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Is an Auction the Best Way to Solve the Roommate/Rent Dilemma?

We’ve blogged before about the very common roommate/rent dilemma — that is, how to fairly split rent among roommates given that different rooms have different features. A reader named Michael Jancsy writes in with an auction solution and a request for feedback:

I recently designed an auction website [called “The Rent Is Too Damn Fair”] to help friends split apartments … The auction works by allowing each roommate to bid on each room in an apartment, and then identifies the permutation of roommates to rooms with the largest consumer surplus (sum of all bids minus rent paid to landlord) to decide who should live in what room. Each person’s rent is then calculated by dividing the surplus evenly over the occupants, so that the difference between a person’s bid and the rent paid is the same for each person. 


Are Architects Still Worth It?

A reader named Marc Krawitz writes in with a question. Does anyone have an answer for him?

I’m a recent architecture school graduate, and just wondering:

Given laws in America that don’t specifically require an architect to stamp drawings (as opposed to Europe), are architects economically valuable to a housing and building market/culture that strives for bottom dollar and cheap/fast returns?  Assuming that hiring an architect has a positive impact on a project, is the time and financial investment on the part of the client worth it in the long run?

Related: Michael Graves writes about the death of drawing in architecture.

 


Modesty Glasses

Men in the ultra-Orthodox religious community in Jerusalem object to women walking on the street in short skirts or sleeveless blouses, even attacking those who venture out in such unacceptable outfits.  Very few women will dare to go out dressed that way in certain sections of this magnificent city.  News of the Weird reports a solution that shifts the cost of enforcing the policy to the men: Members of “modesty patrols” are now selling ultra-Orthodox men glasses that blur distant images, thus preventing them from seeing “immodestly dressed” women.  This is a neat application of the Coase Theorem, and it seems a fair one: With these glasses, the costs of enforcing the men’s religious beliefs will be borne by the men rather than by women who choose how they wish to dress.


How to Make Millions By Doing Nothing

Fascinating article in today’s Times by Richard Sandomir about how the owners of the old American Basketball Association team the St. Louis Spirit are still being compensated for an agreement forged in 1976, when the Spirit were excluded from joining the NBA. Those owners, Ozzie and Daniel Silna, were given a share — in perpetuity — of future TV revenues:

In 1980-81, the first year the Silnas were eligible to get their share of TV money, they received $521,749, according to court documents filed by the N.B.A. For the 2010-11 season, they received $17,450,000. The N.B.A.’s latest TV deal, with ESPN and TNT, is worth $7.4 billion over eight years. Soon, the Silnas’ total take will hit $300 million. …


Happiness Up, Poverty Down

This is a crosspost from Consultative Group to Assist the Poor (CGAP).

There was plenty of encouraging information shared at the recent “Reaching the Poorest 2012” meeting, convened by CGAP and the Ford Foundation. Together with my fellow researchers, I was among the panelists who presented the findings of well over five years worth of randomized control trials evaluating the impact of the Graduation Model. The projects that were evaluated in Bangladesh, Pakistan, Honduras, and India showed an impact on the livelihoods of the poorest that were targeted. The results were mostly heartening – they showed that Graduation Program participants typically improved their food security, stabilized and diversified income, and increased their assets.

The benefits we’re seeing in the lives of the poorest are big and important. The results are strong evidence that the Graduation Model can work. (We’ll know even more in a couple years when we have full results from seven pilots, with more sites and longer term results to see if results sustain themselves.) One of the most intriguing, and I believe important, results is the simplest: happiness went up in the two sites where “happiness” was measured (Honduras and West Bengal).  As part of the surveys to measure the impact of the program on their livelihoods, participants were also asked a series of questions on their general level of happiness and mental health. Often we talk about consumption and income as a measure of wellbeing.


Love Behavioral Economics? Want to Work for the British Government? All Right Then …

A lot of people write to us looking for work — which, sadly, we are nearly always unable to provide. But once in a while we do hear of a good opportunity for the Freakonomically inclined. To wit:

The U.K. Cabinet Office’s Behavioural Insight Team — better known as the Nudge Unit because of its allegiance to the excellent Richard Thaler/Cass Sunstein book Nudge — is looking to expand. Here’s the job listing. Some relevant excerpts:

Successful candidates will need to show that they:
1. have a good understanding of the behavioural science literature
2. have an understanding and ideally ability to conduct randomised controlled trials to test policy interventions; and
3. are highly motivated individuals capable of developing innovative solutions to often complex policy problems.
4. are strong team players

Candidates should be prepared to work on potentially any aspect of government or wider public sector policy. For example, over the past year the team has led work on health, energy, fraud, electoral registration, charitable giving, consumer affairs, the labour market, and access to finance for SMEs [that’s Euro-speak for “small and medium enterprises“]


Can Selling Beer Cut Down on Public Drunkenness? (Ep. 91)

Our latest Freakonomics Radio on Marketplace podcast is called “Can Selling Beer Cut Down on Public Drunkenness?” 

(You can download/subscribe at iTunes, get the RSS feed, listen via the media player above, or read the transcript below.)

It features Oliver Luck, the athletic director at West Virginia University, whose Top 10-ranked football team opened the 2012 season by beating Marshall 69-34. Luck himself played quarterback at West Virginia from 1978 to 1981 and, after a four-year NFL career, got into sports administration. These days, he is best known as the father of Indianapolis Colts’ rookie quarterback Andrew Luck.

As the A.D. at West Virginia, here’s what Luck saw happening at home football games:

“People drinking far too much at pre-game parties and tailgate parties before games. Sneaking alcohol into games. Leaving at halftime or any point during the game to go back out to the tailgate to drink even more and come back into the game. … They would usually drink hard liquor — ‘get their buzz back on’ and come back into the game for the third quarter.  And the police again would know exactly at what point in the third quarter these ‘throw-up calls’ would start to come over the radio.”


Why Knockoffs Can Help Build a Strong Brand

Here is an excerpt from The Knockoff Economy: How Imitation Sparks Innovation, which has just been published by Oxford University Press. Next week, we’ll be taking questions from Freakonomics readers in a Q&A. We’ll also run a contest for the wackiest photo of a knockoff item.

THE KNOCKOFF ECONOMY
CONCLUSION

The traditional justification for trademark law, which protects brands, has little to do with innovation. Instead, trademark law’s justification is that brands help consumers identify the source of products, and thereby buy the item they want–and not an imitation. And yet brands—like Apple, or J. Crew–play an important and often unappreciated creativity-inducing role in several of the industries we explore in The Knockoff Economy.

Put in economic terms, trademarks reduce the search costs associated with consumption. If you’ve had a positive experience with basketball shoes from Adidas, then marking them with the trademark-protected three-stripes helps ensure that you can quickly find their shoes the next time you are shopping. And of course it also lets everyone else know which shoes you prefer. 


Announcing a New (Online Economics) University

Wowie kazowie! The Marginal Revolution blog, whose excellence is routinely noted on this blog, is launching a free, online Marginal Revolution University (MRU). From the announcement:

We think education should be better, cheaper, and easier to access.  So we decided to take matters into our own hands and create a new online education platform toward those ends. We have decided to do more to communicate our personal vision of economics to you and to the broader world. …

Here are a few of the principles behind MR University:


Timing Matters for Armstrong, Clemens and Lin

One of the great lessons of contracts (and of the law more generally) is that the timing of actions can dramatically change legal consequences.  An offeree who says “I accept” a moment after the offer is withdrawn is in a very different position than an offeree who says the same thing a moment before an attempt to withdrawn.

This past summer three sports stories seemed to turn on matters of timing. Les Carpenter writes that Lance Armstrong could have avoided is downfall if he had stayed retired:

The irony is that Armstrong could have remained a hero. He could have been a saint, as well as a beacon of light to millions who never would have thought he had cheated throughout his career. All he had to do was stay retired.


Are Brazilian Drug Lords Giving Crack the Boot?

The AP reports that Brazilian drug lords are colluding to get rid of crack cocaine even though it will result in millions of lost dollars. Why? Because crack customers have made their jobs unmanageable:

“Rio was always cocaine and marijuana,” [former police chief Mario Sergio Duarte] said. “If drug traffickers are coming up with this strategy of going back to cocaine and marijuana, it’s not because they suddenly developed an awareness, or because they want to be charitable and help the addicts. It’s just that crack brings them too much trouble to be worth it.”

A lawyer for the gangs confirms this:


Is There Another Side to the "Hurricane Death Toll"?

Miguel Sancho, a senior producer with ABC’s 20/20, writes in with a question I’ve often wondered myself but cannot answer. Can you?

A thought – every hurricane season we see headlines ascribing blame for lives lost on a given storm. “Hurricane Irene Blamed for Five Deaths in North Carolina,” etc. Certainly when people drown, are killed by floating debris, or die because they can’t make it to the hospital, the statistic sounds logical. But it occurred to me that perhaps, in the interests of fairness and accuracy, we should also give Hurricanes “credit” for lives not lost thanks to the interruption of normal human activity. How many homicides, vehicular fatalities, or drug overdoses didn’t happen [last] week in New Orleans, for example, because people were otherwise occupied protecting themselves from Hurricane Isaac? Just wondering if anyone has ever studied this, comparing average morbidity rates in hurricane zones to the stats during the times when hurricanes roll through.
 
This is not to suggest that overall, hurricanes are a social good. Bastiat’s broken-windows fallacy and all that. But perhaps in this one particular metric, we aren’t seeing the whole picture.

Please don’t judge Sancho’s observation as insensitive to the death and destruction caused by the hurricane itself. I can assure you he is not.


Downsizing Soft Drinks

In a recent New Yorker column, one of our best economics journalists, James Surowiecki, discusses Mayor Bloomberg’s proposal to ban sales of soft drinks in containers exceeding 16 ounces. Mayor Bloomberg clearly believes, and Surowiecki seems to agree, that people would consume smaller amounts of soft drinks and fewer calories if a ban were enacted.

But would the effect result from behavioral considerations—many people will drink only one serving whether it is 8 oz. or 32 oz.? Or would it result from the second drink costing more time—the effort to get up and order a second 16-oz. drink after buying one—and more money—because the per-ounce price reflects the additional cost of serving two 16-oz. portions instead of one larger portion?  Outside the laboratory, what many argue is evidence for behavioral economics can often be explained by standard neoclassical considerations of money and time costs in demand.


Excerpt from The Knockoff Economy: Tweakonomics

Here is an excerpt from The Knockoff Economy: How Imitation Sparks Innovation, which has just been published by Oxford University Press. Over the next few weeks, we’ll be running 2 excerpts from the book here on the blog and taking questions from Freakonomics readers in a Q&A. We’ll also run a contest for the wackiest photo of a knockoff item. 

In The Knockoff Economy we examine the relationship between copying and creativity. Most people who study this area look at industries such as music or publishing, where intellectual property (IP) protections are central. We do something different: we explore innovative industries—such as fashion, food, fonts, and finance–in which IP is either unavailable or not effective. In these industries copying is common, yet we find that innovation thrives. In a world in which technology is making copying ever easier, we think these industries have a lot to teach us. And one of the key lessons is that copying is not just a destructive force; it can also be productive. Harnessing the productive side of copying—the ability to refine, improve, and update existing innovations—is at the heart of this excerpt.

THE KNOCKOFF ECONOMY
CHAPTER 4

Rules against copying don’t just cover outright imitation. They also address variations: works that use that some portion of another creative work but add in new stuff, and in the process transform the original work. Think of Shepard Fairey’s famous Hope poster of Barack Obama, which took an existing photograph and reworked it into an iconic image: 


Incentives for Organ Donations

A new paper from Nicola Lacetera, Mario Macis, and Sarah S. Stith (abstract; PDF) looks at whether various incentives are helping in getting more organ donations and bone-marrow donations:

In an attempt to alleviate the shortfall in organs and bone marrow available for transplants, many U.S. states passed legislation providing leave to organ and bone marrow donors and/or tax benefits for live and deceased organ and bone marrow donations and to employers of donors. We exploit cross-state variation in the timing and passage of such legislation to analyze its impact on organ donations by living and deceased persons, on measures of the quality of the organs transplanted, and on the number of bone marrow donations. We find that these provisions did not have a significant impact on the quantity of organs donated. The leave legislation, however, did have a positive impact on bone marrow donations. We also find some evidence of a positive impact on the quality of organ transplants, measured by post-transplant survival rates. Our results suggest that these types of legislation work for moderately invasive procedures such as bone marrow donation, but may be too low for organ donation, which is riskier and more burdensome to the donor.

Are we perhaps inching closer to a legal market in organs?


The Sharapova Effect

A recent paper (full PDF here) by Young Hoon Lee and Seung Chan Ahn makes a clever point about occupations in which people are paid for a main activity and a secondary area where success depends on productivity in the main activity.  If success in the latter also depends on some other characteristic, people who are well-endowed with that characteristic will invest more in the skills needed to be productive in the main activity: the incentives created by that synergy will spill over to earnings in the main activity. 

Their example is the Ladies Professional Golf Association (LPGA).  Better-looking golfers get lower scores (perform better) — but only going from average-lookers to the best-looking. Below the average, there’s no effect of differences in looks on tournament scores.  That makes sense — you probably won’t get more endorsement opportunities if you’re average-looking instead of bad-looking.  Although not golf, one might call this the Sharapova Effect. Are there other labor markets, or other activities, in which a similarly unusual synergy exists??


Evidence on School Choice

Economists, long inspired by Milton Friedman and others, generally embrace the concept of school choice. But actual evidence on its efficacy has been thin.

A new working paper by Justine S. Hastings, Christopher A. Neilson, and Seth D. Zimmerman, using data from a low-income urban school district, offers some encouraging news for choice advocates:

[W]e use unique daily data on individual-level student absences and suspensions to show that lottery winners have significantly lower truancies after they learn about lottery outcomes but before they enroll in their new schools. The effects are largest for male students entering high school, whose truancy rates decline by 21% in the months after winning the lottery.

How do the authors interpret this finding?


There’s Cake in the Breakroom! (Ep. 89)

If you work in an office, do you ever find yourself thinking that you could get more work done at home?

That’s the question we address in our latest podcast, “There’s Cake in the Breakroom!”

You can download/subscribe at iTunes, get the RSS feed, listen via the media player above, or read the transcript below.

There are at least two primary perspectives on this topic:

  1. Employees think about how much better their lives would be if they didn’t have to deal with commuting, the office culture, etc.
  2. Employers think about how productivity would plunge if employees were allowed to work at home — or, as it’s sometimes known, “shirk at home.”

But there’s at least one more perspective to consider. A firm might look at the office rent it pays and think it might be worth the trade-off to let employees work at home instead.


From the Comments: Nudge Nudge, Herd Herd

A reader in Australia named Ian Lyons, in response to our “Herd Mentality” podcast, writes to say:

At the 2012 Sydney Festival, we created a sophisticated set of interactive dashboards showing which artists were buzzing (on Twitter and Facebook) in real time, where people were coming from, interesting facts and live photos.

To my astonishment the most popular tool simply allowed you to see which show other people from your postcode were going to see. Viewed through the lens of behavioral economics, this makes perfect sense but it’s the opposite of what I would have predicted instinctively. In fact it almost didn’t get deployed because it was too simple.


Can Marijuana “Brands” Be Legally Protected Against Copying?

In states like California, where medical marijuana is a big business, dispensaries often feature dozens of kinds of marijuana. Each has it own (supposed) qualities, often reflected in the price per gram. And these names, while colorful, are pretty standardized: newspapers like the LA Weekly run pages of ads that list prices for “White Widow,” “Skywalker OG,” “Strawberry Kush,” and “Charlie Sheen”.

Can you trademark a strain of marijuana to keep a competitor from copying your “brand”? The answer is more complicated than you might think. 

First, names like Strawberry Kush are not necessarily brands, but more like plant varieties, such as Meyer lemon or Alphonso mangoes. Plant varieties in general cannot be trademarked. Instead, breeders essentially get a form of plant patent. Growers and breeders can add a trademark on top of that, but the underlying plant variety name ultimately goes into the public domain for all to use. In other words, Fuji apples are a variety; Ranier Brand Fuji Apples is a trademark. A competitor can’t call their Fuji apples “Ranier”, but nothing stops a competitor from identifying their apples as Fujis.


Drug Dealers in the Netherlands Now Selling Marijuana

A few months ago, I discussed the tourist drug ban in the Netherlands, with a focus on my town, Maastricht.  NPR just ran a story on the intermediate term effects of the new regulations.  Some of the “coffee shops” (places where one could buy a pre-rolled or roll-you-own joint for €3) have reopened, as I predicted; others have not. Unsurprisingly, what has happened is that drug dealers, who previously had dealt only in hard drugs, are now also selling marijuana illegally.  While total consumption of weed has probably dropped, buyers are worse off, as are coffee-house owners, with the main beneficiaries being drug dealers.  As always, something that raises price in a legal market will increase demand in the illegal market.


An Explanation for That Business-Hours-Only Web Page

I blogged yesterday about a Department of State (N.Y.) government website page that only accepts information during business hours. You offered several other similar examples (many of them government sites as well) and possible explanations. We also received, via comment and e-mail, an explanation from Edison Alban, press officer for the D.O.S. (BTW, his name could be considered a pretty good aptonym, since Albany is the capital of New York.)

He begins by objecting to the post, particularly the headline, which was “This Website Only Open During Business Hours”:

The New York Department of State’s Division of Corporation website is accessible 24 hours a day, 7 days a week. The Division of Corporation does not shut down its website during non-business hours.

No comment.


What Do You Have to Say about "Trophy Inflation" and "Gamification"?

An interesting e-mail from a reader/listener named Andrei Herasimchuk about what he calls “gamification”: 

It’s a word and term that drives me nuts these days. I design software, and have done so for two decades now. Everyone is trying to add gamification features to their products these days in the tech industry. Think badges, achievements, and things normally found in a game like World of Warcraft. People in this industry lately seem to believe that these sorts of things drive engagement in their products. From everything I’ve seen, and from influences of your work, I’d assume what people really want to do is find ways to design incentives into products. Incentives versus Gamification? What works better?

Andrei (and I) would love to hear what you have to say on this question. I have a few superficial thoughts:


This Website Only Open During Business Hours

If you happen to manage a Limited Liability Corp (LLC) in New York State and need to file your Biennial Statement, you might follow the directions sent to you in the mail and go to the state’s website for conducting such business: www.ebiennial.dos.ny.gov.

But if you try this on, say, a weekend, here is the message you’ll see:


How to Get a Doctorate in Six Weeks

I assume this is only a coincidence but still, it’s a good one.

Shortly after putting out the first half of our “Freakonomics Goes to College” podcast, which included a segment on the market for fake diplomas from counterfeiters and diploma mills, I got the following piece of spam. It appears to be from a Norwegian e-mail domain:


Return to Sender: What Can Postal Behavior Tell Us About a Nation?

I am not sure this is as meaningful as the authors think, but still it is an interesting experiment. From a new working paper called “Letter Grading Government Efficiency” by Alberto Chong, Rafael La Porta, Florencio Lopez-de-Silanes, and Andrei Shleifer:

We mailed letters to non-existent business addresses in 159 countries (10 per country), and measured whether they come back to the return address in the U.S. and how long it takes.  About 60% of the letters were returned, taking over 6 months, on average.  The results provide new objective indicators of government efficiency across countries, based on a simple and universal service, and allow us to shed light on its determinants.  The evidence suggests that both technology and management quality influence the quality of government.

I am happy to read that final sentence but surprised it needed to be said. This paper may tickle your memory with thoughts of Stanley Milgram‘s “small-world experiment” (better known as “six degrees of separation“) and Judith Kleinfeld‘s reassessment of that experiment as told in Duncan Watts‘s excellent book Six Degrees.


Ira Glass on Guilty Pleasures and Pedophilia

From a Q&A in the Times Book Review, in response to a question about literary appetites and guilty pleasures:

I don’t believe in guilty pleasures, I only believe in pleasures. People who call reading detective fiction or eating dessert a guilty pleasure make me want to puke. Pedophilia is a pleasure a person should have guilt about. Not chocolate.