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Archive for 2012

Comparative Advantage, Opera Edition

The American League believes in comparative advantage, and has a designated hitter bat for the pitcher.  I prefer this: I believe in comparative advantage and division of labor (and being a White Sox fan from age 5, I like the American League anyway).  

This afternoon we heard a performance of Pagliacci, before which an announcer informed the audience that the soprano was ill, but would act the role while another—the designated soprano—sang from the side of the stage. The acting was better than usual, and so was the singing—an illustration here of comparative advantage.  The overall effect wasn’t good:  Opera is both acting and singing, and it was absurd and disconcerting to separate them.  The production function for opera requires one person doing both—division of labor makes no sense in this case.  

(HT to FWH)


More Commitment Devices From Our Readers

Our recent podcast about commitment devices, called “Save Me From Myself,” continues to elicit responses from readers sharing their own experience. The other day, Amber told us about joining the Air Force as a commitment device.

Here’s another pair of stories. The first is from Philip Veysey, who lives in Madrid. He is looking for some advice:

Hi guys,
 
I listened with interest to your podcast about commitment devices and I thought I would share my own which I devised as a way to curb my unnecessary clothes shopping.  I found that I was buying simply more clothing that I needed and although this wasn’t causing me any major problems, I realized that it was really wasteful and I decided to think of incentives to make me stop.


Is Male Kindness Actually a "Peacock Tail?"

A new paper from psychology researchers Mark Van Vugt and Wendy Iredale finds that acts of male kindness may not always be quite what they seem. From Science Daily:

Two experiments were undertaken. For the first, 65 men and 65 women, all of an average age of 21, anonymously played a cooperation game where they could donate money via a computer program to a group fund. Donations were selfless acts, as all other players would benefit from the fund, whilst the donor wouldn’t necessarily receive anything in return.

Players did not know who they were playing with. They were observed by either someone of the same sex or opposite sex — two physically attractive volunteers, one man and one woman. Men were found to do significantly more good deeds when observed by the opposite sex. Whilst the number of good deeds made by women didn’t change, regardless of who observed.

For the second experiment, groups of males were formed. Males were asked to make a number of public donations. These increased when observed by an attractive female, where they were found to actively compete with one another. When observed by another male, however, donations didn’t increase.


Two Ways to Make Them Pay

A reader, who is also a lawyer, writes in with an interesting example of incentives in the courtroom. He tells us about a particular judge in New Hampshire, who developed a strategic approach to collecting fines: I thought you might be interested in this little experiment in economics. People cannot be sent to jail, under the Constitution, for being poor — . . .


The Air Force as Commitment Device

A podcast listener named Amber writes in to say:

I recently listened to your podcast on commitment devices, which finally gave a name to something that I recently had been contemplating and finally contracted myself to.

There is a lot of background to this story that neither would interest you nor better illuminate the value of my commitment device, so I shall skip that and instead tell you that I recently enlisted in the U.S. Air Force with the hope that the training and experience will not only make me into a better person for the benefit of my country and my state, but that it would replace some of my bad habits with more honorable ones.

The ideal outcome of this device is that, by the end of basic training, I would be a more compassionate leader, a more resilient individual, and a more capable collaborator. There is something tremendously beautiful about surrendering to such an extreme situation as basic training.


The Prius Driver’s Conundrum

For a singularly grim, if fiercely literary, assessment of the earth’s environmental fate, the grizzled wisdom of Cormac McCarthy is always there to deliver the dark pronouncement that we’re flat-out doomed. “The way of the world is to bloom and to flower and die,” explains the judge in McCarthy’s masterpiece, Blood Meridian. “[B]ut in the affairs of men there is no waning and the noon of his expression signals the onset of night.” Darkness, in essence, will fall at the very moment when we think we’re out-of-our-mind brilliant. 

Brilliance in conventional environmentalism has thus far been embodied by the caricature of hybrid-driving solar evangelists with soft spots for local farms, grass-fed beef, and re-useable shopping bags adorned with inscriptions of ecological virtue. Such popular solutions to our environmental quandary come not only with the eager endorsement of a progressive political establishment, but with the added appeal of basic pragmatism. Drive a more fuel-efficient car, eat locally, seek energy-efficient light fixtures, and vote “yes!” for public transit initiatives — such ideas simply make sense. And thus they’ve become the nuts-and-bolts of modern environmentalism.


How Should Alumni Think About Giving Back?

Antonia writes in with a conundrum:

As a graduate of three private schools (K-8, high school, and college), around this time of year I receive a slew of letters, emails, and phone calls asking me to pledge to various annual funds. I’ve always been told by my parents that I should support my former schools financially because alumni giving rates directly correlate to the prestige of any private institution. In other words, by giving even the minimum of $20, I’m ensuring the value of my diploma. Is this true?


Happy Valentine's Day: Economist Edition

 You might think that the dismal science has very little to offer on matters of the heart.  But I disagree.  And so does Elisabeth Fosslien. She’s a brilliant young analyst interested in design, math, and economics. Yes, she’s the sort of person who dressed up as a bear market for Halloween.  All this makes her the perfect person for economics-themed data visualization. And so when #FedValentines lit up Twitter last week, she decided to go a step further, and provide the perfect valentine for the economist in your life.  Make your selection, below:


Ball Hogs and Long Meetings

Listen to an NBA coach during a game and you will often hear him scream something like the following:

  • “You have to share the ball.”
  • “Start looking for your teammates.”
  • “Quit taking the first damn shot you see.”
  • “Come on, pass the damn ball.”

Why do coaches have to keep screaming this message?  The answer seems easy.  Basketball players love to shoot.  In other words, many players have trouble resisting their inner ball hog.  Consequently, coaches have to scream a lot.

Academic meetings typically involve less screaming.  But the behavior we see in these meetings is surprisingly similar to what we see on a basketball court.  For example, recently I attended a meeting at Southern Utah University.  The meeting began at 4 pm, and 25 minutes later we still hadn’t started on the items that were the actual subject of this gathering.  Instead, numerous people had chimed in on items we supposedly had finished in our previous meeting (and other issues not related to the subject at hand). 


The Unequal Couple

Lucas Cranach the Elder’s painting The Unequal Couple (Old Man in Love) illustrates exchange in the marriage market.  An unusually looks-challenged old man, holding a gorgeous necklace, embraces a beautiful young woman, who seems pleased with the arrangement.  

Nearly 500 years ago, Cranach recognized that in the marriage market men typically exchange their earning ability for a woman’s looks and reproductive ability.  That is probably less true today than in Cranach’s time (early 16thcentury), but the evidence shows it is still partly valid.


It’s the Economy, Honey

Yesterday’s NY Times contained a very flattering (and quite personal!) profile of Betsey Stevenson and me. For me, it was all worth it just to get a great family portrait. (Have you ever tried to get a dog and a toddler to look at the camera at the same time?)

I don’t really have a lot to add, other than to say that I thought the author, Motoko Rich, did a fabulous job.  Hopefully it gives folks outside the ivory tower some sense of just what it is that animates the lives of economists.  And yes, I admit that reading it, you’ll quickly conclude both that we are passionate about economics, and that we fit the usual stereotypes about academics.  And if the article makes it sound like we are crazy about our kid, that’s because we are.


Why Was Jeremy Lin Overlooked, and Should He Get Married?

A reader named Xavier Fan writes:

Would love to see some commentary on the Jeremy Lin phenomenon in the NBA. Is this not a classic Moneyball-style “undervalued player”? Indeed, one of the best parts of the whole feel-good story (and there are many) is how consistently teams and coaches at the college and NBA level overlooked him before his breakout week. Even the Knicks were ready to release him a few days before his first big game against the Nets. Was he overlooked because he didn’t “look the part”? Will this impact how scouts and coaches evaluate players? What is the current status of sabermetrics for basketball?

The phenomenon is indeed phenomenal, and there has already been a lot of interesting stuff written about it (including his overseas marketing potential and an anti-Asian joke-gone-wrong).


Some Links We Like: Economists in the News Edition

1. Allen Sanderson on numbers in the news.
2. Dan Ariely on how online dating is like drinking wine: “You could describe it, but it’s not a very useful description. But you know if you like it or don’t.”
3. Betsey Stevenson and Justin Wolfers (friends of the blog) on their lives as the It Couple of Economics. My favorite line? Betsey talking about economics itself: “It’s not a profession that rewards modesty in any way.” One might consider this a print version of the Stevenson-Wolfers story we told in our “Economist’s Guide to Parenting” radio program


Nightclubs as Research Labs

Yale Fox, a former Freakonomics intern, is a Canadian DJ who studies nightclub culture. He looks at how music trends, fashion, and even perfumes are the results of codified social behavior at nightclubs. He recently gave a TED talk on the subject:


Football Freakonomics: The First Annual Dough Bowl Awards

Are you the kind of person who loves to hunt for undervalued stocks that are ready to pop? Or maybe you cruise tag sales and flea markets hoping to find an old stamp collection or oil painting that’s worth millions?

If so, you may like our latest Football Freakonomics episode. It’s called “Dough Bowl.” It is our tribute to the NFL’s best bargains, the players who lit it up this year for far fewer dollars than their counterparts. (We had a lot of help on this one, since it isn’t always easy to get good salary and cap-hit data. Big shout-outs to Scott Kacsmar and to Spotrac.com founder Michael Ginnitti; also: a big hat tip to the Ravens’ Domonique Foxworth for suggesting the idea.)

We put together an entire offensive and defensive roster of Dough Bowl stars:


What Does Your Fed Valentine Say?

One of the most wonderful things about Twitter is the spontaneous conversations that start around almost anything. And so, inspired by the hilarious #HealthPolicyValentines, I began a new hashtag on Twitter this morning: #FedValentines.  Folks are tweeting all sorts of Fed-themed valentine’s wishes. As I write, it’s the second-top trending hashtag in the U.S.  

Given that it’s Friday, I figured it worth sharing the fun.  Here’s what I came up with:


Should New Financial Instruments Be Treated Like New Drugs?

My colleague Glen Weyl and Eric Posner at the University of Chicago Law School, argue in a recent white paper, that new financial products should be subject to regulatory approval analogous to that for new drugs by the Food and Drug Administration. Here is the abstract:

The financial crisis of 2008 was caused in part by speculative investment in sophisticated derivatives. In enacting the Dodd-Frank Act, Congress sought to address the problem of speculative investment, but merely transferred that authority to various agencies, which have not yet found a solution. Most discussions center on enhanced disclosure and the use of exchanges and clearinghouses. However, we argue that disclosure rules do not address the real problem, which is that financial firms invest enormous resources to develop financial products that facilitate gambling and regulatory arbitrage, both of which are socially wasteful activities.


The Statistical Significance of Beer

According to a new paper by Stephen T. Ziliak, it was a brewer at the famed Guinness beer company, William Sealy Gosset, who first began to explore the concept of statistical significance:

Gosset (1876–1937) aka “Student” – he of Student’s t-table and test of statistical significance – rejected artificial rules about sample size, experimental design, and the level of significance, and took instead an economic approach to the logic of decisions made under uncertainty. In his job as Apprentice Brewer, Head Experimental Brewer, and finally Head Brewer of Guinness, Student produced small samples of experimental barley, malt, and hops, seeking guidance for industrial quality control and maximum expected profit at the large-scale brewery. In the process Student invented or inspired half of modern statistics.


Volcanoes and the Little Ice Age

We wrote in SuperFreakonomics about how past volcanic eruptions have resulted in a temporarily cooler planet, thanks to the release of sulfuric ash into the atmosphere. New research indicates that a series of volcanic eruptions may have caused the Little Ice Age:

The study, led by the University of Colorado Boulder with co-authors at the National Center for Atmospheric Research (NCAR) and other organizations, suggests that an unusual, 50-year-long episode of four massive tropical volcanic eruptions triggered the Little Ice Age between 1275 and 1300 A.D. The persistence of cold summers following the eruptions is best explained by a subsequent expansion of sea ice and a related weakening of Atlantic currents, according to computer simulations conducted for the study.


What Should Scare You More: Sharks or Big TVs?

In SuperFreakonomics, we wrote about a media sensation in 2001 that came to be known as “Summer of the Shark.” A few particularly gruesome shark attacks in American waters had newspapers, magazines, and TV stations scrambling to out-shout each other about the danger. As we wrote:

A reasonable person might never go near the ocean again. But how many shark attacks do you think actually happened that year?

Take a guess — and then cut your guess in half, and now cut it in half a few more times.

During the entire year of 2001, around the world there were just 68 shark attacks, of which 4 were fatal. Not only are these numbers far lower than the media hysteria implied; they were also no higher than in earlier years or in the years to follow. Between 1995 and 2005, there were on average 60.3 worldwide shark attacks each year, with a high of 79 and a low of 46. There were on average 5.9 fatalities per year, with a high of 11 and a low of 3. In other words, the headlines during the summer of 2001 might just as easily have read “Shark Attacks About Average This Year.” But that probably wouldn’t have sold many magazines.


Does Military Service Lead to Crime?

A new working paper (ungated version) by Jason M. Lindo and Charles F. Stoecker examines the link between military service (in Vietnam) and crime. It has some bad news: “We find that military service increases the probability of incarceration for violent crimes among whites, with point estimates suggesting an impact of 0.27 percentage points.”  The authors also find offsetting impacts on nonviolent crime and hypothesize that “military service may not change an individual’s propensity to commit crime but instead may cause them to commit more-severe crimes involving violence.”


Does This Recession Make Me Look Fat? (Ep. 61)

We seem to be in the midst of a national obsession with obesity. Our latest Freakonomics Radio on Marketplace podcast is about some of the surprising contributors, and possible economic solutions, to the problem. (Download/subscribe at iTunes, get the RSS feed, listen via the media player above, or read the transcript.)

One suspected contributor to obesity, for instance, is the drastic decline in smoking in recent years. It’s great news that fewer people smoke but, according to Vanderbilt economist Kip Viscusi, people who quit smoking tend to gain weight.


Exchange Economies

A friend of ours had her purse, containing her driver’s license and passport, stolen in a German train station. She reported it to the local police, who told her that she may well get the purse back — minus any cash. Homeless people in the stations troll the trash bins for food and other goodies. When they find purses, wallets, etc., they turn them over to station police. In exchange the police do not roust them out of the stations, which they use for shelter and warmth. In fact, the police were right — the friend did eventually get some of the lost items back.


Freakonomics Poll: Have You Tried a Commitment Device?

Our latest podcast, “Save Me From Myself,” is about the use of commitment devices. (You can download/subscribe at iTunes or get the RSS feed.)

A commitment device is a sort of mind trick to help you accomplish a goal that you don’t quite have the willpower to achieve on your own. Sometimes we need a contract with ourselves, or a little financial stake for motivation. This goal can be exercising, studying, quitting smoking, or anything really.

So we want to ask: have you tried one? What was it? And, most important, how did it turn out?


The Positive Effects of a Higher Alcohol Tax

Philip J. Cook and Christine Piette Durrance have published a working paper called “The Virtuous Tax:  Lifesaving and Crime-Prevention Effects of the 1991 Federal Alcohol-Tax Increase.” It makes a substantial argument for the upside of higher alcohol taxes:

On January 1, 1991, the federal excise tax on beer doubled, and the tax rates on wine and liquor increased as well. … We demonstrate that the relative importance of drinking in traffic fatalities is closely tied to per capita alcohol consumption across states.  As a result, we expect that the proportional effects of the federal tax increase on traffic fatalities would be positively correlated with per capita consumption. 


(Almost) The Triumph of Game Theory at the Super Bowl

One of the amazing things about the Super Bowl game this past weekend was that both coaches understood that the Patriots would be better off if the Giants scored a touchdown late in the game and reportedly instructed their teams accordingly.  To my mind, this represents a high point in the prevalence of strategic thinking. 

Was the failure of Ahmad Bradshaw to follow through on his coach’s instruction merely a failure of execution?

But I wonder whether the Giants failed to strategically optimize on the very next play selection.  With about a minute left in the game (and with a timeout remaining for the Patriots), the Giants choose to go for a two-point conversion.  My question is not about whether they should have kicked a point after.  No, I wonder whether they might have done better by handing the ball to a swift runner, who might have even more perversely attempted to forgo scoring two points and instead tried to burn as many seconds off the clock as possible by merely running away from the other team (toward, but not into, the other endzone!).  


How Do We Like This Idea for Teaching People to Save Money?

A reader named Philip Serghini writes in:

Great podcast about financial literacy and clean hands.   I’ll try to refrain from sending hate mail to the attorney who espoused not teaching kids about it.   

It would be an interesting experiment if (in, say, Buffalo) every kid entering the first grade were given a $100 savings deposit (paid for by a private foundation). They wouldn’t be allowed to withdraw the money at any time up until they graduate, but they’d be able to add if they wanted.  Each grade they ascended, another $100 would be added.  If you dropped out or failed out, you’d forfeit everything (except anything you’d voluntarily put in). By the time they graduated from high school, each student would have saved a nice tidy sum to spend as they please: college, car, suit.   


How Many Lives Do Smoke Alarms Really Save?

Last year, we put out a podcast called “Death By Fire? Probably Not.” It was about the remarkable decline in fatal fires in the U.S. over the past century, and explored some of the contributing factors.

Joseph M. Fleming, a deputy fire chief with the Boston Fire Department, has now written in with a guest post that challenges what we think we know about smoke alarms. Fleming has more than 30 years of experience in the fire industry (in both firefighting and management), and suggests that people think a little harder about smoke alarms.


Revenue-Sharing Isn't Needed to Make NBA Small-Market Teams Competitive

According to the Sports Business Journal, the NBA is going to fully phase in a revenue-sharing plan in 2013-14 which:

1. “Calls for all teams to contribute an annually fixed percentage, roughly 50 percent, of their total annual revenue, minus certain expenses such as arena operating costs, into a revenue sharing pool.
2. “Will shift $140 million around the league
3. Will allow a single team to receive up to $16 million (this year the most any team could receive was $5.8 million), a mark that is about 25 percent of this year’s payroll cap

All of this will — according to Jeanie Buss (Executive VP of business operations for the Los Angeles Lakers) — allow teams to become “economically viable so that every team has the opportunity to compete.”  And according to Buss, this will “make for a healthier league.” 

As the article notes, Buss served on the committee that created this plan.  And as the article also notes, Buss and the Lakers will contribute the most revenue.  Unfortunately, it seems unlikely that this plan will dramatically change the level of balance in the league.