“Less than an hour after we started, the randomization was complete and the immediate future of 1,800 women was determined.”
Last week, we got an email from Freakonomics reader Paul Gu, a Thiel 20under20 fellow and founding team member of Upstart, a startup from former Googler Dave Girouard aimed at matching promising young students with financial backers. Here’s how it works:
Upstart aims to help you with the most important part of pursuing your dreams — taking the first step. It may be as simple as applying for an internship, relocating to another city, or spending a few months in a garage working on your idea. Your Upstart backers will provide you with a modest amount of capital, combined with the support and guidance you’ll need. In return, you share a small portion of your income for 10 years. By matching you with the right backers and by providing just a slice of economic freedom – where repayment is based on your future success — we help you get started on the right path.
In addition to being an Upstart employee, Gu is also a participant. We were curious about why someone with such high potential future earnings was willing to give away a percentage of his hypothetical millions … here’s how he explained his decision:
For me, becoming an upstart is good economics. I’m stepping away from the hedge fund path to build a startup. That’s a much higher risk, higher volatility path, and most of the income potential is concentrated years into the future. Taking an Upstart investment makes it possible for me to access the educational and long-term benefits of working on a startup I’m passionate about without the loss of financial security or flexibility to make efficient consumption choices today (e.g. choosing housing with a shorter commute). Since Upstart determines each upstart’s funding rate offer based on his or her academic and career achievements, it makes economic sense for individuals all along the talent distribution.
Behavioral economics has a new testing ground: the Busara Center for Behavioral Economics in Nairobi, Kenya. The lab, which will be open to researchers and students from around the world, is hosted by Innovations for Poverty Action (IPA). Here’s its website blurb:
Busara is a state-of-the-art facility for experimental studies in behavioral economics and other social sciences, located in Nairobi, Kenya. The core of Busara is a pool of participants from the Nairobi slums, combined with a cluster of 20 networked computers with which researchers can investigate economic behavior and preferences. A central feature of the computer setup is that all computers have touchscreen monitors; together with specially developed paradigms, this allows for the participation of not only computer-illiterate, but entirely illiterate populations.
Johannes Haushofer, the Scientific Director of the Center, gave us a little more information:
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.
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.
The Boston Marathon filled up in just eight hours — that’s 65 times faster than last year. Self-fulfilling prophecy or athletes outrunning the qualifying times?
Christian churches and Jewish synagogues rely on very different financing models, yet both “appear to raise about the same amount per member,” according to a survey conducted by the Jewish newspaper The Forward (article by Josh Nathan-Kazis). While synagogue members pay annual dues, churches rely primarily on voluntary donations from members.
We recently solicited your questions for Betsey Stevenson, a sometimes Freakonomics contributor and newly minted Chief Economist of the Department of Labor. Your questions were excellent and varied, and Betsey’s responses cover everything from persistent unemployment to parental leave. Thanks to Betsey and everyone who participated.
The Freakonomics blog will have to do without Betsey Stevenson for the next year as she’ll be serving as the Chief Economist of the Department of Labor (DOL). Betsey has agreed to answer your questions about her new position.
We recently solicited your questions for Sonia Shah, author of The Fever: How Malaria Has Ruled Humankind for 500,000 Years. Her responses cover the effect of Rachel Carson and Silent Spring on malaria; bed nets and their alternatives; and the history of malaria in the U.S. Thanks to Sonia and everyone who participated.
Malaria has been infecting and killing humans for many millennia, yet it continues to elude man’s efforts to control it. Sonia Shah’s fascinating new book, The Fever: How Malaria Has Ruled Humankind for 500,000 Years, describes our long relationship with the disease. Shah has agreed to answer your questions so fire away.
An economics primer written by 10th graders.
Rajan on the crisis.
A new book offers more insights into geoengineering.
Practice makes genius?
In The Tall Book, Arianne Cohen relies on insights from her own life (including a brief stint as one half of the world’s tallest couple), and research from economists and scientists to shed light on the pros and cons of life as a really tall person.
Thomas Goetz, the executive editor of Wired, has written a new book that he hopes will give people some tools in this effort. Goetz has agreed to answer some of our questions about his book.
In recent months, the U.S. government has taken on a challenging and controversial new role: private sector investor. This development has raised a host of questions about the government’s role in the economy and a new book by Josh Lerner, Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed – and What to Do About It, is required reading for anyone hoping to understand the issues.
Since the onset of the current financial crisis, political and economic pundits have loudly proclaimed the end of American economic dominance. U.S. policymakers are struggling to revive the economy, establish new industrial competencies, and remain globally competitive. Meanwhile, in a small, young, constantly embattled country across the globe, old-fashioned entrepreneurialism is alive and well. Israel, just 60 years old and with a population of 7.1 million, has emerged as a model of entrepreneurialism that countries at all stages of development have tried to replicate.
The problems facing developing countries, in Africa and elsewhere, are overwhelming in their magnitude and complexity. From HIV/AIDS to widespread corruption and poverty, obstacles to economic development are occupying some of the world’s brightest minds. The three individuals profiled below are tackling Africa’s most trenchant problems in vastly different ways but with a common goal: to create a new development paradigm for the continent.
I went to northern Uganda to observe an economic experiment — a randomized program intervention focused on highly vulnerable women in the region. The program, Women’s Income Generating Support (WINGS), is being implemented by the Association of Volunteers in International Service (AVSI) and will provide the women with grants and business training.
“Less than an hour after we started, the randomization was complete and the immediate future of 1,800 women was determined.”
Due to resource constraints, the women will receive the intervention in two different phases, allowing a team of economists to evaluate the effectiveness of the program.
Barry Ritholtz, in his new book Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy writes, “The iconic image is the American cowboy. You can picture him on a cattle drive, wearily watching over his herd. All he needed to get by were his wits, his horse — and his trusty Winchester.”
To most people in the developed world, agricultural science is a bit of an afterthought. We go to the grocery store and decide between small, vibrantly red cherry tomatoes and charmingly misshapen heirloom tomatoes. We buy big, juicy oranges and know that when we peel them the juice will run over our fingers and the sticky scent will linger. We can choose between 10 different kinds of apples, no matter the season. At no point during our shopping do most of us stop to think about the technology used to produce this bounty. …
When oil was discovered in 2007 off the shores of small, sturdy Ghana, the country’s government officials called the discovery “perhaps the greatest managerial challenge” the country had faced since independence. John Kufuor, Ghana’s president at the time, warned that “instead of a being a blessing, oil sometimes proves the undoing of many … nations who come by this precious commodity.”
Ghana’s reaction no doubt surprised oil-starved observers in developed countries, but the Ghanaian officials were referring to the “resource curse” that has wreaked havoc in other resource-rich, developing countries. Natural-resource wealth not only increases civil violence but, in a bizarre development paradox, is linked to lower economic growth.
The iconic libertarian Milton Friedman once said “The great advances of civilization, whether in architecture or painting, in science or literature, in industry or agriculture, have never come from centralized government.” Michael Strong, founder of innovative charter schools, and John Mackey, C.E.O. of Whole Foods, agree with Friedman, and have their own libertarian vision. They believe that entrepreneurs and “conscious . . .
Feeling a little feverish? Throat a little scratchy? You may be relieved to know that the last time a great swine flu epidemic was predicted it didn’t materialize. In 1976, the U.S. government predicted that 1 million Americans would die from a swine flu epidemic — but only one did. Meanwhile, this post at Foreign Policy points out that while . . .
It’s safe to say that macroeconomists haven’t been very popular lately. In fact, many people blame the profession for such sins as failing to predict the housing bubble and encouraging the deregulation of the financial industry. In their new book Animal Spirits, the economists George Akerlof and Robert Shiller propose a new macroeconomic framework — one that incorporates real human . . .
Feeling a little guilty about that flight to London last month? No problem — you can offset that trip with credits from a reforestation project in Nicaragua, available at carbonfund.org. The thriving carbon-offset market in the U.S. allows individuals and companies to voluntarily offset their carbon footprints relatively painlessly — just point, click, and pay. If the United States implements . . .
Please welcome to our corps of in-house bloggers Dwyer Gunn, a young writer who has studied economics at Wellesley, worked in finance, and been a research assistant at the Becker Center on Chicago Price Theory. “The biggest economic crisis since the Great Depression,” as described by Richard Posner, began in December of 2007 amidst plunging housing prices and reached its . . .
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