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Archive for November, 2011

Circling the Drain: Can the Euro Be Saved, Or Is It Doomed? A Freakonomics Quorum

On Jan. 1, 1999, the euro was launched in electronic form. A few years later, amidst much fanfare, 12 European countries began replacing beloved national currencies with the euro, and the currency rapidly became the tender of choice across Europe. Wim Duisenberg, the then-president of the European Central Bank applauded the new currency: “By using the euro notes and coins we give a clear signal of the confidence and hope we have in tomorrow’s Europe.”

Almost ten years later, things look a little different. The financial crisis that has brought much of the developed world to its knees looks poised to bring down Europe’s single currency as well. The cover of this week‘s Economist reads “Is this really the end?” Inside, the magazine offers the following observation:

The chances of the euro zone being smashed apart have risen alarmingly, thanks to financial panic, a rapidly weakening economic outlook and pigheaded brinkmanship. The odds of a safe landing are dwindling fast.


Diversity and Charity: An Inverse Relationship?

Our latest Freakonomics Radio on Marketplace podcast, “What Makes Donors Donate?” looks at what works (and what doesn’t) to incentivize people to give. A new NBER working paper studies the relationship between religious and ethnic diversity and charitable donations by looking at Canadian census data and tax records. Authors James Andereoni, Abigail Payne, Justin D. Smith and David Karp argue that the two are inversely related, that is to say that the more diverse a neighborhood, the lower its charitable donations. From the abstract:

A 10 percentage point increase in ethnic diversity reduces donations by 14%, and a 10 percentage point increase in religious diversity reduces donations by 10%. The ethnic diversity effect is driven by a within-group disposition among non-minorities, and is most evident in high income, but low education areas. The religious diversity effect is driven by a within-group disposition among Catholics, and is concentrated in high income and high education areas.


Tattoo Taboo

I was in Tokyo a few weeks ago speaking at IBM’s Business Analytics Forum. At 6:30 in the morning a few hours before my talk, I had a wonderfully rejuvenating swim at the Royal Park Hotel. But I was surprised to see a pool-side sign stating “Persons With Body Tattoos Not Allowed.”
I have swum at dozens of pools in the United States and have never encountered such a restriction. Is there any valid public health reason for tattoo discrimination? Is the pool policy driven by irrational health concerns (a la the early days of HIV hysteria)?


The Latest News on Global Warming; Weirdness Still Prevails

The U.N. is holding its big annual conference on climate change in Durban, South Africa. For those of you still paying attention to global-warming news, you may want to add a couple of links to your reading:

+ There’s been a second round of “ClimateGate” e-mails, (the first preceded the U.N.’s climate-change Copenhagen conference in 2009); the Times‘s Andy Revkin becomes a more prominent character this time around, for which he is attacked, and which attack he promptly defends.

+ A new study in Science argues with the accepted wisdom on climate sensitivity. From the website of Oregon State University, home to lead researcher Andreas Schmittner:


Bargain Hunting for Charities

Gosh that sounds so stingy. When we are charitable, we don’t want to be cheap. This is our moment of giving, of generosity, not bah-humbugness. Alas, that is exactly what we should be. If we go to a restaurant for chicken wings, what would you think of the following prices:

4 chicken wings: $8
6 chicken wings: $8
8 chicken wings: $8

Which would you opt for (assuming more is always better)? Naturally, it shouldn’t require much thought. So why not apply this to charity?

This is what Givewell does. (And I’m pleased to say, you can see the imprint of lots of research from Innovations for Poverty Action on their assessments and recommendations). You may remember I blogged about Givewell over the summer, and how there is no correlation between their assessment of organizational effectiveness and the horrid measure often used by those in search of a good charity, “general administrative and fundraising expenditures as a proportion of program expenses.”


Labor Peace in Baseball May Not Last Forever

The following is a guest post by David Berri, a Professor of Economics at Southern Utah University. He is also the lead author of Stumbling on Wins, the general manager of the sports-economics blog Wages of Wins, and is a frequent contributor to the Freakonomics blog.

Last week I looked at the labor negotiations in the NBA. Since then, the NBA appears to have reached an agreement with its workers, ending the latest dispute in professional North American sports.

Over the last three decades, labor disputes have become a common feature in professional sports. In fact – as The Wages of Wins indicated– relative to non-sports industries, labor disputes are about 25 times more likely in professional sports. So the recent lockout in the NBA was hardly surprising.


Shooting The Right Profile

My old band was called The Right Profile. (I talked about quitting in this radio show.) It wasn’t a great name probably but we stuck with it. I did love its provenance. It came from a song on The Clash’s London Calling, which is still one of my favorite records ever. “The Right Profile” was about the strange, sad life of the actor Montgomery Clift, who after a terrible car crash was shot from the right side. It was hardly the best song on London Calling — I wouldn’t even put it in the top five — but you come to love the names of people and things you loved, so I always loved The Right Profile.

So I was very jazzed to learn, via Variety, that a biopic of Clash leader Joe Strummer is in the works, to be directed by Julie Delpy, and it’s got a great title:

Details from The Right Profile are being kept under wraps, but the idea is to focus on Strummer’s life and his planned disappearance from the public spotlight in 1982. Pic is titled after the song “The Right Profile,” which appeared on the Clash’s seminal 1979 album “London Calling.”

An iconic figure of the British punk movement, Strummer died in December 2002, just a month before he and the Clash were inducted into the Rock and Roll Hall of Fame.

Can’t wait.

(HT: Mark Ehrenkranz)


More Heresy on Obesity

Obesity — its causes and consequences — is a frequent topic on this blog (and the podcast too). In the podcast, Eric Oliver argued that “the causal relationship between weight and maladies like heart disease, cancer, and even diabetes has not been firmly established.” That certainly strikes some as heresy. In a recent EconTalk podcast, noted heretic Gary Taubes lays out a well-argued position:

Taubes argues that for decades, doctors, the medical establishment, and government agencies encouraged Americans to reduce fat in their diet and increase carbohydrates in order to reduce heart disease. Taubes argues that the evidence for the connection between fat in the diet and heart disease was weak yet the consensus in favor of low-fat diets remained strong. Casual evidence (such as low heart disease rates among populations with little fat in their diet) ignores the possibilities that other factors such as low sugar consumption may explain the relationship.

Anyone for the paleo diet?


Addition Is Useless, Multiplication Is King: Channeling Our Inner Logarithm

TIME magazine has been running a series called “Brilliant: The science of smart” by Annie Murphy Paul. The latest column, “Why Guessing Is Undervalued,” quoted several results from research on learning estimation, a topic near to my heart. One result surprised me particularly:

…good estimators possess a clear mental number line — one in which numbers are evenly spaced, or linear, rather than a logarithmic one in which numbers crowd closer together as they get bigger. Most schoolchildren start out with the latter understanding, shedding it as they grow more experienced with numbers.

I do agree that children start out with a logarithmic understanding. I first learned this idea from a wonderful episode of WNYC’s Radio Lab on “Innate numbers” (Nov. 30, 2009). The producers had asked Stanislas Dehaene to discuss his research on innate number perception.

One of his studies involved an Indian tribe in the Amazon. This tribe does not have words for numbers beyond five, and does not have formal teaching of arithmetic.


Fun Things That Show Up on Flickr

Its content notwithstanding, what’s interesting to me about this picture is how jarring it is to see a black-and-white photograph these days. It instantly looks like an antique. There was a time, not so long ago, when 99 percent of serious photographers sneered at color photography. I worked at the N.Y. Times when it began printing color photographs in the news sections, and from some of the shrieking commentary you would have thought they were producing the color ink by pulverizing baby seals and kittens. The full-on proliferation of color photography is a good example of how quickly we get used to new things that we predicted we’d never get used to.

(HT: J.L.)


Risk = Hazard + Outrage: A Conversation with Risk Consultant Peter Sandman

In our recent podcast “The Truth is Out There… Isn’t It?,” we hear from professional skeptics, former UFO investigators, and “social incompetence” experts. One fascinating interview that didn’t make the final cut was with Peter Sandman, a “risk-communication consultant” whose work was also cited in Freakonomics. (Here is how he came to be what he is.)

Sandman breaks his work into three areas: scaring people who are ignoring something that is legitimately dangerous and risky; calming down people who are freaking out over something that’s not risky; and guiding people who are freaking out over something that is legitimately risky. To accomplish all this, Sandman came up with a useful equation: Risk = Hazard + Outrage. Here are some excerpts from Stephen Dubner’s interview with Sandman, which ranges from the perceived risk of WMD’s in Iraq to the debate over climate change.


Finally, an Investment Worth Making

From the Pittsburgh Post-Gazette:

In the decade since the stadium opened, the personal seat licenses or PSLs fans bought for the right to purchase season tickets have soared in value, offering a far better return on investment than the slumping stock market or even the price of a barrel of oil.

Take, for instance, a fan who bought a license for a seat in an upper level of Heinz Field for $250 in 2001. It now is selling for an average of $4,306, an increase of 1,622.4 percent, based on 2011 sales at STR Marketplace, a website authorized by the Steelers to allow fans to buy and sell seat licenses.

A seat license that went for $500 in an end zone now is selling for an average of $7,486, an increase of 1,397.2 percent. And one that sold in a lower midfield section for $2,700 when the stadium opened now is going for an average of $17,131, a jump of nearly 534.5 percent.

Taken together, the 49,278 seat licenses sold by the Steelers for an average of $1,172 since Heinz Field opened now are selling for $9,802, on average, or an increase of 736.3 percent, based on the sales data.


In Search of an NGO in New Delhi

I’m going to be in India this week, just for a few days. My time is completely booked except for a few hours on the morning of Friday, Dec. 2. I’m looking for an NGO that works with the downtrodden in New Delhi and is willing to show me around some poor neighborhoods there. In return, I will donate $5,000 to that NGO in appreciation.

Can any blog readers provide guidance on this? I know it is short notice.


Lessons in Dr. Seussonomics

Every year, I have my 500 intro students write vignettes like those in my little book, Economics Is Everywhere. This year, I got one which is the most clever and original of the roughly 2,000 submitted in the past four years. It’s by my student Kourtney Kech, and appears below.

As a small child, I remember quite clearly, a book that my mother read and loved dearly.

The Lorax, by Seuss, a doctor of rhymes, provided us both with some great pre-sleep times.

The idea of scarcity is not that complex and is shown in great detail through Lorax’s text.


Daniel Kahneman Answers Your Questions

Two weeks ago, we solicited your questions for Princeton psychology professor and Nobel laureate  Daniel Kahneman, whose new book is called Thinking, Fast and Slow. You responded by asking 45 questions. Kahneman has answered 22 of them in one of the more in-depth and wide-ranging Q&A’s we’ve run recently. It’s a great read. As always, thanks for your questions, and thanks to Daniel Kahneman for taking the time to answer so many of them.

Q. Now that we understand reason as being largely unconscious, motivated by emotion, embodied and constituted by many biases and heuristics, where do you see the future of cognitive science going? Are we at the beginning stages of a paradigm shift? -McNerney


"Football Freakonomics": When Good Stats Go Bad

The following is a cross-post from NFL.com, where we’ve recently launched a Football Freakonomics Project.

What do Dan Marino, Jerry Rice, and MarTay Jenkins have in common?

Yes, wise guy, they all played in the NFL. But beyond that? They all hold all-time single-season records.

+ Marino (among his other records) passed for 5,084 yards in 1984.

+ Rice (among his many other records) gained 1,848 receiving yards in 1995.

+ Jenkins had 2,186 kickoff-return yards in 2000 for the Arizona Cardinals.

But Jenkins, unlike the other two, won’t be getting a call from Canton any time soon, even though he set a second record that season – for the number of kickoff returns, with 82. Eighty-two kickoff returns! That’s an average of more than 5 a game.

Care to guess the Cardinals’ record in 2000? They were 3-13. Yes, it’s great to be a kickoff returner when your team is getting kicked off to over and over and over again.

And so it is that MarTay Jenkins is the poster boy for our latest Freakonomics Football video, “When Good Stats Go Bad.”


To Develop Expertise, Motivation is Necessary but Insufficient

Lots of readers of my entry on learning languages have said that the only reason I learned French well the second time (with the Assimil course) is that I was motivated. Here is one example: “Guy, the main reason that you learned French this time was because you wanted to learn it this time.”

Understanding the role of motivation in learning is important for designing productive learning environments — i.e. for learning well — so I would like to discuss it further.

Yes, motivation is important for learning! When I was in high school and training for the U.S. Physics Olympiad team, we heard (maybe apocryphal) stories about how our counterparts were being trained in the USSR: Candidates who didn’t make the cut got sent to the army. This kind of motivation, I thought, would definitely lead me to put in the needed hours.

To agree with the readers’ comments more strongly: For learning, motivation is necessary. However, there is a distinction between necessary and sufficient. Although motivation is necessary, it is not sufficient.


Lessons in Anchoring and Framing From … George Clooney?

In a Time magazine Q&A, the actor gives a fascinating reply to the question “Are you disappointed in Obama”:

I get angry at people who don’t stand for him, actually. If this were a Republican president, Republicans would say, “We were losing 400,000 jobs a month. We stopped it. We saved the car industry.” You could go down the list. Democrats should talk to Hollywood about how to posture some of these things. Say you’re about to get into tax loopholes. Instead of “loopholes,” say “cheating.” And then on the floor of the Senate, get up and say, “We’re not going to raise your taxes, but we’re not for cheating. Are you?” I just think Democrats are bad at that.

A few points: I assume the “people” he gets angry at for not standing for Obama are Democrats? If not … well … hard to imagine someone like Clooney getting angry at Democrats who didn’t “stand for” Bush.

Great point re the job loss and car industry! Perhaps not nearly 100 percent accurate, but still, a great point re how those accomplishments haven’t been framed as successes.


FREAK-est Links

This week, the debate continues on whether talent matters; does coffee lower the risk of cancer in women? Felix Salmon examines the rising costs of tuition; Groupon nearly bankrupts a London bakery; nice guys actually can finish first; why men of average height have more children, and the dawn of neuroeconomics.


National Treasure 2.7 Deciphered

In one of my previous posts, I asked for help interpreting a rather bizarre dream imagining a new plotline for a National Treasure movie. These movies often involve deciphering secret codes, and so did my post. My [day]dream was actually an aid to help me remember 40 digits of the irrational, transcendental constant of Leonhard Euler, e.

Here is the dream again with numeric annotations in brackets:


Flight Status

If you are in the least bit an airplane junkie, you should follow the advice of Jason Kottke (no relation to Daniel, or Leo, fwiw) and search for “planes overhead” on the Wolfram Alpha search engine. It returns a list of airplanes above your geographical location, including carrier, origin/destination, altitude, angle, type, slant distance, as well as a sky map so you can find the actual planes in the sky:


Does Walking Through Doorways Cause Forgetfulness?

We’ve all been there: you’ve got a million things you’re trying to get done, you’re running behind, you walk through a door into another room to get something and… wait a minute, what are you looking for again? Son of a…

According to new research (PDF here) from Notre Dame psychology professor Gabriel Radvansky, passing through doorways actually does cause us to forget things because of the way the brain compartmentalizes information. Doorways, according to Radvansky, serve as “event boundaries in the mind.” The simple act of having to adjust to a new setting takes just enough mental effort to cause a break in short-term memory. “Recalling the decision or activity that was made in a different room is difficult because it has been compartmentalized,” says Radvansky.


At Least One Labor Measure Was Up During the Recession

Productivity, that is. One factor was the trimming of deadwood; the other seems to be old-fashioned harder work. From a new working paper by Casey Mulligan (emphasis added):

During the recession of 2008-9, labor hours fell sharply, while wages and output per hour rose. Some, but not all, of the productivity and wage increase can be attributed to changing quality of the workforce. The rest of the increase appears to be due to increases in production inputs other than labor hours. All of these findings, plus the drop in consumer expenditure, are consistent with the hypothesis that labor market “distortions” were increasing during the recession and have remained in place during the slow “recovery.” Producers appear to be trying to continue production with less labor, rather than cutting labor hours as a means of cutting output.


Artificial Insemination: What About the Other Animals?

Our latest Freakonomics Radio on Marketplace podcast, “Unnatural Turkeys,” reveals the surprising origins of the 40 million turkeys that Americans are going to eat this Thanksgiving. You can download/subscribe at iTunes, get the RSS feed, or read the transcript here.

So, 100 percent of commercially raised turkeys in the U.S. (save for heritage turkeys) are born from artificial insemination. But what about other animals? We talked to reproductive experts Dale Coleman at Auburn University, Wayne Singleton from Purdue, and Keith Bramwell at University of Arkansas. The graphic below shows what percentage of each animal is born from artificial insemination:


Bring Your Freakonomics Questions for a Radio FAQ

Once in a while, we do an FAQ podcast (that’s FREAK-quently Asked Questions) whereby you send us questions via the comments section and we answer them in a radio program. We’re gearing up to do another FAQ, likely to be released on Jan. 4, so fire away. Given the release date, you might consider asking about New Year’s resolutions (and the commitment devices we sometimes employ); the dangers of drunk walking; maybe even the reproductive provenance of your holiday meal. Feel free to ask followup questions on radio stuff we’ve done in the past too, like the “Prius Effect” (conspicuous conservation), the decline of hitchhiking, and whether expensive wines actually taste better. Thanks in advance.


The World's Best Economics Department?

A new website, from the University of Chicago’s Initiative on Global Markets (IGM), will “pose one question a week, and post answers from 40 senior professors at elite U.S. universities” in an effort to create “the world’s best economics department.”

“We’re doing this because we think economists have a distorted role in policy debates,” said Brian Barry, the director of IGM. “When experts fight about minor points they get much more attention than when they broadly agree about important ones. And when they disagree about big issues, the reasons don’t often come through clearly. Sometimes, ideas that are shaky or on the fringe get passed off as mainstream.”

So far, economists have responded to questions about federal “buy American” mandates, education and taxes.


Beware: This Blog Apparently Causes Academic Fraud

Way to scapegoat, Chronicle of Higher Education!

An article about a Dutch psychologist accused of faking his research data wonders if academic fraudsters are responding to the wrong incentives:

Is a desire to get picked up by the Freakonomics blog, or the dozens of similar outlets for funky findings, really driving work in psychology labs? Alternatively—though not really mutually exclusively—are there broader statistical problems with the field that let snazzy but questionable findings slip through?


The Economic Battlefield of the NBA Lockout

The following is a guest post by David Berri, a Professor of Economics at Southern Utah University. He is also the lead author of Stumbling on Wins, the general manager of the sports-economics blog Wages of Wins, and is a frequent contributor to the Freakonomics blog.

With the NBA away, sports fans are looking for something to satisfy their need to watch teams strive for victory. Well, why not take a look at the teams competing in the lockout? Okay, maybe this is a contest only a sports economist could love. But while it may not appeal to everyone, the labor dispute is still best thought of as a contest between two teams.

The first team is the NBA owners. The owners are the dominant buyer in the world market for elite basketball talent, so they have substantial monopsony power. In the other corner are the players, who are currently trying to disband their union. This union gave the players monopoly power in the sale of elite basketball talent (more specifically, in helping to determine the conditions under which individual players would sell their services). When a monopsony meets a monopoly on the economic battlefield, the outcome is determined by bargaining.


One More Time: Most Notable Quote of 2011

Since my last posting elicited many helpful comments, let me repeat it this week in hope of getting even more input:

I’m starting to think about my annual list, run by the Associated Press, of the top 10 most notable quotations of the year. By “notable” I mean “important” or “famous” or “particularly revealing of the spirit of our times” rather than necessarily being eloquent or admirable. Last year’s winners were a tie between Tony Hayward‘s “I’d like my life back” and Christine O’Donnell‘s “I’m not a witch.”

I would welcome suggestions of notable quotations from 2011, particularly ones from politics or popular culture or entertainment or sports or business or technology.


Paying People to Quit: What Law Schools Can Learn From Zappos

My favorite incentives book tells the story of how after a week of training, Zappos offers new employees a one-time, one-day offer of a cash bonus if they will quit (As noted in the Freakonomics Radio hour, “The Upside of Quitting”). I describe this as an anti-incentive because even though the Zappos offer on its face gives employees an additional reason to quit, in practice it keeps employees on the job longer.

The vast majority of trainees turn down the offer during training – resisting the temptation to take the money and run. Then almost no one quits in the initial months after training because they’d feel like fools to quit for nothing when they could have quit for money. The cognitive dissonance would be too great. This is the power of resisted temptation.

But in a recent Slate piece, Akhil Amar and I deploy the Zappos idea for a different purpose – to reduce the concern that law schools are admitting students who are unlikely to pass the bar.