shapes and sizes, fails to raise student performance. In the worst of cases, such as the scandal in Atlanta, it’s contributed to flat-out cheating on the part of teachers and administrators. So, are we surprised that educators don’t respond to monetary incentives? What makes teachers different?
For answers to these and related questions, we decided to convene a Freakonomics Quorum.


Killing What You Eat: The Dark Side of Compassionate Carnivorism

There’s a relatively new category of conscientious consumer on the rise known as the “compassionate carnivore.” These are meat eaters who have chosen, with good reason, to remove themselves from the horrific practices of factory farming. In her thoughtful book, The Compassionate Carnivore, Catherine Friend puts it this way:

I believe it’s possible to show compassion for animals and still eat them. For me, this means paying attention. It means learning more about the animals I eat and taking some responsibility for their quality of life.

A significant number of meat consumers have taken this message seriously enough to become meat producers. Indeed, the urban homestead movement in particular has inspired untold numbers of urbanites to take compassion to the extreme and become part-time animal farmers themselves.
The rationale for this transition is multifaceted, and often quite convincing. “Those of us that raise our own animals,” one of my critics concisely points out, “are doing so because we don’t want to be part of the industrialized agricultural machine that routinely abuses animals for the sake of the almighty dollar.” An urban homesteader from Oakland went one further: “the level of appreciation for nature and life when you slaughter your own meat creates a kind of ethic that I think is what we need to save the world.”


Will First-to-File Hurt Small Inventors?

The U.S. just passed the first major patent reform in nearly sixty years – which includes as a central provision a change to the patent priority rule. Instead of awarding a patent to the first person to invent, we will join other nations in awarding patents to the first person to file an invention.
David Abrams and Polk Wagner have a great paper looking at whether the proposed change in our patent system from a “first to invent” regime to a “first to file” regime is likely to disadvantage individual inventors. The concern is that corporate inventors will have an easier time than the individual in gearing up to draft and file a patent application.
The paper ingeniously looks to see what happened when Canada introduced a similar reform in 1989. The paper is also a great way to teach yourself about the difference-in-difference approach to estimation. The paper first estimates the pre-reform difference between the U.S. and Canada in the proportion of patents going to individual inventors. It then looks to see whether this difference changed – that is, whether there was a difference in the difference – after the Canadian first-to-file reform went into effect.


American Health Fail: What's Making Us Fat? A Decline in Smoking

Americans are fat. The latest obesity estimates reach as high as 30% of the population. The future looks worse. There’s been much hand wringing over the years, with a new television show sprouting up every season imploring the obese to lose weight. But everyone wants to know: why is this happening?
Researchers Charles Baum and Shin-Yi Chou provide a detailed look at the leading indicators of weight, using the National Longitudinal Survey of Youth from 1979 and 1997 to compare the habits, similarities and differences between people of the same age – just a quarter century apart. The results aren’t pleasant: the largest effect on our recent weight gain? The decline in cigarette smoking.


What Percentage of Microfinance Loans Actually Go to Business Investment?

If someone with a clipboard came up to you in the street and asked you if you secretly harbor racist views, have stolen things in the past, had unprotected sex, or some other illicit behavior, how likely would you be to tell the truth?
Probably not very. This causes havoc for any researcher who wants to study behavior that may deviate from social norms in some way. A survey technique called “list randomization” allows researchers to calculate the average response to a question in a population, without being able to identify the response of any one individual. In theory this gives people the freedom to answer truthfully, knowing that even the interviewer won’t be able to tell what they answered.
This method has indeed been used to measure hidden racism and sexism among American voters, as well as all sorts of bad behavior by American teens.
In a paper, forthcoming in the Journal of Development Economics, Jonathan Zinman and I apply this approach to the question of how the poor spend their microfinance loans.


The Vanishing Walk to School

Since the late 1960s, the share of U.S. kids and teens who are overweight has more than tripled. Why? I personally find Ronald McDonald kind of sinister, but it’s possible that Happy Meals might not deserve all the blame. In fact, Noreen McDonald—no relation to Ronald—of the University of North Carolina at Chapel Hill has analyzed a trend that might be contributing to the alarming rise in childhood obesity. Kids today aren’t walking or biking to school like they used to.
In 1969, the National Household Travel Survey found that roughly 41% of school-age children/teens got to school by “active travel” (i.e. walking and biking, though mostly walking, which then and now is more than 10 times more prevalent than biking).
In 2001 the walk/bike share was down to roughly 13%, a pretty spectacular drop. For elementary school children the change was even more stark. Today, even students who live within one mile of school have a less than 50% chance of walking; about 86% of similarly situated students walked in 1969.


Forgive Student Loans? Worst Idea Ever.

There’s an argument going around right now that forgiving the country’s student loan debt would have a stimulative effect on the economy. This online petition by Signon.org, an offshoot of Moveon.org, has nearly 300,000 signatures. Its basic argument is this:

Forgiving the student loan debt of all Americans will have an immediate stimulative effect on our economy. With the stroke of the President’s pen, millions of Americans would suddenly have hundreds, or in some cases, thousands of extra dollars in their pockets each and every month with which to spend on ailing sectors of the economy. As consumer spending increases, businesses will begin to hire, jobs will be created and a new era of innovation, entrepreneurship and prosperity will be ushered in for all.


Buyout Package Bingo: A Reason to Choose More Work for Same Pay?

An example of irrationality? A colleague at another university was offered a buy-out: A full year’s pay if he would resign/retire at the end of the current semester. At the same time his school also offered a phased retirement deal: Two years at half pay, with half a usual teaching load.
This economist chose to take the phased retirement, thus choosing the same pay, but teaching four courses over two years instead of no teaching. I think he’s crazy; but I think you can write down a utility function that is consistent with his behavior and violates none of our assumptions about preferences.


Caption Contest: The Winners!

Last Friday, our contributor and friend Justin Wolfers decided to have some end-of-the-week fun and run a caption contest for a pretty amusing picture he came across. The response was great: the post got 170 comments. As promised, we picked a winner based on the number of thumbs-up approvals given.
That lucky, and witty winner, is VB in NV, who posted the following less than 10 minutes after the post went live:

“I checked the vault Mr. President, and we’re down to a stack of twenties about this high.”
Well-loved. Like or Dislike: Thumb up 276 Thumb down 13

We’re going to give you some Freakonomics swag, VB, so watch out for an email from us. Thanks to everybody for participating!


Freakonomics Poll: When It Comes to Predictions, Whom Do You Trust?

Our latest Freakonomics Radio podcast, “The Folly of Prediction,” is built around the premise that humans love to predict the future, but are generally terrible at it. (You can download/subscribe at iTunes, get the RSS feed, listen live via the media player above, or read the transcript here.)
There are a host of professions built around predicting some future outcome: from predicting the score of a sports match, to forecasting the weather for the weekend, to being able to tell what the stock market is going to do tomorrow. But is anyone actually good at it?


Physical Activity During the Recession: More Voluntary Exercise, Less Exertion

Last month, we wrote about data pulled from the American Time Use Survey (ATUS), examining how Americans spend their lost work hours during the recession. While 32% of foregone work hours were spent watching TV and sleeping (not great, though sleeping is helpful), 15% of that time went to “other leisure,” among which, there is “listening to music” and “being on the computer,” as well as “exercise and recreation.”
Two new studies (both coauthored by Dhaval M. Dave of Bentley University) drill further into that ATUS data to paint a more complete picture of our exercise and physical activity habits, and ultimately, what impact they have on our health. The first finds that during the recession, we engage in more voluntary exercise, but have less exertion. Part of this has to do with the difference between exercise and physical activity — the latter is seen as the healthier of the two. (Better to walk to work everyday than do sit-ups twice a week.) With the loss of work, comes a loss of physical activity — particularly with the types of jobs we’ve lost.


FREAK-est Links

This week, why SpongeBob hurts kids’ willpower, a restaurant in Saudi Arabia fines you for unfinished plates, robots inventing their own language, Indonesia’s floating trash problem, jet packs are finally for real, and lie detectors that actually work.


Good News: We're Getting Better at Not Killing Sea Turtles

Human-caused sea turtle deaths are down 94% since 1990 because of “fisheries-specific bycatch mitigation measures.” Basically, it means we’re getting better at not catching sea turtles in giant fishing and shrimping nets. A paper to be published in the November issue of the journal Biological Conservation compiles the first cumulative estimates of the number of sea turtles unintentionally caught across U.S. fisheries between 1990 and 2007 — before and after implementation of mitigation measures. The researchers are careful to point out, however, that they cannot account for off-the-books fisheries. They write in their abstract:

Our estimates represent minimum annual interactions and mortality because our methods were conservative and we could not analyze unobserved fisheries potentially interacting with sea turtles.

Before measures were put in place 20 years ago, 300,000 sea turtles were victims of bycatch, and 70,000 were killed every year.


Entitled to Know

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.
jennifer atkinson asked:

“When did we start calling social security, medicare, and medicaid ‘entitlements’? Seems like they might well be deemed obligations.”

The Oxford English Dictionary does not yet include this sense of the word “entitlement,” but I believe that it originated with or was at least popularized by pioneering legal scholar Charles Reich. Reich used “entitlement” meaning “right to governmental benefits” in his landmark article “Individual Rights and Social Welfare: The Emerging Legal Issues” in the Yale Law Journal in 1965. He had earlier used the corresponding sense of the verb “entitled” in his even more landmark article “The New Property” in the Yale Law Journal in 1964.
Do any readers have any other quotations whose origins they would like me to attempt to trace?


The Testosterone Tradeoff: Hormone Decrease Makes Better Fathers

It’s official: having a baby will lower your testosterone levels. If you’re a man, of course. And while this may seem scary and vaguely emasculating, it’s actually a good thing, according to a new study by researchers at Northwestern University. While testosterone is good for some activities, like competing for a mate, it’s not great for other activities, like nurturing a newborn baby. Here’s part of the abstract:

In species in which males care for young, testosterone (T) is often high during mating periods but then declines to allow for caregiving of resulting offspring. This model may apply to human males, but past human studies of T and fatherhood have been cross-sectional, making it unclear whether fatherhood suppresses T or if men with lower T are more likely to become fathers. …Our findings suggest that T mediates tradeoffs between mating and parenting in humans, as seen in other species in which fathers care for young. They also highlight one likely explanation for previously observed health disparities between partnered fathers and single men.