I always love it when I’ve been doing something one way my whole life, and then someone explains to me there is a better way to do that same thing, and the new way is so simple I can immediately switch and see benefits.
Usually it is a new technology that unlocks the magic. For instance, XM Radio, iTunes and Pandora all fundamentally changed the way I listen to music. My Sonicare toothbrush is a hundred times better than a regular toothbrush. After the creation of seedless watermelons, I would never again intentionally buy one that had seeds. Microwave popcorn is another example.
What is even neater, I think, than a new technology changing things, is when someone just comes up with a better way of thinking about a problem. I’ve done a little bit of reading on the origins of randomized experimentation, and it is fascinating to see how that new and powerful idea emerged.
On a much smaller scale, I’ve recently had that sort of change in my thinking about another issue: how to read putts on the green when playing golf.
A few months back, hundreds of thousands of pages of U.S. government documents were made available to the public through WikiLeaks. I have to say that, at the time, I thought this would be a history-making event. I figured there would be loads of interesting and controversial revelations in the documents. Huge scandals would emerge; heads would roll.
I was recently reminded, while reading a months-old copy of The Economist, just how little of interest has thus far emerged from the documents. The U.S. ambassador to Ecuador was sent home by the Ecuadorians because she had written a leaked cable saying (gasp) that the Ecuadorian police were corrupt. The article mentioned that a similar fate had befallen the American ambassador to Mexico.
Is that it? Is there nothing of importance in State Department cables?
Last week, the Supreme Court ordered California to release at least 30,000 prisoners due to poor prison conditions caused by overcrowding.
This is what economists call a “natural experiment,” or what I prefer to call an “accidental experiment.” The Supreme Court order will be a “shock” to the California prison system, leading to roughly a 10 percent reduction in the prison population there. I used this sort of accidental experiment in a paper I published back in 1996, finding a large impact of mandated prison releases on state crime rates. If my estimates remain relevant to the current time period, I predict that California violent crime rates should rise about 4 percent relative to the rest of the U.S. over the next few years. That adds up to about 80 extra homicides a year.
Five years from now, no doubt, an economics graduate student will analyze the data and tell us what the actual numbers look like. Unless, of course, I beat them to the punch!
I have been remiss in not offering public congratulations to Stanford economist Jon Levin, who recently became the latest recipient of the John Bates Clark Medal, given annually by the American Economic Association to the most promising economist under the age of 40.
Levin is best known for his contributions to economic theory, but my favorite paper of his is one that is quite applied. Levin and co-authors describe their efforts to help a wireless carrier bid more effectively in a government-run spectrum auction.
As noted in a blog post I wrote at the time, the strategies engineered by Levin’s team generated $1 billion in surplus for the company that hired them. The economists did, however, make one dreadful mistake: they agreed to be paid by the hour instead of getting a share of the surplus.
It was like the 1990s all over again when the FBI released the latest crime statistics last week. Violent crime fell by five percent; property crime fell three percent. Those are the sorts of crime declines that were commonplace in the 1990s.
But what was really reminiscent of the 1990s was the way the media covered it. The New York Times is a perfect example. For starters, the set of criminologists who give quotes in the story are the exact same criminologists who were called upon by the Times each year in the 1990s to assess the latest numbers: James Alan Fox, Alfred Blumstein, and Franklin Zimring. (You may remember James Alan Fox as the portent of doom in the abortion and crime chapter of Freakonomics.)
And these experts are just as puzzled by the recent crime drop as they were 20 years ago. “Remarkable,” says James Alan Fox. “Striking,” says Blumstein.
More well-deserved attention for University of Chicago economist John List, whose research is the star of Chapter 3 of SuperFreakonomics and also featured in the last segment of the Freakonomics movie.
Oliver Staley crafts a long piece that both describes some of List’s recent research endeavors and gives the reader a feel for his personality.
Like all economists, apparently, he has a story about potty training his kids:
List believes so strongly in incentives that he offers his own children lottery tickets to do extra math homework, he says. He promised a daughter a trip to Disney World in exchange for her becoming potty trained. The day he made the offer, she used the toilet and was trained, he says.
I was going through a pile of old papers in my office when I found a sheet entitled “Blackboard at the University of Chicago October 5, 2005: Future Nobel Laureates.” I have no idea who brainstormed the list that was written up on the board, or why. I can’t even remember whether I took part in the exercise, although seeing how good the predictions have turned out, I’m going to assert (rightly or wrongly) that I was one of the predictors.
For your entertainment, here is the list of names that were on the board, in their original order.
Electric cars are all the rage today, but some of the smartest people I know believe that moving towards electric vehicles is a terrible idea. Looking casually as an outsider at the unappealing economics of electric vehicles (the need for a new and immensely expensive infrastructure, cars that cost much more than either traditional gas engines or hybrids, limited ranges and long recharging times), I find it hard to understand why the Obama administration is pushing electric cars.
One argument I’ve heard is “national security,” the idea being that electric vehicles would make the United States less dependent on imported oil. Be careful what you wish for, however, because if electric cars become a mainstay, we may be trading one dependence for another that is even more troubling. Ninety-five percent of the world’s output of rare-earth metals today comes from one country: China. By some estimates, demand will outstrip supply within five years. At least with oil we know there are fifty years of oil reserves readily available. Moreover, oil is produced all over the world, limiting the monopoly power of any one country.
Yesterday, I described my own personal moral code regarding government prohibitions, which led me to be outraged by recent actions by the U.S. government shutting down the three major internet poker sites for American players.
Forgetting about my own moral standards, which are probably of interest and relevance only to myself, there are four other reasons why the government actions make no sense:
1) Prohibitions that focus on punishing suppliers are largely ineffective. Prohibition of internet poker is no exception.
When there is consumer demand for a good or service, it is extremely difficult to fight the problem through government punishments of suppliers. Illegal drugs are a good case in point. Americans want cocaine. Over the last 40 years of the “War on Drugs,” we have expended enormous amounts of resources locking up drug dealers. (Contrary to public opinion, the punishment of drug users has been relatively limited; by my estimates 95 percent of the prison time served has been by sellers of drugs, as opposed to users.) Especially when the demand for a good is inelastic, squashing supply is ineffective. Making life difficult for incumbent suppliers entices new entrants eager to meet existing demand.
I was outraged a few weeks back when the U.S. government cracked down on internet poker. It took me a while to figure out why.
One of the most important roles of government is establishing a set of rules under which society will operate. Governments determine property rights and coordinate the provision of public goods. Some frowned upon activities are deemed illegal (e.g. homicide); other favored activities are encouraged through subsidies (e.g. home ownership, education).
Life is all about incentives, as this paragraph from a New York Times article about Bin Laden makes clear:
“When children playing in the fields let a ball fly into the [Bin Laden] compound by mistake, the owners never let them retrieve it but gave them 50 rupees to buy a new one, said one of the neighbors, a woman with a small boy on her hip who gave her name only as Bibi. When the children began to throw balls into the compound on purpose to get more money, the owners kept paying, she said, laughing.”
(HT Jim Covington)
Dubner and I have been thinking a lot these days about pundits who make predictions. The incentives surrounding predictions are completely skewed. If I make a wild prediction, and it just happens to come true, I have strong incentives to constantly remind the world about how my prediction came true. If, as is much more often the case, the prediction is wrong, it is likely to be quickly forgotten because there is typically no one else who cares enough about my failed prediction to go to the time and effort to continually remind others that I was wrong. Thus, even if I am rarely correct, it makes sense to make a lot of crazy predictions.
Which leads me, of course, to the Kentucky Derby. I’ve made Kentucky Derby predictions every year since we started the blog. Rarely have I been correct. But I did, many years ago, publicly and correctly predict that a 50-1 shot would win the race. I cannot tell you how many times I have mentioned that to people. I have been much quieter about the time that the horse I predicted would finish dead last actually won the race, although in its own way that is also quite a feat.
More than any other economist, Nobel laureate Gary Becker has inspired and shaped the work of Steven Levitt. Here’s your chance to submit a question for Stephen Dubner to ask Becker when they sit down for an upcoming video chat. Fire away in the comments section.
This is an amusing little story. WBBM radio reports that, “Elgin police say Gavina-Morales crashed his pickup truck into a curb and dug up parkway grass in the cul-de-sac at the end of Stockbridge Place in Elgin at about 6:10 a.m. Sunday.”
A handful of Washington D.C. schools are embroiled in a scandal over whether teachers corrected wrong answers to boost students’ test scores, and thereby, increase their bonuses.
Two economists walk into a Las Vegas casino. They ask to place a $2,500 bet on the Chicago White Sox to win more than half their games this year. The reply from the casino? That’s too risky.
From a loss-of-life standpoint, the Japanese earthquake/tsunami may well be at least five times more severe than 9/11. While natural disasters in the past have claimed more lives, it’s extremely rare for a developed country to suffer this kind of catastrophe. While the economic losses no doubt take a distant back seat to the human suffering, nonetheless there are many important economic questions to be answered. I can’t think of a better pair of people to do so than Anil Kashyap and Takeo Hoshi.
I stopped by a local fried chicken joint, Harold’s Chicken Shack, the other day. Just to give you a sense of what sort of restaurant this is, there is a layer of bulletproof glass separating the workers and the customers. They don’t cook the chicken until you order, so I had five or ten minutes to kill waiting for my food.
Up until now, the only way to take a course taught by Gary Becker was to be a student at the University of Chicago.
Thanks to the heroic efforts of three students –Dana Chandler, Salvador Navarro Lozano, and Jorge Garcia — that has changed.
I idolized a lot of golfers growing up, but for some reason Gary Player was not one of them. That is kind of strange, because we have some similarities. We are both diminutive. We both fall all over the place on our golf follow-throughs. And the same thing that was said about him and golf has often been said about me and economics: he did more with less talent than just about anyone else.
This guy is a real life Batman. Amazing.
Photo: Sands Beach Lanzarote Despite the fact that I am not very good at golf, my secret fantasy is to someday play on the Champions Tour, the professional golf tour for fifty-somethings. As I approach my 44th birthday, I realize that it is time to get serious in this endeavor.
The folks at The New York Times couldn’t have been nicer while we had our blog there, but one thing that always bothered me was that there were way too many rules and restrictions regarding what we were allowed to post.
The best strategy I have found for reducing the aggravation of security screening is to pretend I am a terrorist and think about where the weaknesses are in security, and how I might slip through. I think I figured out a way to get a gun or explosives into the White House during the George W. Bush administration. I only got invited to the White House once, however, so I never got a chance to test my theory for real on a return visit.
Last week, I recounted the story of my golf pro Pat Goss, upon first meeting me, comparing my swing to another player. I invited blog readers to guess the answer.
I recently began taking golf lessons for the first time since I was 13 years old. I got to the range early, and my new teacher, Pat Goss, was finishing up a lesson with another student over on the putting green. He eventually made his way over towards me and introduced himself.
Given the sort of topics that elementary schools emphasize these days (e.g., a few weeks back, it was national anti-bullying day; my 10-year-old has painstakingly spelled out “Save the Earth” on her bedroom door), shouldn’t Helen Keller be front and center in the curriculum?
I can’t say that I am surprised by the latest sumo headline from the Associated Press.
When my wife saw the cover of the new book Scorecasting by Tobias J. Moskowitz and L. Jon Wertheim, which was sitting on my bedside table, all she could do was shake her head.
Are NFL coaches starting to listen to economists?
My gut feeling is that the answer to that question is almost certainly a resounding “no.” There are at least three pieces of data that hint at the possibility that economists might be making some headway.
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