Search the Site

Archive for October, 2011

Confessions of a Racecar Driver

Last week we got an email from a reader named Daniel Herrington. He had just finished listening to our podcast, “The Upside of Quitting,” and wanted to tell us about a big quit he’s been pondering recently.

Daniel is a 25 year-old race car driver. He’s also an engineering graduate student at Duke. On the race track, he’s had enough success to keep at it: he’s won at Chicagoland Speedway, and had multiple top ten finishes. But it’s not quite enough to convince him that racing’s the right path. The sport is super expensive; plus, Daniel’s success has been a bit spotty. He’s only completed 2 full seasons in the last 7 years. Keep at it, and he might wind up a star. But he could also end up a middle-aged, burned-out race car driver with no other career to fall back on. So Daniel is hedging and pursuing a graduate degree.

Daniel agreed to answer some of our questions. The result is an honest, revealing piece, one that (especially given the tragic death of Indy Car driver Dan Wheldon last weekend) sheds light on the tough decisions many young drivers face, where they have to weigh the considerable risks of the sport against its obvious thrill.


America, the Underpopulated?

A recent editorial in The New York Sun argues that all this political bickering about immigration among Republican candidates misses an important truth: America is actually underpopulated. From the article:

[N]ot a single Republican candidate has spoken up for the idea that America is an underpopulated country. In terms of population density, it is, at 83 persons a square mile, an impoverished country, barely a quarter of the rich density of China, which is running way behind India. America just has enormous room for population growth.

And a desperate need.

What do you think, readers? Is America under-populated? Would Montana and Wyoming, for example, benefit from a few more people?

(HT: Paul Kedrosky)


FREAK-est Links

100-year-old man the oldest person to complete a full-distance marathon. Subject-object-verb: Linguists think we used to talk like Yoda. What percent are you? Use the WSJ‘s new calculator. Made in China: when a misreading results in a size 1450 monster slipper. Households under-report credit card debt by one-third. Egypt’s “Facebook Revolutionary” is now advising Occupy Wall Street. Will the world . . .


Evaluating Teachers: What About Doing it the Old-Fashioned Way?

As part of our ongoing obsession with improving public education, we bring you a new study from Jonah E. Rockoff of Columbia Business School and Cecilia Speroni, a former doctoral student at Columbia’s Teachers College, that explores the power of objective and subjective teacher evaluations. While an emphasis on merit pay and test scores can lead to widespread cheating (as covered in this week’s Freakonomics Marketplace podcast), not to mention the occasional Matt Damon outburst, Rockoff and Speroni offer a potential glimmer of hope for the old-fashioned approach: the study finds that subjective teacher evaluations for New York City teachers had strong predictive power for future student performance. Here’s the abstract:


Time Banks: Got Time for Lunch?

Last weekend, I was walking around New York’s Lower East Side when I stumbled upon an interesting restaurant. The counter was serving Thai food, but they didn’t take cash – they only took time.

For a home-cooked lunch (with table service), I was told I’d have to pay with a half-hour of my time. This was an alternative economy staged by artists Julieta Aranda and Anton Vidokle as part of Creative Time’s Living as Form exhibition, part of a larger community movement of time banks going on nationally.

A time bank is not a barter system. Your good (or service) is not directly exchanged for another good or service. There’s a medium of exchange: it’s time, not money.

Some interesting history from their artist statement


Lessons of the Listeria Outbreak: Do Locavores Make Us Less Safe?

As the death toll from listeria in cantaloupe reached 25 this week, marking the deadliest outbreak of foodborne illness in a quarter-century, some industry insiders are placing blame on the local foods movement. On economic grounds, they may have a point.

The contaminated melons were traced to a self-described small farm in Colorado that the FDA said had “poor sanitary” conditions. The FDA reported Wednesday that it found listeria in numerous areas of the farm’s packing facility, including a floor drain, a produce dryer, and a conveyor belt. Standing water and poorly designed equipment created “the perfect environment for listeria growth and spread,” according to one FDA expert. The farm claimed to have passed an outside audit just days before the outbreak that has sickened more than 100 people and devastated the cantaloupe industry. Farmers in California are plowing their crops under because of the collapse in demand.


"The Stock Market Crash of 2008 Caused the Great Recession"

That is the title of a new working paper by UCLA economist Roger Farmer (abstract here; PDF here).

Note that Farmer doesn’t argue that the crash “contributed to” the recession, or “was a leading indicator” of the recession — but, rather, that the crash “caused” the recession. It’s worth acknowledging that a) Farmer attributes the housing-market crash as the direct trigger of the stock-market crash; and that b) he does this in service of the larger question: how to beat back unemployment.

From the abstract:

This paper argues that the stock market crash of 2008, triggered by a collapse in house prices, caused the Great Recession. The paper has three parts. First, it provides evidence of a high correlation between the value of the stock market and the unemployment rate in U.S. data since 1929. Second, it compares a new model of the economy developed in recent papers and books by Farmer, with a classical model and with a textbook Keynesian approach. Third, it provides evidence that fiscal stimulus will not permanently restore full employment. In Farmer’s model, as in the Keynesian model, employment is demand determined. But aggregate demand depends on wealth, not on income.


AARP is Wrong About Inflation

I’m getting a 3.6 percent increase in my Social Security retirement benefits on January 1. This reflects the rise in the “cost of living.” I’m happy for the money, but it’s wrong: every economist who has studied the issue knows that the Consumer Price Index (CPI-U) used for this adjustment overstates inflation by failing to account for the fact that people substitute away from goods and services whose prices rise relatively rapidly.

For a decade the U.S. Bureau of Labor Statistics has published a measure that accounts for this substitution, the chained CPI (C-CPI-U). Over the last 10 years it has risen 24.4 percent, while the CPI-U has risen 27.4 percent (and 3.7 instead of 3.9 percent this past 12 months). The C-CPI-U is a better measure of the cost-of-living, and it should be used (although even it overstates inflation because it doesn’t account fully for improvement of products).

Unsurprisingly, groups claiming to represent us greedy geezers are vehemently against even this change, “This so-called ‘chained CPI,’ through compounding, would cut seniors’ benefits by thousands of dollars over their lifetimes ….,” said AARP Executive Vice President Nancy LeaMond.

Of course, nobody’s benefits would be cut. Rather, their future benefits would rise less rapidly and would reflect better the prices of the goods they consume. My advice to other geezers: suck it up—this is the right thing for society and the right thing logically.


Goldman Sachs Stumbles: The End of the "Vampire Squid"?

A few years ago, a friend of mine who used to work on Wall Street told me that the only stock anyone needed to own was Goldman Sachs. He was of course half-joking (I sure hope this wasn’t the advice he was giving clients), but his point was clear: whatever price increases were happening out in the world, whatever profits were there for the taking, no matter the market, you could be fairly certain that Goldman was on the scene.

The image of Goldman Sachs as some sort of omnivorous, ever-present beast was perpetuated by Matt Taibbi in his 2010 Rolling Stone article, in which he dubbed the firm “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” And that was just the second sentence.

It would appear that the squid has since had a few of its tentacles lopped off, or at least been shrunken down to size. For only the second time since it went public in 1999, Goldman Sachs has posted a quarterly loss.


How an Absent Father Affects Boys and Girls Differently

According to the U.S. Census Bureau, the share of children living in mother-only households has risen from 8 percent in 1960 to 23 percent in 2010. Freakonomics has a long-standing interest in the role parents play in the lives of their children, and while we usually find no merit in helicopter parenting, a basic level of involvement is obviously important. Past research has shown that a father’s involvement with his children is linked to all kinds of beneficial outcomes, from higher academic achievement, improved social and emotional well-being, to lower incidences of delinquency, risk taking, and other problem behaviors.

A new working paper from authors Deborah A. Cobb-Clark and Erdal Tekin examines the relationship between juvenile delinquency and the role of a father in the household, particularly in terms of the different effects an absent father has on boys and girls. They discovered, among other things, that sons benefit far more from a father (or father-figure) than daughters do. From the abstract:

…we find that adolescent boys engage in more delinquent behavior if there is no father figure in their lives. However, adolescent girls’ behavior is largely independent of the presence (or absence) of their fathers.


The Suburb as the Slum: Housing Voucher Shifts in America

A new working paper from the Brookings Institution’s Metropolitan Opportunity series examines a major demographic shift in housing voucher recipients from the cities to the suburbs. Authors Kenya Covington, Lance Freeman and Michael A. Stoll write: “Just as the suburbanization of poverty has gathered momentum, Americans who use housing choice vouchers (HCV) to help pay for their housing have increasingly moved into suburban areas as well.” The authors studied data from 2000 to 2008 to see how this shift has taken place.

They found that:

Nearly half of all HCV recipients lived in suburban areas in 2008. However, HCV recipients remained less suburbanized than the total population, the poor population, and affordable housing units generally.
Black HCV recipients suburbanized fastest over the 2000 to 2008 period, though white HCV recipients were still more suburbanized than their black or Latino counterparts by 2008. Black HCV recipients’ suburbanization rate increased by nearly 5 percent over this period, while for Latinos it increased by about 1 percent. The suburbanization rate for white HCV recipients declined slightly.


What Will Be the Impact of Seven Billion People?

On Halloween this year, the world’s population will hit seven billion — or so estimates the United Nations Population Fund. Spooky, considering we hit six billion only a little more than a decade ago. Elizabeth Kolbert offers a brief history of population growth in a recent New Yorker article:

Depending on how you look at things, it has taken humanity a long time to reach this landmark, or practically no time at all. Around ten thousand years ago, there were maybe five million people on earth. By the time of the First Dynasty in Egypt, the number was up to about fifteen million, and by the time of the birth of Christ it had climbed to somewhere in the vicinity of two hundred million. Global population finally reached a billion around 1800, just a couple of years after Thomas Malthus published his famous essay warning that human numbers would always be held in check by war, pestilence, or “inevitable famine.”

Of course, we all know that Malthus was a little off the mark.


Did Risk of Divorce Drive Boomer Women to Increase Their Education?

A new working paper from authors Raquel Fernandez and Joyce Cheng Wong highlights the stark differences in the lives of two generations of American women: those born in 1935 and those born just 20 years later in 1955. The authors found that education, wage structure and divorce were the main causes to changes in labor force participation.

From the abstract:

Women born in 1935 went to college significantly less than their male counterparts and married women’s labor force participation (LFP) averaged 40% between the ages of thirty and forty. The cohort born twenty years later behaved very differently. The education gender gap was eliminated and married women’s LFP averaged 70% over the same ages… We find that the higher probability of divorce and the changes in wage structure faced by the 1955 cohort are each able to explain, in isolation, a large proportion (about 60%) of the observed changes in female LFP.


Are We Really Losing 1% of GDP Due to Poor Health? Also, a Poll on Polling

We’ve been writing a lot about obesity recently. First, it was this study about projected future obesity rates, then we covered Denmark’s saturated fat tax, which Steve Sexton then criticized for being inefficient. So, if you’re tired of reading fat-related posts on our blog, I get it. But as long as reports like this one from Gallup keep coming out, we’re going to keep writing about them, especially when they include so many interesting conversation points.

Here are the top-line numbers:

About 86% of full-time American workers are above normal weight or have at least one chronic condition. These workers miss a combined estimate of 450 million more days of work each year than their healthy counterparts, resulting in an estimated cost of more than $153 billion in lost productivity per year. That’s roughly 1% of GDP.


How Will Sean Payton's Injury Affect the Saints' Offense?

On Sunday, in a game against the Tampa Bay Buccaneers, New Orleans Saints head coach Sean Payton tore his MCL and fractured his knee when one of his own players was tackled out of bounds and crashed into him on the sideline. You can watch the replay here if you have a thing for gruesome knee injuries.

Payton is the rare NFL head coach who still calls the offensive plays, so the injury presented a pretty big problem for the Saints, especially since it happened early in the first quarter. Rather than going to the training room, Payton gutted it out on the sideline and kept calling plays while trainers tended to his knee. By halftime though, with the Saints trailing 20-10, Payton had had enough and passed play-calling duties over to his offensive coordinator Pete Carmichael.

It’s tough to say what effect the injury had on the Saints’ offense Sunday; they lost 26-20. By the numbers, the Saints’ output was fairly even through the first to second half.


International Aid and Mobile Cash Transfers

We’ve blogged before about the many applications of mobile phone technology in developing countries, especially when it comes to mobile banking. In much of the developing world, particularly in Africa, mobile phones are thriving in remote villages, while access to electricity, clean water, schools and government services is weak at best; yet cellular service is strong.

A new research paper by Jenny C. Aker, Rachid Boumnijel, Amanda McClelland and Niall Tierney analyzes the effectiveness of yet another mobile application gaining strength in the developing world: cash transfer programs. After a drought in Niger in 2009 and 2010, Concern Worldwide, an international NGO, provided “unconditional cash transfers to approximately 10,000 households during the ‘hungry season,’ the five-month period before the harvest and typically the time of increased malnutrition.”

Instead of distributing cash in the usual way, the NGO conducted a randomized experiment: one-third of targeted villages received a monthly cash transfer through a mobile system called zap; another third received manual cash transfers, and the remaining third received manual cash transfers plus a mobile phone.


Did Blackberry Outages Cut Abu Dhabi Traffic Accidents by 40 Percent?

A three-day Blackberry service outage last week in parts of the United Arab Emirates once again demonstrates the value of “distracted driving” laws. According to an article in The National, an English-language paper in Abu Dhabi, traffic accidents in Dubai last week fell 20 percent from average rates on the days when BlackBerry users were unable to use its messaging service. In Abu Dhabi, the number of accidents last week fell 40 percent, and there were no fatal accidents. According to the article, on average there is a traffic accident every three minutes in Dubai, and a fatal accident every two days in Abu Dhabi.

Abu Dhabi recently launched a campaign against cell phone use while driving and plans to use electronic evidence in traffic cases.


Marriage: More Money, More Problems

We included this in last week’s FREAK-est Links, but thought it was worth a full blog post. A recent study of 1,734 married couples in the U.S. finds that money, indeed, can’t buy you love. According to an article about the study, couples who don’t value money very highly score “10 to 15 percent better on marriage stability and other measures of relationship quality than couples where one or both are materialistic.”

“Couples where both spouses are materialistic were worse off on nearly every measure we looked at,” said Jason Carroll, a professor at BYU, and the lead author of the study. “There is a pervasive pattern in the data of eroding communication, poor conflict resolution and low responsiveness to each other.” Interestingly, materialistic couples’ perception of their finances seems to matter more than their actual financial status: “Though these couples were better off financially, money was often a bigger source of conflict for them.”


Call It a Comeback: Why Performance Increases When We're Losing

If you were a New York Knicks fan in the mid 1990’s, you surely remember a certain 1995 playoff game in which Reggie Miller scored 8 points in under 9 seconds (two back-to-back three pointers, and two foul shots) to rally the Indiana Pacers to a last-second win over the stunned Knicks. It was a truly sad moment for New Yorkers, made all the worse when the Knicks lost the series in seven games. For whatever reason, some players seem to play better from behind. Reggie Miller certainly did.

A recent study by Jonah Berger of Wharton and Devin Pope of the University of Chicago highlights how being slightly behind is often an advantage. The authors devote a large part of their research to studying 18,000 NBA and 45,000 college basketball games. They also conducted an experiment in which people played competitive games and were given feedback halfway through.


More Research on Why Nice Guys Lose

A couple months ago, we wrote about a study by researchers from Notre Dame and Cornell that showed how “agreeableness” negatively affects monetary earnings, particularly for men. Translation: it pays to be a jerk. Well, not exactly, but it apparently doesn’t pay to be overly nice.

Now, a recent paper from a host of researchers (from Stanford, Northwestern and Carnegie Mellon) fleshes out this notion by showing why nice guys who watch out for others generally fail to become leaders. The study looks at how contributing to the public good (i.e. taking care of outsiders, and even others in a group setting) influences a person’s status on two critical dimensions of leadership: prestige and dominance. People who shared resources with their group were seen as prestigious, while those who protected their resources and even sought to deprive members of another group were seen as dominant.


The "Being Swindled" Demand Curve Shifts Left

A recent headline in The Onion reads, “Boardwalk Con Men Hit Hard By Sharp Decrease in Chumps.” Even though it’s a fake story, we can still have some fun with the economic principles it illustrates. According to the piece, the weak economy has reduced people’s willingness to be swindled— the demand for being swindled has shifted left. It’s gotten tough for swindlers, with one complaining, “In a stagnant economy like this, I can’t get no one interested in the same old grift.”

Not surprisingly, in this competitive industry (presumably entry/exit into/out of swindling is fairly easy), it is likely that some swindlers will leave the industry. The story notes that, unless the economy improves, many will, “…pull up stakes and take it down to Florida, where the chumps are a dime a dozen.”

That exit should restore normal profits for the swindlers who remain on the boardwalk.


The Freakonomics Guide to Hitchhiking: A Contest

Our latest Freakonomics Radio podcast “Where Have All the Hitchhikers Gone?” has a pretty obvious premise. You can download/subscribe at iTunes, get the RSS feed or read the transcript here.

What may not be super obvious to everyone out there is the meaning of the graphic above. So let’s play name that reference and throw in some swag for good measure!

We haven’t forgotten that your preferred method of giveaway is “random,” and we’ve had a contest before on this blog where the prize is contingent on your comment number. So here’s how it’s going to work this time: the 42nd comment will win if it bears the correct answer. If comment 42 has the wrong answer, the winning number doubles and the 84th comment will win — but again, only if the answer is correct. The winning number will triple, quadruple, etc. until we get a winner.

So tell us, what does 42 signify and where is it from? Hint: the title of this post.


How the Internet Is Restoring the Market for Hitchhiking

In our latest Freakonomics Radio podcast, “Where Have All the Hitchhikers Gone,” we looked at how hitchhiking is essentially a market. Specifically, as Levitt puts it, it’s a “matching market” where supply (a person who’s willing to give a ride) matches up with demand (a person who needs a ride) in natural equilibrium. Over time, that equilibrium, as facilitated by people thumbing on the sides of roads, eventually vanished.

But the supply remained; actually it increased — as the average number of passengers in a car during the work commute went from 1.3 in 1977, to 1.1 today. (Click here for more data.) And as gas prices have steadily risen, and the economy flat-lined, the demand has seemingly come back. Enter the Internet as the new facilitator.

As many of you have pointed out in emails and comments, an entire online ecosystem of ride-sharing ventures has cropped up in the last few years. So here are the highlights:


Political Football

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.

John machlachlan asked:

When did surgery start being called a ‘procedure’?

The Oxford English Dictionary quotes usage of the term “surgical procedure” from the medical journal Lancet in 1853, and “Osteoclasis is a simple procedure” from E. H. Bradford and R. W. Lovett, Treatise on Orthopedic Surgery (1890).

John also asked:

Was the secretary of defense ever called anything else such as the secretary of offense?

The answer is: Secretary of War.


Research Retractions Rising

There’s a new trend emerging in academic research: more retractions. According to a recent article in Nature by Richard Van Noorden, “[i]n the early 2000s, only about 30 retraction notices appeared annually. This year, the Web of Science is on track to index more than 400 (see ‘Rise of the retractions’) — even though the total number of papers published has risen by only 44% over the past decade.”

The article suggests that the increase is a result of ‘an increased awareness of research misconduct” and “the emergence of software for easily detecting plagiarism and image manipulation, combined with the greater number of readers that the Internet brings to research papers.”

While scientists and editors support the change, they point to various problems with the system: policy inconsistencies across journals, “opaque” explanations for retractions, ongoing citation of retraction papers and the stigma surrounding retraction. “[B]ecause almost all of the retractions that hit the headlines are dramatic examples of misconduct, many researchers assume that any retraction indicates that something shady has occurred,” writes Van Noorden.


How to Be Sure Your Waiter Brings You Decaf (And Thwart Tiger Attacks Too!)

You’ve just finished a dinner at a nice restaurant and you order decaf coffee instead of regular so that you won’t have trouble falling asleep. A few minutes later, your server brings you a steaming cup of Joe. You want to drink, but you’re worried it might have caffeine. At this point, I normally ask something like “Are you sure this is decaffeinated?”

But my friend (and newly tenured colleague) Yair Listokin tells me that Oprah suggests that we ask instead: “Is this regular coffee?” Or, “Are you sure this is regular coffee?”

It’s not fool proof, but asking “is it regular” will let you find out whether the waiter is willing to say “yes” to any question, possibly to avoid the extra work of having to go get a replacement? Framing the question doesn’t work if the restaurant follows the “after 8 p.m. or so, all the coffee is decaf” convention.


FREAK-est Links

This week, a new study says materialism ruins marriages; Italian PM Berlusconi thinks drugged-up stock traders cause market volatility; a scientist says memory, not practice, matters for success; does impatience make us fat? Russia’s coming population crisis; and an $18 million sunken treasure.


New Statistics About American Veterans

Sure, serving in the military long-term will likely make you a decent living, but what about the other effects military service has on veterans today? A new research paper from the Pew Research Center takes a look at the attitude of and challenges to American veterans returning from the wars in Iraq and Afghanistan. A total of 1,853 veterans were surveyed, and the poll shows some surprising things.