Thick markets, thin markets, and the triumph of attributes over compatibility.
In a Wall Street Journal op-ed, Red Jahncke argues that the recent drop in U.S. stock markets may be a delayed response to a tax change:
In late 2012, investors sold huge amounts of investments with long-term capital gains to take advantage of the expiring 15% “Bush” long-term capital-gains tax rate before the current 23.8% rate for higher-income investors took effect on Jan. 1, 2013. These sales left investors with few unrealized long-term gains going into 2013.
Instead, as the market surged, investors’ new gains were held mostly in short-term positions, which they were loath to sell given that short-term gains are taxed at ordinary income-tax rates (39.6% for high earners). With this inhibition there was less sales pressure last year, and for that reason the market may have risen more than it would have otherwise. Indeed, last year’s 30% market gain exceeded most analysts’ predictions.
The “beauty premium” is real, for everyone from babies to NFL quarterbacks.
From Babak Givi, an assistant professor at NYU’s Dept. of Otolaryngology-Head & Neck Surgery:
Dear Freakonomicers,
I am writing in regards to your January 9th podcast [“Are We Ready to Legalize Drugs? And Other FREAK-quently Asked Questions”] and the question about hats. Why people used to wear hats? Stephen made a comment about religious roots of hats and Steven talked about fashion.
I am sure there are links with both, but I would like to note that for the most of the human history, hats were protective garments. We are not spending as much time as we used to out in the open environment. If you spend most of the time outside, you will soon realize that similar to the rest of your body, you have to protect your head from the sun, wind, rain, or snow; but most importantly from the sun. Even now, when we spend most of our time inside our manmade structures, skin cancers are the most common type of cancer in humans. Furthermore, the most common area for developing skin cancers is head and neck, which happens to be the most exposed area of human body, as long as you are not a strict nudist. The effects of ultraviolet rays on developing skin cancers is beyond doubt. Lightly pigmented skins are extremely sensitive to the sun and with enough exposure most people will develop skin cancers. Hats, similar to the rest of clothing items, protect our skin. In addition, less sunlight will delay development and progression of cataracts (point for wide brim hats). I think our ancestors had developed the habit of wearing hats out of necessity not fashion or religion. But of course through the millennia, we start adding religious, fashion, and symbolic meanings to wearing hats.
We once wrote about reasons to not vote, at least from an economist’s perspective. Since a single vote almost never alters an outcome, what’s in it for the voter?
If a given citizen doesn’t stand a chance of having her vote affect the outcome, why does she bother? In Switzerland, as in the U.S., “there exists a fairly strong social norm that a good citizen should go to the polls,” [Patricia] Funk writes. “As long as poll-voting was the only option, there was an incentive (or pressure) to go to the polls only to be seen handing in the vote. The motivation could be hope for social esteem, benefits from being perceived as a cooperator or just the avoidance of informal sanctions. Since in small communities, people know each other better and gossip about who fulfills civic duties and who doesn’t, the benefits of norm adherence were particularly high in this type of community.”
In light of our recent podcast “Everybody Gossips (and That’s a Good Thing),” we heard from David Head, an assistant professor of history at Spring Hill College in Mobile, Alabama:
I just listened to the podcast on gossip and as it happens my class on the early American republic will be reading the following article on political gossip for next week:
Joanne B. Freeman, “Slander, Poison, Whispers, and Fame: Jefferson’s ‘Anas’ and Political Gossip in the Early Republic,” Journal of the Early Republic, 15 (1995), 25-57.
Have you heard of it? Freeman shows that not only were the founders inveterate gossips but that gossip was crucial to the formation of political parties as like-minded founders, such as Jefferson and Madison, attempted to marshal support to protect themselves and the country from their enemies, such as Hamilton.
What fun it would have been to include this in our episode! Its thesis strengthens the point made in the podcast by Nick Denton of Gawker:
What “Sleep No More” and the Stanford Prison Experiment tell us about who we really are.
Dubner and Levitt talk about fixing the post office, putting cameras in the classroom, and wearing hats.
Most people blame lack of time for being out of shape. So maybe the solution is to exercise more efficiently.
At the Becker-Posner blog, Richard Posner offers some ideas for amending the entitlements programs that are “threatening the long-term solvency of the federal government”:
Which leads me to the first of the only two practical ideas that occur to me for slowing the increase in entitlement expenditures relative to the size of the economy: a shift in emphasis in medical research from length of life to ability to live independently. Independent living means living without home care (whether by relatives, thus taking time from them that they could use more productively in other activities, including paid employment, or by paid care—paid by the government in many cases) and being able—and wanting—to work. Independent living can be fostered by focusing medical research on problems of vision, musculoskeletal problems (which impair mobility), obesity, and dementia, in preference to research on curing and preventing cancer, heart disease, and stroke.
We get a lot of e-mails with requests/suggestions for podcast and writing topics. These days, the most popular request by far is for Bitcoin. I am still not sure we’ll do it but I’m thinking about it. If so, what do you want to know? Please be specific. Also: do you really care? It strikes me that, at the moment, Bitcoin is one of those things that a small number of people care about hugely but that most people couldn’t care less. (Freakonomics readers aren’t, of course, “most people.”) The rapid spikes and drops in value of course invites lots of news coverage but that is among the least-interesting aspects of a cryptocurrency, isn’t it?
A commitment device forces you to be the person you really want to be. What could possibly go wrong?
As the economics of high-end journalism continue to worsen, it is interesting — and, if you’re a fan of journalism, encouraging — to see how much non-profit journalism is being created. NPR is of course the most famous model but there’s also ProPublica, Pierre Omidyar‘s First Look Media, and a lot of other foundation- and philanthropist-funded projects.
Add to this list The Marshall Project, a “not-for-profit, non-partisan news organization dedicated to covering America’s criminal justice system.” It’s being launched by Neil Barsky, a former journalist, hedge-funder, and most recently film director. (He’s also a friend of mine, but don’t hold that against him.)
Here’s the rest of the Marshall Project’s mission statement:
Thank you, Politico (the Magazine), for taking a look back at various predictions for 2013 to see how they worked out.
In our “Folly of Prediction” podcast, we discussed how the incentives to predict are skewed. Big, bold predictions that turn out to be true are handsomely rewarded; but predictions that turn out to be false are usually forgotten. With the cost of being wrong so low, the incentives to predict are high.
In his Politico piece called “Crystal Balderdash,” Blake Hounshell doesn’t let us forget the bad predictions. A few examples:
This week’s episode of Freakonomics Radio takes a look at Pope Francis’s critique of the free-market system in “Evangelii Gaudium” (“The Joy of the Gospel”), his first apostolic exhortation.
The underlying point of everything we’ve ever written about baby names is that the name is essentially the parents’ signal to the world of what they think of their kid — whether it’s a signal of tradition, religion, aspiration, affiliation, or whatnot.
Here is a very pure example of that principle: a baby named Colt .45 Stratemeyer. It’s via Jim Romenesko, from a birth announcement in the Tillamook (Oregon) Headlight-Herald:
Colt .45 Stratemeyer was born Nov. 26, 2013 at Tillamook Regional Medical Center. He weighed seven pounds, two ounces. He joins his older brother, Hunter Allen Stratemeyer, 3. Baby Colt’s parents are Joshua and Rebekah Stratemeyer of Toledo.
I assume the announcement is legitimate, though I can’t say for certain. I am guessing there are fiction writers out there who could write a short story or maybe even a novel with no more inspiration than this birth announcement.
We are setting up a new series of interviews for Freakonomics Radio in which we’ll identify interesting/accomplished/prominent people and ask them a series of Freakonomics-ish questions, ranging from their professional accomplishments to personal quirks. I am eager to hear your suggestions on both:
1) The people you’d want to hear from; and
2) What kind of questions you’d like to hear them asked.
No idea is too big/small, outlandish/traditional, etc.
Thanks in advance.
More than 1 million people die worldwide each year from traffic accidents. But there’s never been a safer time to drive.
From a Freakonomics Radio listener named Luke Charley:
I am a 21-year-old male college student in Bismarck, ND. I listen to your podcast quite a bit, and I found the one about the energy saved by houses — I believe it was in the podcast titled “Riding the Herd Mentality.” Well, the weight room I frequent often had plates not racked back up after people were done working out. They would just leave them on the floor and it bothered me quite a bit. So I decided to write a sign saying, “Everybody else racks their weights, please do the same.” In the past two weeks since I have done that, every day when I have been in there, there were no weights on the floor! Applying what you learn on a podcast to a weight room is quite invigorating.
Way to go, Luke! Delighted this worked out (so far, at least) …
It’s time to do away with feel-good stories, gut hunches, and magical thinking.
A new working paper (abstract; PDF) by James Heckman and Tim Kautz looks at the relationship between “character” and student achievement as measured by test scores. Long story short: achievement tests don’t necessarily measure what will often matter most once students hit the real world.
This paper reviews the recent literature on measuring and boosting cognitive and noncognitive skills. The literature establishes that achievement tests do not adequately capture character skills–personality traits, goals, motivations, and preferences–that are valued in the labor market, in school, and in many other domains. Their predictive power rivals that of cognitive skills. Reliable measures of character have been developed. All measures of character and cognition are measures of performance on some task. In order to reliably estimate skills from tasks, it is necessary to standardize for incentives, effort, and other skills when measuring any particular skill.
Character is a skill, not a trait. At any age, character skills are stable across different tasks, but skills can change over the life cycle. Character is shaped by families, schools, and social environments. Skill development is a dynamic process, in which the early years lay the foundation for successful investment in later years.
Spontaneous order is everywhere if you know where to look for it.
The online universe doesn’t have nearly as many rules, or rulemakers, as the real world. Discuss.
Aaron Pilkington, an officer trainee at Air Force Officer Training School in Montgomery, Ala., writes to say:
I was driving down the road the other day with a fellow trainee, pointing out to him that the particular road along which we were driving always has police officers hiding out and catching people speeding. Just as I said that, sure enough, we saw a police car pull out with lights on and pull someone over. My friend, Bill, said that he wondered if the song “Sweet Home Alabama” would work in Alabama. I asked him to elaborate.
My friend, who is from Rhode Island, explained that a couple of years ago he was speeding and got pulled over by a police officer. He said that the song “Sweet Home Alabama” was on the radio and that somehow the officer let him off on a warning. Some time later, he was pulled over again and had the song on his iPod. In the time between being pulled over by the police officer and the officer walking up to his window, he pulled the song up on his iPod and left it on loud enough to be heard by the police officer, but not too loud. Again, success. He said this happened one more time just a couple of months ago in Florida and that he now always has at the ready a CD with the song “Sweet Home Alabama,” just in case he gets pulled over again.
American Airlines encourages passengers to pre-book their meals online:
Why “kosher,” I wonder, but “Muslim” rather than “halal”? Should the “kosher” meal be “Jewish” instead? American, it turns out, is hardly the only airline to use this terminology. Don’t know why, but unparallel nomenclature always gets my attention …
College tends to make people happier, healthier, and wealthier. But how?
In our podcast “Parking Is Hell,” we explored how the overwhelming demand for parking space has a lot of downsides. One big problem is that city centers can feel as if they’re practically held hostage by parking lots and garages. I was in Minneapolis the other day, and here are four pictures taken from the window of my hotel room. It’s not exactly a view that makes the heart skip …
Airbus this week called for an industry standard that would provide for a seat at least 18 inches wide in economy cabins, but its U.S. arch-rival Boeing says it should be for airlines to decide.
As you can imagine, there is a lot of money at stake here:
Boeing says its revamped “777X” will hold 406 people based on economy seats over 17 inches wide and set out 10 in each row.
Airbus says the competing version of its A350 will carry 350 people in 18-inch-wide economy seat laid out 9 abreast.
But it’s more than a battle between two companies. It’s a battle between the past and the present:
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