Search the Site

Freakonomics Blog

The Return of the Freelance Economist

A few weeks back, we posted a query from a young economist who, before heading for the job market, was looking to pick up  freelance work. She (yes, she) promised to report back with her progress, and now she has:

Thank you for posting my email. I received a decent handful of responses, but was not flooded with emails. I did get one big project that I am very excited about and will carry me through to the job market, so it worked out very well for me, but is probably not a good career strategy. I had no idea what to charge, so started with the rate I would have received from the employer that didn’t work out, which was clearly too high. I tried to make it clear that it was negotiable, but fear I may have scared off a few people.


Lying to Ourselves (Ep. 97)

Our latest Freakonomics Radio on Marketplace podcast is called “Lying to Ourselves.” (You can download/subscribe at iTunes, get the RSS feed, or listen via the media player in the post.) 

The episode was inspired by a recent poll I saw on Yahoo! Finance (at left).

Does anyone believe for a minute that this many people would actually leave the U.S. if taxes (whatever that means, exactly) were to rise to 40 percent or even 70 percent?


Daniel Kahneman Calls for Change

Nobel laureate and frequent Freakonomics visitor Daniel Kahneman (author of Thinking, Fast and Slow)  has written an open letter to psychologists who work on social priming, calling for them “to restore the credibility of their field by creating a replication ring to check each others’ results.” Here’s an excerpt:

My reason for writing this letter is that I see a train wreck looming. I expect the first victims to be young people on the job market. Being associated with a controversial and suspicious field will put them at a severe disadvantage in the competition for positions. Because of the high visibility of the issue, you may already expect the coming crop of graduates to encounter problems. Another reason for writing is that I am old enough to remember two fields that went into a prolonged eclipse after similar outsider attacks on the replicability of findings: subliminal perception and dissonance reduction.

(HT: BPS Research Digest)


Austin's New Toll Lanes

Traffic in Austin is a mess, mainly because the city is long and linear (east-west travel is made difficult by the topography). In increasingly long rush hours, traffic barely moves on either north-south freeway. To solve the problem, the city is adding one lane in each direction to one freeway, but there will be tolls on that lane. Moreover, the tolls will be variable — but not by time of day or day of week. They will vary with traffic speed, rising when the average speed in the lane drops below 50 mph. Pretty neat — peak-load pricing taken to its logical extreme. The technology that makes this possible is fairly recent. And it’s a good example of how technical improvements raise well-being — in this case, allowing those whose value of time is high to substitute money for their time and reducing congestion on the “free” lanes for the rest of us.


Al Roth Takes Home the Nobel Prize

Hearty congratulations to Harvard economist Al Roth (now at Stanford), whose work has been featured on many occasions here at the Freakonomics blog!

When I talk about economists, one of the greatest compliments I give is to say that they changed the way people think about the world.  Al Roth definitely fits into that category.  The type of economics he is best known for is what is called “Market Design.”  Essentially, it means bringing market-type thinking to areas in which historically non-market allocation mechanisms have been used.  A few examples of the areas Roth has explored are matching fledgling doctors to hospitals for their residency, matching students to public schools in school choice programs, and matching kidney donors with those who need a kidney.

I know Roth changed my thinking because the first time I read Roth’s work in this area I had a strong reaction: this isn’t really economics.


"Under-Savers Anonymous": Using Peer Pressure to Save More Money

A new working paper by Felipe Kast, Stephan Meier, Dina Pomeranz combines two of our favorite topics, both explored in recent podcasts: our inability to save money and the efficacy of commitment devices. The paper is called “Under-Savers Anonymous: Evidence on Self-Help Groups and Peer Pressure as a Savings Commitment Device” (abstract; PDF), and it reports a remarkable near-doubling of savings among those who submit to peer pressure:

We test the effectiveness of self-help peer groups as a commitment device for precautionary savings, through two randomized field experiments among 2,687 microentrepreneurs in Chile.  The first experiment finds that self-help peer groups are a powerful tool to increase savings (the number of deposits grows 3.5-fold and the average savings balance almost doubles).  Conversely, a substantially higher interest rate has no effect on most participants.


FREAK-est Links

1. Just published: Rough Beasts, Charles Siebert‘s new e-book on the Zanesville Zoo Massacre.

2. Chris Sprigman on software patents.

3. 36 bizarre economic indicators. (HT: V. Brenner)

4. Nathan Myhrvold‘s absurdly prolific and diverse output can now be sampled in one place, on his new website. Also, his award-winning six-volume $625 cookbook Modernist Cuisine: The Art and Science of Cooking has just been repurposed into a one-volume edition (retailing for just $140) called Modernist Cuisine at Home.


Season 3 of Freakonomics Radio Hits the Airwaves

We have just released five hour-long Freakonomics Radio episodes that will be airing this fall and winter on NPR affiliates around the country. Because these hours are mashups of earlier podcasts, we will not be releasing the hours into our podcast stream (iTunes version; RSS feed version), but you can download or listen to them here.

This is our third season of radio hours (the first two can be found here and here). You can look for your local station here, but I will warn you that this list is neither complete nor up-to-date. What I do know is that our last season was carried by roughly 220 stations. Your best bet is probably to check the website of your favorite NPR station — and, if they’re not yet carrying Freakonomics Radio, send them a sweet, imploring note, perhaps with a crisp $20 bill tucked inside. Public-radio folks are as honest as the day as long but they are also underpaid, so a small bribe just might tip the scales.

Hope you enjoy!


Money Didn’t Buy Happiness in Baseball in 2012

If you wish to win in baseball, your team has to spend money. Just look at the New York Yankees. USA Today reports that in 2012 the Yankees led the American League in spending.  And the Yankees finished with the best record in the American League.

Of course, one data point doesn’t a trend make. What do we see when we look past the Yankees?


"Information Wants to Be Shared"

The Australian economist Joshua Gans, who has shown up on this blog before, has published a new book called Information Wants to Be Shared. It “looks at the struggles facing information content industries — most notably, publishing (books and newspapers) — and examines the underlying economics of those industries.”  Gans and his publisher, HBR Press, are also running a pricing experiment:

HBR eBooks are all DRM-free but, in this case, if someone were to purchase the book (from HBR or from, say, Amazon or Apple), then they will find on the last page a coupon that they can send to a friend. The friend can then buy the book for only $0.99 directing from HBR. In other words, when you share with a friend, your friend gets a great deal. The usual price of the book is $4.99. I have outlined the rationale behind this at my blog Digitopoly. Basically, it is the sort of thing I advocate for information businesses in general.

Predictions?


Saving Boston's Long Wharf Park From Extinction

Have you visited the beautiful and historic Long Wharf Park on Boston Harbor? And what do you do when the government goes rogue?

The Boston Redevelopment Authority (BRA), in defiance of the Massachusetts Constitution, is trying to turn Long Wharf Park into a late-night restaurant and bar. The Massachusetts Constitution requires a two-thirds vote of the Legislature before public parkland can be converted to other uses. The vote has not happened, and the BRA is telling the world that it is unneeded. As featured in today’s Boston Globe, ten local residents, including me, have been trying to force the government to obey the constitution.


How Crack Cocaine Widened the Black-White Education Gap

A new working paper (abstract; PDF) from William N. Evans, Timothy J. Moore, and Craig Garthwaite presents one explanation for the decline in black high-school graduation rates beginning in the 1980s:

We propose the rise of crack cocaine markets as an explanation for the end to the convergence in black-white educational outcomes beginning in the mid-1980s. After constructing a measure to date the arrival of crack markets in cities and states, we show large increases in murder and incarceration rates after these dates. Black high school graduation rates also decline, and we estimate that crack markets accounts for between 40 and 73 percent of the fall in black male high school graduation rates. We argue that the primary mechanism is reduced educational investments in response to decreased returns to schooling.

How did crack cocaine depress schooling returns? “Crack markets had three primary impacts on young black males: an increased probability of being murdered, an increased risk of incarceration, and a potential source of income,” explain the authors. “Each limits the benefits of education.”  In other words, high school looks less attractive when you’re more likely to end up dead or in jail, or earn money.

This finding echoes a passage from Freakonomics:


Bring Your Questions for Hanna Rosin, Author of The End of Men

“In the Great Recession, three-quarters of the 7.5 million jobs lost were lost by men,” writes Hanna Rosin, author of the new book The End of Men (and the Rise of Women). “The worst-hit industries were overwhelmingly male, and deeply identified with macho: construction, manufacturing, high finance.  Some of those jobs have come back, but the dislocation is neither random nor temporary.  The recession merely revealed — and accelerated — a profound economic shift that has been going on for at least thirty years, and in some respects even longer.”

Rosin’s book (here are some reviews), based on her controversial 2010 Atlantic essay, explores the new American marriage divide, the education gap between young men and women around the world, and the new Asian power women.


A Monopolist's Bridge

More than 25 per cent of trade between the U.S. and Canada goes over the Ambassador Bridge between Detroit and Windsor, Ontario. The bridge, built in 1929, has since 1979 been owned by one individual — Matty Moroun. He also owns duty-free stores and sells gasoline that escapes taxes. The Bridge isn’t quite a monopoly—there is also a tunnel; but the Bridge is more convenient for a lot of traffic.

Michigan has a constitutional amendment on the ballot requiring that any new bridge be approved by voters before state money is spent on it. Perhaps unsurprisingly, the Bridge owner is funding a large advertising campaign supporting the amendment. No monopolist likes to have the stream of monopoly profits diminished, which a new bridge would surely do. His political advertising is a smart move for him—a good way to ensure a continuing flow of profits.  Whether it’s good for Michigan, for U.S.-Canada trade and the well-being of the average North American consumer is questionable.  (HT to DJH)


Chinese Bluegrass

If you have 3 minutes and 41 seconds to spare on this fine Friday, you could do much worse than watching a performance of “Katy Hill” by Mei Han’s Red Chamber with John Reischman and the Jaybirds:

(HT: Nick Frisch)


Challenging the "End of Growth" Argument

Our latest podcast, “Why America’s Economic Growth May Be (Shh!) Over,” is based on a much–discussed paper (abstract, PDF) by the Northwestern economist Robert J. Gordon. It is a fascinating paper that is well worth a read, and its provocative argument has certainly gleaned a lot of attention.

The environmental economist Roger Pielke Jr. has read the paper and argues that Gordon is (what’s the best way to put this?) wrong:

Over the past month I have taken a close look at Gordon’s paper, the data he relies on and the papers that he cites.  My conclusions are that Gordon’s analysis is deeply flawed and tells us essentially nothing about the potential for future economic growth. It does help to reveal a big gap in the discipline of economics, and that is the utter lack of an explicit theory of growth and the mechanisms by which it actually takes place. What Gordon has provided, in his own words, is a “a provocative fantasy” one that tells us much about the discipline of economics but little about the state of the world.

I am not much for making predictions, but I wouldn’t be shocked if Gordon’s paper soon inspires a public forum or two on the topic and that Pielke is invited to rebut.


FiveThirtyEighter Nate Silver Answers Your Questions About Politics, Baseball, and The Signal and the Noise

We recently solicited your questions for Nate Silver regarding his new book The Signal and the Noise: Why So Many Predictions Fail — But Some Don’t. Not too surprisingly, a lot of the questions were about politics and baseball. Below are Nate’s answers to some of them. Thanks to him for playing along and to all of you (as always) for sending in the excellent questions.

Q. Under what circumstances will a voter actually change his/her mind about whom to vote for? I understand that this rarely happens (this study for example), and that most of the action involves undecided voters deciding whom to vote for.

Also, if political scientist are right that voters rarely change their minds, how can a large swing in the polls ever occur? A classic example that your briefly mention in your book is that of Michael Dukakis, who was ahead of GHW Bush by 10% at one point in 1988. –Alan T

A. We see more big shifts in the primaries, when voters don’t have that much information about the candidates. Dukakis was a relative unknown at the start of the 1988 race, before the two parties could advance their own narratives. You rarely see big swings in voter conversion in late stage presidential races, though. If I knew how to cause such a swing, I’d be drawing a big salary from one of the campaigns right now.


Why America’s Economic Growth May Be (Shh!) Over (Ep. 95)

With the Presidential debate finished, we are officially in the final lap of America’s second-favorite spectator sport. (Yes, football is better than politics.) Of all the talking that Barack Obama and Mitt Romney will do by Nov. 6, you can bet that a great deal of their breath will be expended on economic matters. Because that’s what the President of the United States does, right — runs our economy?

Well, actually, no. The President has far less influence over the economy than people tend to think — as we’ve pointed out not once, or twice, but three times.

That, of course, won’t stop the candidates from talking about their plans to “fix” or “heal” or “restore” our economy — all of which imply that we are in an economic doldrums that is sure to pass. But what if it doesn’t? What if the massive economic growth the U.S. has experienced through most of our history is a thing of the past?

That’s the topic of our latest Freakonomics Radio on Marketplace podcast. (You can download/subscribe at iTunes, get the RSS feed, or listen via the media player in the post.)


A Tax Taxonomy

Dan Hamermesh’s much-discussed post about taxing capital gains brought to mind my own taxonomy of taxes, so to speak, from least to most progressive:

1. Poll tax. Everyone pays the same amount. What could be fairer than this?!
England tried it in the late 14th century, leading in 1381 to Wat Tyler‘s Rebellion. Six hundred years later, England tried it again, leading to the Poll Tax Riots.

2. Sales tax. Goods are taxed at a flat rate (often 17 to 20 percent in Europe, and 5 to 8 percent in various American jurisdictions). Because the wealthy spend a smaller fraction of their income on taxable goods than do the poor, this tax is less progressive than a flat income tax.

3. Flat income tax. Everyone pays the same fraction of his or her income. This tax was the core of Steve Forbes’s platform when he ran for president in 1996 and 2000.


Does Military Service Increase Future Wages?

In this month’s American Economic Journal, David Card and Ana Rute Cardoso explore the relationship between military service and future wages (abstract; PDF): 

We provide new evidence on the long-term impacts of peacetime conscription, using longitudinal data for Portuguese men born in 1967. These men were inducted at age 21, allowing us to use preconscription wages to control for ability differences between conscripts and nonconscripts. We find a significant 4-5 percentage point impact of service on the wages of men with only primary education, coupled with a zero effect for men with higher education. The effect for less-educated men suggests that mandatory service can be a valuable experience for those who might otherwise spend their careers in low-level jobs.


Do the Bacteria in Your Gut Also Influence Your Mind?

Last year, we put out a podcast called “The Power of Poop,” which looked at the use of fecal transplants (a.k.a. “transpoosions”) to treat everything from multiple sclerosis to Parkinson’s disease. A fascinating Scientific American article explores how gut bacteria may have even further-reaching functions:

In the past few years scientists have been discovering that these microscopic inhabitants of our body may be subtly altering our moods, emotions and perhaps even our personalities. Gut microbiota appear to alter gene activity in the brain and the development of key regions involved in memory and learning. These denizens of our intestines could help explain why psychiatric symptoms vary among individuals, as well as their responses to medications. Gut microbes could also account for some of the differences in mood, personality and thought processes that occur within and among individuals.

(HT: Market Design)


Consuming More Energy in the Pursuit of Saving Energy

Next week, we’ll be putting out a Freakonomics Radio podcast called “The Cobra Effect.” Without spilling the details now, I’ll tell you that it’s about unintended consequences, the kind of stuff that happens when clever-seeming incentives are let loose on an even cleverer public.

With that in mind, I was intrigued by the following e-mail from a reader named Eugene Kim:

My locality in Virginia has mandated biennial emissions inspections for automobiles before registrations can be renewed on those years. Since mine is expiring at the end of this month and it’s been two years since my last emissions test, I took my car to the service station this morning. They don’t seem to actually measure any emissions; they merely check the OBD computer for stored readings.

Here’s where it gets stupid. I don’t drive a lot. I take the train to work so I only drive on weekends, if that. (If you’re wondering why I even have a car, I bought it when I lived in the Midwest and needed it, but moved to the East Coast shortly thereafter and was upside-down on my loan. Plus I feel strangely vulnerable without a car.) Anyway, my car is idle a lot while the battery charge depletes slowly. And apparently, if it drops to a certain point the computer loses all those readings. I didn’t think it had gotten that low since the car hasn’t had any problems starting.


Women Who Want Equal Pay Should Think About Becoming Pharmacists

We’ve written before about Claudia Goldin and Larry Katz‘s research on the persistent gender wage gap in the U.S.  Now Goldin and Katz are back with a new working paper (abstract; PDF) on “the most egalitarian of all U.S. professions today”:

Pharmacy has become a female-majority profession that is highly remunerated with a small gender earnings gap and low earnings dispersion relative to other occupations. We sketch a labor market framework based on the theory of equalizing differences to integrate and interpret our empirical findings on earnings, hours of work, and the part-time work wage penalty for pharmacists. Using extensive surveys of pharmacists for 2000, 2004, and 2009 as well as samples from the American Community Surveys and the Current Population Surveys, we explore the gender earnings gap, the penalty to part-time work, labor force persistence, and the demographics of pharmacists relative to other college graduates. We address why the substantial entrance of women into the profession was associated with an increase in their earnings relative to male pharmacists. We conclude that the changing nature of pharmacy employment with the growth of large national pharmacy chains and hospitals and the related decline of independent pharmacies played key roles in the creation of a more family-friendly, female-friendly pharmacy profession. The position of pharmacist is probably the most egalitarian of all U.S. professions today.


The Candy Auction

As I do each year, I auctioned off candy (this year Reese’s peanut butter cups) to my class.  None were bought at a price above $0.50, all 23 were sold at that price. As usual, a nice illustration of downward-sloping demand curves.  I had kept one piece at the start, extolling its taste while eating half of it (and thus presumably causing an increase in demand).  The other half fell off my lectern, and I stepped in it after returning to the front of the room.  The first half piece of candy was really tasty, and I was dying for another one.  

What to do?


The Miracle at Medinah

The Ryder Cup was about as exciting as golf can get. Down 10-6 going into the last day, the European team eked out a 14.5-13.5 victory.

The headline in USA Today reads “Europe Rallies for Miraculous Ryder Cup Win.” The Ryder Cup website calls it the “Miracle at Medinah.”

So how miraculous was the outcome from a statistical perspective?

Europe needed to win eight of twelve matches for a victory.  (If the teams tied, Europe got to keep the trophy, so it is considered a European win.)  Let’s assume that each of the pairings was an even match.  Then the likelihood that Europe wins after being down 10-6 after two days is given by the binomial distribution: what is the likelihood of at least 8 heads coming up if you flip a fair coin 12 times.

The answer is about 19 percent.

Not exactly the stuff of miracles, but fun nonetheless.


How Shale Gas Can Benefit Us and the Environment

It took less than an hour for Apple to sell out the initial supply of its new iPhone 5. It’s thinner, lighter, faster, brighter, taller than its predecessors, and yet it costs the same. That’s called progress.

Elsewhere, progress is met by protest rather than praise.

A suite of technologies has brought vast supplies of previously unrecoverable shale gas within reach of humans, dramatically expanding natural gas reserves in the U.S. and around the world. Horizontal drilling and hydraulic fracturing have produced a fuel that can at once promote a cooler planet and an expanded economy, essentially eliminating the tradeoff between climate change mitigation and the pursuit of other public projects and, perhaps, economic growth. But unlike the iPhone, the productivity gain embodied in shale gas technologies doesn’t attract a cult following and its benefits get obscured. 


Calling All Bosses for a New Freakonomics Radio Segment

We are working on a short Freakonomics Radio piece about “the value of bosses,” derived from a new working paper of that name (abstract; PDF) by Edward Lazear, Kathryn Shaw, and Christopher Stanton. The paper finds a good boss is indeed considerably more valuable than a mediocre or bad boss, at least in terms of productivity.

What do you think? We’d like to include in the radio piece some real bosses (i.e., not just the anonymized kind that show up in economics papers) so if you’re a boss (in retail or service or I.T. or manufacturing or whatever), let us hear from you via radio@freakonomics.com. How much do you think bosses matter? What makes a good boss good (and a bad one bad)? Who’s the best (or worse) boss you ever had? And, most important, how are good bosses made?