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Sudhir Venkatesh Responds to the Freakonomics Community

Dear Freakonomics readers,

A profile of me and my work appeared in the N.Y. Times yesterday. There were two story angles: how I conduct my research and allegations of questionable financial dealings in which I was involved. I wrote a formal statement to the Columbia University student paper and online blog, but you are also my community, so let me address you directly.

Three years ago, at my request, I began working with Columbia University on an internal initiative to develop greater clarity and transparency of an institute that they had asked me to direct. Together, we systematically reviewed grants management and research procedures as we sought to establish new, higher standards of reporting and accountability. Part of that review included the grants managed by my position. An audit was conducted, it was completed, and ethically I felt it was my responsibility to pay back $13,000 in previously reimbursed expenses for which my own recordkeeping did not meet these new standards. That matter is closed, and has been for over two years.


Are Independents More Immune to Bias Than Liberals or Conservatives?

Dan Kahan‘s research at the Cultural Cognition Project has found that even very smart people fit their knowledge to their ideology. (He has appeared on this blog a few times, and in our podcast “The Truth Is Out There…Isn’t It?”) Kahan has a new working paper (abstract; PDF) on political affiliations and bias, which argues that independents seem to show immunity to the bias that afflicts both conservatives and liberals:

Social psychologists have identified various plausible sources of ideological polarization over climate change, gun violence, national security, and like societal risks. This paper reports a study of three of them: the predominance of heuristic-driven information processing by members of the public; ideologically motivated cognition; and personality-trait correlates of political conservativism. The results of the study suggest reason to doubt two common surmises about how these dynamics interact. First, the study presents both observational and experimental data inconsistent with the hypothesis that political conservatism is distinctively associated with closed-mindedness: conservatives did no better or worse than liberals on an objective measure of cognitive reflection; and more importantly, both demonstrated the same unconscious tendency to fit assessments of empirical evidence to their ideological predispositions.


Skipping the Free Buffet

Rational? I’m at a hotel and was given a coupon allowing me to eat the excellent breakfast buffet at no cost. Sounds good; but instead, I go next door to Caribou Coffee and buy a coffee and blackberry scone for $5. Is this utility-maximizing? 

I think so. I know that if I get the “free” buffet, I’ll eat a lot—probably orange juice and a large Belgian waffle with lots of syrup. Having pigged out over Thanksgiving, my weight is already up. Spending the $5 is a self-control mechanism: I know that once I’m done at Caribou, I’ll be sufficiently less hungry that I won’t want to spend time at the buffet (and won’t have eaten more than I should). There’s more to utility than increasing income and/or reducing spending!


How a Microfinance Program Encouraged School Dropouts

A new working paper (abstract; PDF) by Britta Augsburg, Ralph De Haas, Heike Harmgart, and Costas Meghir uses a randomized trial to assess a microcredit program in Bosnia:

[W]e randomly allocated loans to a subset of applicants considered too risky and “unreliable” to be offered loans as regular borrowers of a well established MFI [micro-finance institution] in Bosnia. Our group is poorer and generally more disadvantaged than regular borrowers. What is particularly interesting is that they have applied for the loan and thus believe they have a profitable investment opportunity; however, they were turned down. This is exactly the group we need to analyze if we are to understand whether alleviating liquidity constraints in this way can be an effective anti-poverty tool.


A Small Nudge For College Enrollment?

A new working paper by George Bulman, a Stanford Ph.D. candidate and former Teach for America teacher, looks at whether having an in-school SAT or ACT testing center affects test-taking and college enrollment: Because the additional cost of taking the exam at a neighboring high school is very small, standard economic models suggest that there should be no effect. To . . .


Guilty Thought of the Day

Kenneth Chang, writing in the N.Y. Times about recent findings from the planet Mercury:

Mercury is as cold as ice.

Indeed, Mercury, the closest planet to the Sun, possesses a lot of ice — 100 billion to 1 trillion tons — scientists working with NASA’s Messenger spacecraft reported on Thursday.

Sean C. Solomon, the principal investigator for Messenger, said there was enough ice there to encase Washington, D.C., in a frozen block two and a half miles deep.

My first thought: encase Washington in miles-deep ice? — let’s do it!


Free-conomics (Ep. 103)

Our latest Freakonomics Radio on Marketplace podcast is called “Free-conomics.”  (You can download/subscribe at iTunes, get the RSS feed, listen via the media player above, or read the transcript below.) 

The gist: economists are a notoriously self-interested bunch, but a British outfit called Pro Bono Economics is giving away its services to selected charities. Martin Brookes is one of its founders:

BROOKES: When we first set up Pro Bono Economics, there were some economists who thought it was wrong, in principle, to give a service to charity for free. That if the service of analysis of their data was valuable, they should have to pay for it.

If the supply side was reluctant, so was the demand side:


How to Get the Best out of College? Your Questions Answered

We recently solicited your questions for Peter D. Feaver, Sue Wasiolek, and Anne Crossman, the authors of Getting the Best Out of College. Your questions ran the gamut and so do their replies. Thanks to all for participating. And feel free to check out our podcast on the value of a college education, “Freakonomics Goes to College” (Part 1 here, Part 2 here, and together as an hour-long special). 

Q. Michael Pollan summed up his philosophy of nutrition in seven words: “Eat food, not too much, mostly plants.” Do you have similarly pithy advice for students trying to maximize their college experience? Don’t feel limited to seven words – I’m just looking for something aphoristic. –Glen Davis

A. Your choices in college matter more than your choices of college, so choose wisely. 


The Benefits of the Safety Net

A new working paper (abstract; PDF) by Hilary W. Hoynes, Diane Whitmore Schanzenbach, and Douglas Almond examines the effects of in utero and childhood access to the social safety net, specifically food stamps:

A growing economics literature establishes a causal link between in utero shocks and health and human capital in adulthood. Most studies rely on extreme negative shocks such as famine and pandemics. We are the first to examine the impact of a positive and policy-driven change in economic resources available in utero and during childhood. In particular, we focus on the introduction of a key element of the U.S. safety net, the Food Stamp Program, which was rolled out across counties in the U.S. between 1961 and 1975. We use the Panel Study of Income Dynamics to assemble unique data linking family background and county of residence in early childhood to adult health and economic outcomes.


Putting Microeconomics to Work

I’ve long been puzzled by the almost complete disconnect between real-world businesses and academic economics.  After I graduated from college, I went to work as a management consultant.  Almost nothing I learned as an economics major proved helpful to me in that job.  Then, when I went back to get a Ph.D., I thought what I had learned in consulting would help me in economics.  I was wrong about that as well!

Ever since, I’ve felt that both business and economics would benefit from a greater connection.  Why don’t businesses set prices the way economics textbooks say they should?  Why are randomized experiments so rare in business?  Why do economists write down models of how businesses behave without spending time watching how decisions are actually made at businesses? The list goes on and on.


InTrade, Prediction Market to the Stars, Gets Banned From the U.S.

InTrade, the Dublin-based prediction market (i.e., betting platform) that we’ve written about regularly over the years (including a Q&A with its founder, John Delaney, who has since died), is under legal scrutiny from U.S. regulators and will therefore stop taking bets from U.S. customers. Here is InTrade’s statement, and here is the CFTC’s press release on the shutdown. What will U.S. regulators do next, outlaw online poker?


Massimo Young Reports from Kenya: The Surprising Secret to Banking Success

My good friend Massimo Young recently moved to Kenya, where he is seeing what happens when you mix a little American ingenuity into a thriving but chaotic developing economy.  In what I hope is the first of many blog posts, Massimo reports on just what it takes to succeed in the banking industry in Kenya.  (Massimo does not have a financial interest in any of the companies discussed in his post, although he wishes he did!)

M-PESA: The Story of the Most Successful Bank in Kenya
By Massimo Young 

It’s not easy to do business in Kenya. Business people complain all the time that despite a wealth of opportunities, there are often major roadblocks to accomplishing much on the ground, especially at scale. In fact, Kenya ranks 121st out of 185 countries in the World Bank’s “Ease of Doing Business” survey.

On the other hand, there are some amazing examples in recent years of businesses that have managed to accomplish a lot very quickly. In particular, the wild success of mobile banking in Kenya has changed the way people use money here. Launched just 5 years ago, Kenya’s leading mobile money transfer service, M-PESA, now processes a total of about $5 billion in transactions per year, equivalent to an astounding 15% of the country’s GDP. Before it launched, only 14% of Kenyans participated in the formal banking sector. Today, about half the adult population uses M-PESA.


What's That Database Worth?

Laura Meckler of the Wall Street Journal investigates the value and possible future uses of President Obama’s massive “data trove.”  Here’s a quick rundown of the data at stake:

Mr. Obama’s campaign collected 13.5 million email addresses in the 2008 election, according to people who worked on the effort. Officials say the list has grown since then, but officials won’t say by how much.

The campaign also has lists of volunteers, including the names of neighborhood team leaders who were the most active supporters. A donor database has names of millions of people who made small campaign contributions. Campaigns aren’t legally required to report the names of people who give less than $200 total, and these donors haven’t been made public.

Meckler reports that Obama’s staff plans to enlist supporters’ help in getting the President’s agenda passed, but is still debating what to do with the data over the long-term.


The Demand Curve for Religion

“Render unto Caesar what is Caesar’s”? In many European countries, religion comes at a price: If you want the services of a religious community — for marriages, burial, and other activities — you pay a tax.  (In Germany, for example, there is an 8 percent surcharge on your income-tax bill.) A very nice Finnish study by Teemu Lyytikäinen and Torsten Santavirta, “The Effect of Church Tax on Church Membership” (Journal of Population Economics, forthcoming), uses this institution to examine the demand curve for religion. The price elasticity of demand is fairly small—not more than 0.05—but that is partly because until 2003, Finland made it difficult to opt out of a religious community (and opt out of paying the tax).  Not surprisingly, once the transactions costs of tax avoidance were reduced, the elasticity of demand appears to have risen.


Our Daily Bleg: Something That You Expected to Be Free

Hi everyone. We’re working on a Freakonomics Radio episode about — sorry, I’m going to be cryptic here — a person who expected to get/use something for free but was very surprised to learn that it wasn’t free after all.

I am looking for another good/fun example of this same idea. Do you have any? Ideally, it would be something that happened to you personally but it’s okay if you only read or heard about it, as long as we can verify it and maybe interview someone involved.

Thanks in advance.


Here's a School Incentive You Probably Never Thought of (and That's a Good Thing)

Fourth-graders in Declo, Idaho, faced an unusual incentive scheme for reading: if they didn’t complete their work they could either forgo recess or have others kids draw on their face with marker. Several kids chose the latter punishment and, as you can imagine, this didn’t go over so well. It should be noted that the teacher had let the students choose these rules. From the Times-News:

When Cindy Hurst’s 10-year-old son arrived home from school Nov. 5, his entire face, hairline to chin, was scribbled on in red marker — including his eyelids. He also had green, red and purple scribble marks over the red, and his face was scratched by a marker that had a rough edge.

“He was humiliated, he hung his head and wanted to go wash his face,” said Hurst. “He knows he’s a slow reader. Now he thinks he should be punished for it.” …

As more and more schools look for better ways to motivate students, I am guessing this tactic won’t gain a lot of traction.

(HT: C.P.)


A Perverse Incentive to Not Vote?

From a reader named Kyle Gregory:

I decided about a year ago that I am not going to vote and happened to find a neat little trick for those of us who take this stance.
 
I’m not sure about other states, but in Virginia, jury duty is determined by voter registration. I moved a couple of years ago, but never changed my voter registration since I didn’t plan on voting. I recently received notification of jury duty at my parents’ address where I am still registered to vote. The notification form has a section to fill out stating that you have not lived in that county in the past 6 months, which automatically disqualifies you from jury duty! So, as long as I do not want to vote, I am also exempt from having to do jury duty!


How Vulnerable Is Our Power Grid?

A newly declassified report from the National Research Council analyzes the vulnerabilities of America’s electric-power system. Douglas Birch of Foreign Policy explains:

[T]he formerly secret report to the Department of Homeland Security focuses more on the U.S. electric power system’s older technology and lack of spare capacity, saying the “physical capabilities of much of the transmission network have not kept pace with the increasing burden that is being placed on it.” As a result, it found, sophisticated physical assaults against key facilities could damage difficult-to-replace hardware and cause multiple cascading failures with catastrophic results.

Hurricane Sandy wasn’t a “sophisticated physical assault,” but it still did the job.


What Happens When You Get Rid of Affirmative Action?

A new working paper (abstract; PDF) by economists Peter Arcidiacono, Esteban Aucejo, Patrick Coate, and V. Joseph Hotz looks at the effects of California’s Proposition 209 on university matching:

Proposition 209 banned using racial preferences in admissions at California’s public colleges. We analyze unique data for all applicants and enrollees within the University of California (UC) system before and after Prop 209. After Prop 209, graduation rates of minorities increased by 4.4%. We characterize conditions required for better matching of students to campuses to account for this increase. We find that Prop 209 did improve matching and this improvement was important for the graduation gains experienced by less-prepared students. At the same time, better matching only explains about 20% of the overall graduation rate increase. Changes after Prop 209 in the selectivity of enrolled students explains 34-50% of the increase. Finally, it appears UC campuses responded to Prop 209 by doing more to help retain and graduate its students, which explains between 30-46% of the post-Prop 209 improvement in the graduation rate of minorities.

One caveat: the study doesn’t address outcomes for students who didn’t attend University of California schools as a result of the change.


Mass Transit Hysteria (Ep. 101)

New York City’s subways and buses carry roughly seven million passengers a day, which goes a long way toward explaining why New Yorkers have one of the smallest carbon footprints in the U.S. Doesn’t that mean that mass transit is inevitably good for the environment?

Yes, no, and sometimes.

Our latest Freakonomics Radio on Marketplace podcast is called “Mass Transit Hysteria.” (You can download/subscribe at iTunes, get the RSS feed, listen via the media player in the post, or read the transcript below.) 


Should Companies Pay Us for Waiting?

My Dutch friend walked into his bank for a short transaction and was kept waiting for 45 minutes. Infuriated, he told the manager that his time was too valuable for this.  Ten days later a credit of €25 appeared on his account!  

Why can’t service organizations that keep you waiting an overly long time all do this?  Admittedly the proper price is not easy — Bill Gates’s time is more valuable than mine. But companies that offer a credit on your account if you have to wait more than some posted time would have a competitive advantage in attracting clients; and the threat of payment would provide lower-level managers an incentive to improve efficiency.  The only example I know of this practice is our plumber, who advertises that if he is more than 30 minutes late, the cost of labor is waived. (HT to GAP)


Freakonomics Radio Hits the Air on WNYC

We recently released our third set of hour-long Freakonomics Radio programs to NPR stations across the country. If you regularly listen to our podcast, there isn’t  much new to hear but if you prefer to take in your radio program via the actual radio, now is your chance. Check your local station for listings. If you’re in the New York area, you can hear Freakonomics Radio on our flagship station, WNYC, for the next five weeks at the following times:


Fans of a "Fat Tax" Will Be Saddened by the News From Denmark

The other day, Levitt and I participated in a brainstorming session on how to fight childhood obesity, sponsored by the Robert Wood Johnson Foundation. (FWIW, we recorded the event and will try to turn it into a podcast.)

One topic that got a lot of traction was a targeted tax on sugary drinks and fatty foods. (This is often called a “fat tax” but should not be confused with a tax on overweight people.) Many people in the session were in favor of the idea but a few were skeptical, primarily because such a tax will be tricky to implement well. One objection that I was surprised no one raised: the simple fact that taxpayers might hate the tax and rebel against it to the point where it becomes politically and economically impossible.

In support of the idea, one person reminded us that Denmark recently instituted a “fat tax” on  foods containing more than 2.3 percent of saturated fat.


How to Get the Best out of College? Bring Your Questions

We recently put out a two-part podcast called “Freakonomics Goes to College” (Part 1 here, Part 2 here, and together as an hour-long special). The main question we tried to answer was if, and on what dimensions, a college education is “worth it” — i.e., whether the returns to education are as robust as we’ve been led to think. (Short answer: yes.) Along the way, we talked to economists including David Card, Betsey Stevenson, and Justin Wolfers, and  poked into the market for counterfeit degrees.

But let’s say you’re interested in the question from a practical, rather than a theoretical, perspective. That is, let’s say you’re an actual college student, or related to one, already deep in the throes of higher education, and that your primary question is: Okay, now what? Now that I’m here, what do I do to get the very most out of this expensive, time-consuming endeavor?

Glad you asked. Peter D. Feaver, Sue Wasiolek, and Anne Crossman are the authors of Getting the Best Out of College: Insider Advice for Success From a Professor, a Dean, and a Recent Grad, and they have agreed to field questions from Freakonomics readers.


Question of the Day: Are We Overlooking a Meat Source?

From the inbox:

Gentlemen:

I am a big fan — one who especially appreciates your willingness to (perhaps enjoyment in?) exploring solutions that many would consider repugnant.  In that spirit, I would love to get your thoughts on a seemingly unconscionable idea that I recently became aware of.

Every year the U.S. euthanizes approximately 3 to 4 million companion animals (mostly dogs and cats).  To put it bluntly, what do you think about using these carcasses as a meat source? We expend enormous resources — land, money, and energy —  in producing animal feed and ultimately meat.  Given this expense, as well as the world’s need for protein sources, I’d love for you to weigh in on this rather repugnant idea.