A paper by Georgios Zervas, John Byers, and Michael Mitzenmacher explores the relationship between a Groupon surge (like when a small bakery has to make 100,000 cupcakes) and a drop in Yelp ratings. Tim Worstall at Forbes explains:
Imagine that you are an enthusiastic and regular consumer of the finest chimichangas that you can find. You’ll likely have scoped out your neighbourhood, tested the chimichangas on offer and zeroed in on those places that make excellent ones. You might even provide reviews on Yelp pointing other enthusiasts for the comestible so as to guide them to the good places.
Bloomberg Businessweek explores how firms are adapting to a future climate:
Investing in climate change used to mean putting money into efforts to stop global warming. Morgan Stanley, Goldman Sachs, and other firms took stakes in wind farms and tidal-energy projects, and set up carbon-trading desks. The appeal of cleantech has dimmed as efforts to curb greenhouse gas emissions have faltered: Venture capital and private equity investments fell 34 percent last year, to $5.8 billion, according to Bloomberg New Energy Finance.
Now some investors are taking another approach. Working under the assumption that climate change is inevitable, they’re investing in businesses that will profit as the planet gets hotter. (The World Bank says the earth could warm by 4C by the end of the century.) Their strategies include buying water treatment companies, brokering deals for Australian farmland, and backing a startup that has engineered a mosquito to fight dengue, a disease that’s spreading as the mercury climbs.
Piet Dircke of the Dutch engineering and flood-prevention firm Arcadis says he was besieged with calls after Hurricane Sandy: “The climate is changing. Sea level is rising. That’s quite obvious. At the same time, the cities that are close to the waterline continue to grow and have more money and need for protection. It’s almost a natural growth market.”
A Washington Post profile of Liberty University, founded in 1971 by Jerry Falwell, says that Liberty has doubled its enrollment in the last six years:
The surging enrollment for a bastion of Christian conservatism in the central Virginia foothills highlights the school as a market leader at the crossroads of religion and higher education. Liberty figured out how to recruit masses of students via the Internet years before elite universities began ballyhooed experiments with free online courses.
Turbocharged growth inevitably raises questions about quality, and Liberty’s academic reputation has not risen as fast as its enrollment. About 47 percent of its first-time, full-time students graduate within six years, federal data show, below the national average of 58 percent. Liberty officials say such statistics reflect an admissions policy geared more toward opportunity than exclusivity.
And Liberty is doing well on the finance front too: “The university ended 2012 with more than $1 billion in net assets for the first time, counting cash, property, investments and other holdings. That is 10 times what the school had in 2006.”
(HT: Marginal Revolution)
Our recent podcast “When Is a Negative a Positive?” is about the productive use of feedback. It argues that, while positive feedback has its place, especially for beginners, it is negative feedback that drives improvement.
This belief is firmly held by Ray Dalio, the founder of the Bridgewater Associates, which has been called (in a fine New Yorker profile by John Cassidy) “the world’s richest and strangest hedge fund.” Bridgewater’s “principles” argue for constant, ruthless feedback, and Dalio attributes Bridgewater’s success to this culture.
Here are some excerpts from an interview with Dalio that, unfortunately, didn’t make it into our podcast:
“Learning about what you’re doing wrong and your mistakes is so much more productive to making improvement because you develop a means for dealing with that — learning about what you’re doing right.”
“Nobody knows what others are doing wrong. It’s a discovery process. So if I think you’re doing something wrong, I convey that to you in a forthright way. You’re an equal partner in that. But the people around us all then are partners in that. And we go through a process of experimenting, because the same things come up over, and over, and over again. So if you’re doing something wrong, it’s going to come up over and over and over again. And pretty soon, when you’re paying attention to it, it then becomes more apparent. So there’s really very little disagreement concerning each person’s strengths and weaknesses. And then of course, everybody sees that converted into productivity, because once they embrace the standing of what they’re doing wrong and have a strategy to not let that stand in their way — to create a compensating mechanism — it’s no longer a barrier to their effectiveness. …
Joshua Tucker of the Monkey Cage points to a new website designed to collect information on voter behavior in various electoral systems and educate the public about different systems. Here’s the rundown, from University of Montreal political scientist André Blais:
A team of scientists has launched the website voteforpope.net. The website has two objectives: inform the public about the various electoral systems that exist in the world to elect state leaders, and collect data on voters’ behaviour under these systems. We provide information about four electoral systems: one round plurality, two round runoff, alternative vote, and approval vote. The electoral system that is used for the election of the Pope is also described. The visitor is invited to imagine how he/she would vote if the pope was elected under each of these four electoral systems. The study is part of a larger international project designed to better understand the functioning of electoral democracy (Making Electoral Democracy Work). For an example of how such data can help us understand how electoral rules affect vote choice, see Blais et al. 2012. “Assessing the psychological and mechanical impact of electoral rules : A quasi-experiment.” Electoral Studies 31 :829-837.
In a recent TED talk for TED2013, design consultant Leyla Acaroglu tackles some persistent sustainability myths and advocates a new way of thinking about sustainability. From the TED blog:
Acaroglu wants you to think beyond choosing a material for your grocery tote. Instead, she encourages us to think about the entire life of a finished product, to think hard about the net impact a product has on the environment. This is life-cycle thinking, not just whether a product can be recycled, but all the parts of its existence: material extraction, manufacturing, packaging and transportation, product use, and end of life.
Electric tea kettles, for example, are an unlikely drain on the environment:
In the UK, 97 percent of households have an electric tea kettle, and 65 percent of tea drinkers admit to overfilling their kettles, boiling way more water than they need for a cuppa. One day of extra energy use from these kettles is enough to light all the streetlights in London for a night. What we need, Acaroglu says, is not better materials for the tea kettle, but a behavior-changing kettle that helps you boil just what you need.
It may not last long but as of this writing, Freakonomics Radio is the No. 1 podcast on iTunes. Thanks to everyone for listening!
We’ve talked before about one possible future of food production: food printers. Andras Forgacs is the CEO of a company called Modern Meadow, which is working on printing leather and meat products. He recently took questions on reddit.com; here’s his take on his company’s progress with replicating hamburger and steak:
Real steak is a big stretch. It won’t be the first product since steak is very hard to make for now. Instead, the first wave of meat products to be made with this approach will likely be minced meats (burgers, sausages, etc.) and pates (goose liver pate, etc.). Also seafood is an early possibility since the texture requires may be easier to achieve than premium cuts.
While I doubt anyone will make commercial quantities of premium steak within 10 years, we will eventually get there but it will be an Nth generation product.
With the sequester looming large, Business Insider has created a set of interactive maps to demonstrate which states will be hit the hardest by cuts to the education budget. “The report [from the National Education Association] claims that, if the cuts kick in, 7.4 million students would be affected — which means that either the quality of education they receive will go down or be eliminated entirely. The funding cuts could also lead to 49,365 potential job losses,” writes Lisa Mahapatra. “But not all states will feel the hit equally. With more than $100 million cuts to their education budget, the states that will be most affected by the sequester are California, Texas, Illinois, New York and Florida.”
An article in Choices by David R. Just and Brian Wansink illustrates how school administrators can use behavioral economics to nudge kids toward good eating choices and away from the obesity-causing junk food. Just and Wansink point out that administrators often face a difficult choice between nutritious meals and the bottom line:
It may be possible to replace the standard cheese pizza on white flour crust with pizza smothered in spinach, artichoke hearts, and other vegetables on a whole wheat flaxseed crust. But the healthier pizza is more expensive, and fewer children may want to eat it. Hence many school districts walk a tightrope. School districts must increase the health content of their sales while trying to avoid any reduction in their financial viability. Eliminating the less nutritional items often means eliminating the meal budget’s highest margin items. Further, child patronage of the school lunch program is understandably dependent upon schools offering foods that students are familiar with and that they like, and that will satisfy their appetites.
Hans Rosling, whose fantastic animated-data talks have been featured here before, has a new one about child-mortality trends.
The video was timed to coincide with the release of Bill Gates‘s 2013 Annual Letter, which notes successful health reforms in Ethiopia and the importance of quality measurements. “[A]ny innovation — whether it’s a new vaccine or an improved seed — can’t have an impact unless it reaches the people who will benefit from it,” writes Gates.
Amidst another scandal surrounding U.S. News and World Report’s college rankings, economists Christopher N. Avery, Mark E. Glickman, Caroline M. Hoxby, and Andrew Metrick have proposed another option: rankings based on students’ revealed preferences. Here’s the abstract:
We present a method of ranking U.S. undergraduate programs based on students’ revealed preferences. When a student chooses a college among those that have admitted him, that college “wins” his “tournament.” Our method efficiently integrates the information from thousands of such tournaments. We implement the method using data from a national sample of high-achieving students. We demonstrate that this ranking method has strong theoretical properties, eliminating incentives for colleges to adopt strategic, inefficient admissions policies to improve their rankings. We also show empirically that our ranking is (1) not vulnerable to strategic manipulation; (2) similar regardless of whether we control for variables, such as net cost, that vary among a college’s admits; (3) similar regardless of whether we account for students selecting where to apply, including Early Decision. We exemplify multiple rankings for different types of students who have preferences that vary systematically.
Students in three of Professor Peter Fröhlich‘s computer programming classes at Johns Hopkins University recently devised a method to game their final grades. Frolich grades exams on a curve — the highest grade in the class, whatever it may be, becomes 100 percent, and “everybody else gets a percentage relative to it.” So students collectively planned a boycott:
Because they all did, a zero was the highest score in each of the three classes, which, by the rules of Fröhlich’s curve, meant every student received an A.
“The students refused to come into the room and take the exam, so we sat there for a while: me on the inside, they on the outside,” Fröhlich said. “After about 20-30 minutes I would give up…. Then we all left.” The students waited outside the rooms to make sure that others honored the boycott, and were poised to go in if someone had. No one did, though.
Catherine Rampell discusses the strategy:
Al Roth, the Nobel Prize winner and market design guru who’s worked on everything from organ exchanges to school matching, posts a reader email about Wagaroo, a new matching market for dog buyers and responsible breeders. Christine Exley, an Economics grad student at Stanford, writes:
It is estimated that 23.5 million people plan to acquire a pet every year. Of this, 1.5 million intend to buy their pet from a breeder, 5 million are committed to adopting their pet, and 17 million are undecided about the source for their new pet. At the same time, 3 million dogs and cats are killed every year in shelters because they cannot find a home. When you account for people acquiring dogs from shelters, rescue groups, the street (i.e., strays), friends, family members and purebred breeders, there are still over 6 million people acquiring dogs and cats from “other” sources. These other sources (as well as some of the listed sources) are likely puppy mills – places that mass-produce dogs for profit in horrid conditions.
At McSweeney’s, Josh Freedman breaks up with his girlfriend, economist-style:
Susan, we need to talk. I’ve been doing a lot of thinking lately. About us. I really like you, but ever since we met in that econ class in college I knew there was something missing from how I felt: quantitative reasoning. We can say we love each other all we want, but I just can’t trust it without the data. And after performing an in-depth cost-benefit analysis of our relationship, I just don’t think this is working out.
Please know that this decision was not rash. In fact, it was anything but—it was completely devoid of emotion. I just made a series of quantitative calculations, culled from available OECD data on comparable families and conservative estimates of future likelihoods. I then assigned weights to various “feelings” based on importance, as judged by the relevant scholarly literature. From this, it was easy to determine that given all of the options available, the winning decision on both cost-effectiveness and comparative-effectiveness grounds was to see other people.
(HT: Greg Mankiw)
A new working paper (PDF; abstract) from economists Michael F. Lovenheim and Emily G. Owens examines the effects of federal financial aid, a somewhat controversial issue during last fall’s campaign, on the college attendance of students with drug convictions. From the abstract:
In 2001, amendments to the Higher Education Act made people convicted of drug offenses ineligible for federal financial aid for up to two years after their conviction. Using rich data on educational outcomes and drug charges in the NLSY 1997, we show that this law change had a large negative impact on the college attendance of students with drug convictions. On average, the temporary ban on federal financial aid increased the amount of time between high school graduation and college enrollment by about two years, and we also present suggestive evidence that affected students were less likely to ever enroll in college. Students living in urban areas and those whose mothers did not attend college appear to be the most affected by these amendments.
In the New Republic, Nate Cohn explores the small but growing role of advanced statistics in football. Projects like Football Freakonomics notwithstanding, the NFL isn’t usually thought of as a realm where stats hold all that much sway, in part because the game is so much more of a complex-dynamic system than, say, baseball. Here’s Cohn on one big change fans might notice if more coaches start relying on statistics:
The one place where fans could see analytics at work is in play calling, which also happens to be the place where analytics could impact the average fan’s experience of the game. The numbers suggest, for instance, that teams should be aggressive on fourth down, and that it’s better to go for first down with a lead in a game’s final minutes than to run the ball on third down to run out the clock. Yet even the teams with well-regarded analytics departments, including San Francisco and Baltimore, largely adhere to a conservative and traditional play calling approach: the coaches “just aren’t listening to them yet,” [Brian] Burke says. And the few coaches with a reputation for following the statistics, like New England Patriots coach Bill Belichick, aren’t even close to as aggressive as the numbers would advise.
A working paper (PDF; abstract) from economists Resul Cesur, Erdal Tekin, and Aydogan Ulker explores the effects of increased natural gas use on infant mortality:
In this paper, we use the variation across space and time in the expansion of natural gas infrastructure in Turkish provinces using data between 2001 and 2011. Our results indicate that the rate of increase in the use of natural gas has resulted in a significant reduction in the rate of infant mortality in Turkey. In particular, a one-percentage point increase in the rate of subscriptions to natural gas services would cause the infant mortality rate to decline by 4 percent, which could result in 348 infant lives saved in 2011 alone. These results are robust to a large number of specifications.
The authors outline two ways through which the effect may occur:
1. You too can outsource your job to China.
2. What are all those bacteria doing in the troposphere? (academic paper/press summary)
3. How much of your state’s road budget is funded by the government?
4. North Korea gets the Google Maps treatment.
A new paper (abstract; PDF) by Gustavo J. Bobonis, Melissa González-Brenes, and Roberto Castro examines the effects the Mexican welfare program Oportunidades on spousal abuse:
Beneficiary women are 40 percent less likely to be victims of physical abuse, but are more likely to receive violent threats with no associated abuse. This evidence is consistent with a model of decision-makers’ interactions with asymmetric information in the male partner’s gains to marriage, who can then use threats of violence to extract rents from their female partners.
“The article may have important implications for policy, since it provide a mixed view of conditional cash transfer programs’ effectiveness in improving women’s empowerment within the household,” the authors wrote in an earlier draft. “The program may increase the likelihood of violent threats, which may in turn compromise women’s emotional health and other aspects of their wellbeing.”
In SuperFreakonomics
Tim Harford, a.k.a. the Undercover Economist (also a Financial Times columnist) has a new radio series on the BBC called Pop-Up Economics:
The show is all about storytelling – and the stories are of remarkable lives or surprising ideas in economics. We’ll learn about the impromptu engineering genius Bill Phillips, the cold war guru Thomas Schelling, and life-saving market designer Al Roth. We’ll discover how the geeks took over poker, and what happened to them.
And the series begins with the innovation lessons from the London Olympics – or as we’ve called it, “Hot Pants vs. the Knockout Mouse.”
We’ll be tuning in.
Steven Levy of Wired provides the “inside story” of Facebook’s new search engine, Graph Search:
For years now, Facebook watchers have wondered when the company would unleash the potential of its underpowered search bar. (Nobody has feared this day more than Google, which suddenly faces a competitor able to index tons of data that Google’s own search engine can’t access.) They have also wondered how a Facebook search product might work. Now we know. Graph Search is fundamentally different from web search. Instead of a Google-like effort to help users find answers from a stitched-together corpus of all the world’s information, Facebook is helping them tap its vast, monolithic database to make better use of their “social graph,” the term Zuckerberg uses to describe the network of one’s relationships with friends, acquaintances, favorite celebrities, and preferred brands.
1. Austin tries to incentivize employees to leave their cars at home, but it doesn’t work.
2. Are 60 percent of New York State’s cigarettes smuggled in?
3. Freakonomics movie trailer in Italian.
4. Sunk costs and Mark Sanchez.
5. Garlic smugglers in the E.U. dodge high import duties. (HT: Rich)
We’ve blogged and podcasted about the value (or lack thereof?) of a college education. A new paper (summarized here) by sociologist Laura Hamilton suggests one way parents can help their kids get more out of college: help them a little less — with tuition, at least. Here’s the abstract:
Evidence shows that parental financial investments increase college attendance, but we know little about how these investments shape postsecondary achievement. Two theoretical frameworks suggest diametric conclusions. Some studies operate from amore-is-more perspective in which children use calculated parental allocations to make academic progress. In contrast, a more-is-less perspective, rooted in a different model of rational behavior, suggests that parental investments create a disincentive for student achievement. I adjudicate between these frameworks, using data from nationally representative postsecondary datasets to determine what effect financial parental investments have on student GPA and degree completion. The findings suggest seemingly contradictory processes. Parental aid decreases student GPA, but it increases the odds of graduating—net of explanatory variables and accounting for alternative funding. Rather than strategically using resources in accordance with parental goals, or maximizing on their ability to avoid academic work, students are satisficing: they meet the criteria for adequacy on multiple fronts, rather than optimizing their chances for a particular outcome. As a result, students with parental funding often perform well enough to stay in school but dial down their academic efforts. I conclude by highlighting the importance of life stage and institutional context for parental investment.
In a Freakonomics Radio episode called “Misadventures in Baby-Making,” we looked at the unintended consequences of China’s One Child Policy. A new paper (gated) in Science looks at the so-called “little emperors” and how they might impact China’s economy. From Bloomberg:
China’s one-child policy has produced adults that tend to have personality traits unsuited for starting businesses or managing companies, according to a study that adds to economic concerns surrounding the rule.
Using surveys of 421 men and women in Beijing and testing their skills in economic games, researchers in Australia found those born after the 1979 policy were more pessimistic, nervous, less conscientious, less competitive and more risk averse. They also found them to be 23 percent less prone to choose an occupation that entails business risk, such as becoming a stockbroker, entrepreneur or private firm manager.
(HT: Katherine Wells)
One of the first Freakonomics Radio podcasts we made was an episode about the (surprisingly tenuous) link between obesity and health problems. A new study in The Journal of the American Medical Association finds that “Grade 1 obesity overall was not associated with higher mortality, and overweight was associated with significantly lower all-cause mortality.” Writing for The Daily Beast, Kent Sepkowitz explains:
Compared to people with a normal weight (a BMI less than 25), the overweight (BMI between 25 to 30) had a 6 percent lower mortality rate—and both groups had a rate about 15 percent lower than the obese, especially the very obese (BMI above 35).
The explanation for the finding is uncertain. Perhaps the pleasantly plump but not obese have an extra reserve—a literal spare tire—that confers a survival advantage should they become seriously ill, whereas the lean-iacs do not. Or maybe the thin ones were thin because of a serious illness that, in the course the various studies, killed them. Or maybe the thin ones were thin because they were chain smokers living off Scotch and potato chips. Or just maybe the occasional pig-out does soothe the soul and make for a happier, healthier individual.
(HT: Andrew Sullivan)
The Atlantic has a roundup of the 12 goofiest petitions submitted so far to the White House’s We the People initiative. Our two favorites: “Secure resources and funding, and begin construction of a Death Star by 2016” and “authorize the production of a recurring television program featuring Vice President Joe Biden.”
A petition to “Direct the United States Mint to make a single platinum trillion-dollar coin” has so far garnered only 5,149 signatures (as compared to the Death Star’s 33,836 signatures), even though Paul Krugman recently endorsed of the idea. Stephen Colbert has also weighed in on the #Mintthecoin movement.
Cass Sunstein, writing on Bloomberg View, reviews the research on judicial voting patterns to determine whether judges are really as “political” as people seem to think. The good news: federal judges aren’t nearly as bad as politicians. “Judges are far from mere politicians; we don’t see anything like the kind of polarization found in Congress,” writes Sunstein. “At the same time, judicial predispositions matter, and they help explain why judges are divided on some of the great issues of the day.”
The research also indicates that even judges are subject to a phenomenon called “group polarization.” “[J]udicial voting becomes a lot more ideological when judges sit on panels with two others appointed by presidents of the same political party,” Sunstein explains. “For example, Republican appointees side with plaintiffs complaining of disability discrimination about 29 percent of the time — but that number drops to 17 percent when they are sitting with two fellow Republican appointees.”
As for the Supreme Court, Sunstein highlights research from a new book on the political leanings of Supreme Court justices since 1937:
Strikingly, they find that of the six most conservative justices in their entire sample, no fewer than three are currently on the court (Clarence Thomas, Antonin Scalia and Samuel Alito). A fourth makes the top 10 (John Roberts). By contrast, none of the current justices ranks among the most liberal six, and only one makes the liberal top 10 (Ruth Bader Ginsburg).
Yes — if you don’t know much math, that is. A new study finds that even academic scholars perceived research to be of higher quality if there’s some math involved — even if the math makes no sense. The experiment threw an irrelevant mathematical equation into research paper abstracts, and asked scholars of different fields to evaluate the quality of the research:
Mathematics is a fundamental tool of research. Although potentially applicable in every discipline, the amount of training in mathematics that students typically receive varies greatly between different disciplines. In those disciplines where most researchers do not master mathematics, the use of mathematics may be held in too much awe. To demonstrate this I conducted an online experiment with 200 participants, all of which had experience of reading research reports and a postgraduate degree (in any subject).
1. Gary Becker and Kevin Murphy on the failed war on drugs.
2. Selling beer at college football games worked out pretty well for the University of Minnesota this season: $907,000 in alcohol sales and fewer incidents.
3. The Economist‘s 2012 in charts.
4. Hedging hackers: firms create fake data to defend against data thieves.
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