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Freakonomics Blog

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.


How a Football Coach Sends Signals That Have Nothing to Do With Football

On Yahoo! Sports, the football writer Jason Cole profiles Todd Haley, the Pittsburgh native who has returned to his hometown Steelers (yeah, they’re my team too) to take over as offensive coordinator. Cole writes about Haley’s notorious “screaming jags” and wonders if Haley and Steelers quarterback Ben Roethlisberger can coexist:

Haley believes the outside world doesn’t understand the method to his madness. In previous stops, Haley was walking into rebuilding situations that required more attitude.

“The general public doesn’t know if that’s contrived or not contrived and over the years you have seen a lot of coaches who have shown emotion,” Haley said. “I take a great deal of pride in my passion for the game, but it was also what the situation dictated at the time.”

Okay, nothing so noteworthy about that. But then Haley reveals himself as a master of signaling theory:


What's More Dangerous Than a Shark?

Our latest Freakonomics podcast, “The Season of Death,” explored the relative danger of some favorite summertime activities — all of which claim many more lives than the much-feared shark attack. Foreign Policy has compiled a list of 10 things that kill more people than sharks. Our favorites: trampolines, roller coasters, and vending machines.  Also on the list: aggressive TVs or furniture:

Crushed by television or furniture: 26.64 deaths per year. As I’ve noted, this is a bigger killer of Americans than terrorism, which led to this Colbert Report Threat Down warning against the perils of “terrorist furniture.”

 


Why My Favorite American Cities Have a Chinatown

Relatives from South Africa were visiting and we got to talking about which cities to visit in America. I shared my list: San Francisco, New York, Boston, Washington, DC, Seattle, and Philadelphia. Each city has a Chinatown. Coincidence? Or maybe the connection is just that I like Chinese food. Indeed, our family has been going to a favorite dim-sum restaurant most every week since moving to Boston seven years ago.

Then the larger connection came to me. Chinatowns were made by Chinese laborers building the railroads (when the laborers had finished this vast public-works program, the Chinese Exclusion Act barred most Chinese from emigration to or citizenship of the United States). Having a Chinatown marks a city as of the railroad era, built up before the wide deployment of the automobile. As Lewis Mumford said, “The right to have access to every building in the city by private motorcar in an age when everyone possesses such a vehicle is actually the right to destroy the city.” Cities with Chinatowns had enough roots to escape carmageddon.


Taxing Capital Gains

Dividends in the U.S. are taxed at only 15 percent (much lower than wages/salaries).  The argument is that since corporate profits, from which dividends are paid, are already taxed, taxing dividends is double taxation.  But what about capital gains—why are they taxed at 15 percent too?  The standard argument is that we should be taxing real capital gains, not nominal gains.  Okay, but it would be easy to include the Consumer Price Index for each of many years in TurboTax or TaxCut, base taxes on real gains and tax the real gain at the same rate as wages. The administrative cost of calculating real gains has disappeared. Another argument for a lower tax on capital gains might be that investment/risk-taking is more responsive to net returns than is labor supply, justifying a lower tax rate as optimal taxation.  Perhaps, but at best the evidence is scarce.  My guess is that the real justification is the ability of wealthy people, who are the main beneficiaries of this tax giveaway, to get Congress to enhance their net incomes. (HT: PLM).


From the Nice-Turn-of-Phrase Dept.

In a Yahoo! Sports column about Brooklyn Nets G.M. Billy King, writer Kelly Dwyer notes that if New York is “the city that never sleeps,” then Brooklyn is “the borough that never shaves.” This is not a wholly original phrase but pretty close, and, from personal observation, I’d have to say pretty accurate too, at least for a certain demographic. I can’t think of the last white Brooklyn male under 40 I saw without a full Grizzly Adams, a set of muttonchops, or at the very least a patch of second-cut-rough stubble. Bad borough for razor sales.


Is "Statistically Significant" Really Significant?

A new paper by psychologists E.J. Masicampo and David Lalande finds that an uncanny number of psychology findings just barely qualify as statistically significant.  From the abstract:

We examined a large subset of papers from three highly regarded journals. Distributions of p were found to be similar across the different journals. Moreover, p values were much more common immediately below .05 than would be expected based on the number of p values occurring in other ranges. This prevalence of p values just below the arbitrary criterion for significance was observed in all three journals.

The BPS Research Digest explains the likely causes:

The pattern of results could be indicative of dubious research practices, in which researchers nudge their results towards significance, for example by excluding troublesome outliers or adding new participants. Or it could reflect a selective publication bias in the discipline – an obsession with reporting results that have the magic stamp of statistical significance. Most likely it reflects a combination of both these influences. 

“[T]he field may benefit from practices aimed at counteracting the single-minded drive toward achieving statistical significance,” say Masicampo and Lalande.


It Really Is All About the Players

Economists are often asked – and perhaps, just as often just volunteer – to make predictions. This is odd, since – as the old joke goes – economists only seem to exist to make meteorologists look good.  In other words, economists often get their guesses about the future wrong.

Given this tendency, I always like to note when I get a prediction right (and it has actually happened before).  And prior to the Olympics, I did predict that the U.S. would win the gold medal in men’s basketball.  And on Sunday, that prediction came true.

Okay, that wasn’t much of a prediction (did anyone predict that wouldn’t happen?).  And despite the lack of challenge with respect to this prediction, I also heavily qualified my original forecast. Nevertheless, I did make something that could be called a prediction.  And it was right.  So that means something!


Pricing Road Races

The Berlin Half Marathon charges €30 to each of the first 5,000 registrants, €35 for the next 10,000, €40 for the next 10,000 and €45 for the next 2,500, at which time registration closes.  This pricing strategy is new to me:  in the more than 100 road races I’ve done, including one in Europe, a fixed entry fee is charged that jumps up shortly before the race date.  Why the difference?  I don’t think this pricing mechanism is playing off demand elasticities: those who register earliest would be the most avid, low demand-elasticity runners. I don’t see the purpose of what is to me a novel pricing strategy for road races.


Economists in a Coal Mine

From the Onion, “Nation’s Economists Quietly Evacuating Their Families”:

As employment stagnates, manufacturing continues its slump, and overall confidence in the U.S. financial system wavers, the nation’s economists have begun abandoning their homes and sending their loved ones overseas. “We’ve noticed a trend among the leading economic thinkers, be they Keynsians, supply-siders, or students of the Austrian school—they’re putting their families on one-way flights out of the country, often leaving half-finished survival bunkers behind them,” Paul Klement, an analyst with the Brookings Institute, told reporters Tuesday.

This, meanwhile, is not a joke: Economists for Romney today announces that its statement in support of Mitt Romney for President has been signed by more than 400 economists, including Nobelists Gary Becker, Robert Lucas, Robert Mundell, Edward Prescott, and Myron Scholes.

(HT: Dave Domingo)

 


A Good Reason to Take a Glance at the Comments Section if You Run a Blog, or Even a News Site; or: Hey CNBC, Let Your Commenters Help Fix Your Typos

I saw this late yesterday afternoon when looking over the financial news.

Wait a minute, you think — I knew Groupon is a big deal (or used to be, at least), but $568 billion in revenues in the second quarter? Billion with a “b”? That would rank Groupon in the top 70 countries for GDP.

Okay, of course not. It should have read $568 million, with an “m.” Hey: people make mistakes, no biggie.

But here we are many hours later and, as I type this, the CNBC article remains uncorrected even though many commenters have pointed out the mistake (some quite kindly, others less so).


Adventures in Ideas: Conversation With Al Norman, Author of Occupy Walmart

Perhaps some of you have been following the debates in various cities (e.g., New York, Chicago) over big retail stores that land in their backyard. I enjoy reading about attempts to regulate economic activity because I believe it raises a central contradiction of American society: phrased as a question, how much regulation is necessary to maintain the free market? Maybe this is not a contradiction, but a perennial challenge. Two areas seem ripe for inquiry: The need to monitor big financial institutions and the limitations that some want to impose on mega-retailers who crowd out the little mom & pop establishments.

Regarding the second issue, I came across a book I thought might interest you. Al Norman has been writing critically about the retail chain Walmart for some time. He brings his insights and passion together in a book called Occupy Walmart. Below is a brief Q&A.


FREAK-est Links

1. German startup “Schimpf-los” (“swear away”) provides telephone therapy for those who want to blow off steam by cursing. (HT: V. Brenner)

2. The “left-digit” effects for cigarettes.

3. Tim Harford‘s book Undercover Economist has an updated chapter on the financial crisis. You can download it for free if you have the book.

4. China rounds up 2,000 people for fake pharmaceuticals.

5. Major League Soccer set to create a “smart league” with a microchip on each player that records “more than 200 data records per second.” (HT: Michael Kesterton)

6. Nice new blog called Spreadsheet Journalism from Abbott Katz.


Division, Not Long Division

Division is the most powerful arithmetic operation. It makes comparisons. When the numerator and denominator have the same units, the comparison makes a dimensionless number, the only kind that the universe cares about. Long division, however, is something else entirely. In my post “Dump algebra,” many commentators objected to my loathing of long division. But long division is not division! Long division is just one way to do the computation, and is far from the most useful way.

I’ll illustrate with an actual example of division. For my environmental-protection lawsuit, now in the Massachusetts Supreme Court, I needed to divide 142,500 by 4655.


The Birth of the “Chicken Offset”

The battle over gay rights and the Southern fast food chain Chick-fil-A has dominated the news in the last couple of weeks. 

Kiss-ins, boycotts, and counterprotests have all ensued. But maybe the most clever response to the anti-gay marriage comments is the “chicken offset,” the brainchild of  a lawyer, political operative, and all-around character named Ted Frank (disclosure: one of us – Sprigman – went to law school with Ted).

These build on the existing idea of “carbon offsets,” which started out as a way to bring market flexibility to CO2 emissions caps. If a polluter exceeds a cap, it can purchase an offset. The money that the polluter pays for the offsets supports projects that reduce CO2 emissions – say, the construction of a wind farm. The new, green projects “offset” the bad emissions. 

Today, firms like Brighter Planet offer offsets that consumers can voluntarily purchase to balance out the carbon output of their flying, their houses, their weddings, and even their pets (did you know that the average housecat has a carbon pawprint of over 0.5 ton – mostly from production and transport of cat food?).

Ted’s stroke of inspiration was to tweak the concept of the offset and apply it to chicken sandwiches.  As he explains on his new website, chickenoffsets.com, he loves Chick-fil-A sandwiches, but doesn’t want his love to come at the expense of his gay friends.  And so every time you give in to that chicken sandwich jones, Ted will sell you an offset for $1.  He promises that he’ll give at least 90% of that dollar to pro-gay rights groups. Which is much more than anti-gay groups are going to make on your lunch at Chick-fil-A.


The Economics Revolution Will Be Televised

There’s a revolution underway in economics. It’s not due to the financial crisis, but rather something more mundane: Data, and computing power. At least that’s the claim that Betsey Stevenson and I make in our latest Bloomberg View column:

“Consider the stream of data you will create today. Your metro card will record what time you caught the train. Your Web browser will note how you go about your job, and how much you procrastinate. A mid-afternoon purchase at Starbucks will reveal your penchant for lattes and the occasional cookie. Your flow of e-mail traffic will trace out your professional and personal networks.

At the same time, computing power has made it extremely easy and cheap to analyze all the data you produce. An economist with a laptop can, in a matter of seconds, do the kind of number crunching it used to take a roomful of Ph.D.’s weeks to achieve. Just a few decades ago, economists used punch cards to program data analysis for their empirical studies.”

Two weeks ago, Harvard’s Raj Chetty gave a spectacular talk at the National Bureau of Economic Research, about what he called “The Transformative Potential of Administrative Data.” He documented that today’s cutting-edge research is based on crunching newly-available data from the vast databases which underlay our schools, welfare state and tax systems.  I’m just as optimistic that new data coming online from the private sector will prove to be just as useful.


Weird But True: Freakonomics-Flavored Cop Show Bought by NBC

A few months back, Levitt and I were asked help put together a TV cop show based on the concepts of Freakonomics. The gist: a big-city police force, in crisis, hires a rogue academic (sound familiar?) to help get crime under control.

It struck us as a totally crazy but also strangely appealing idea. The concept had been hatched by Brian Taylor, a  young exec at Kelsey Grammer‘s production company, Grammnet, which then partnered with Lionsgate; and the acclaimed writer Kevin Fox was brought on board. The show would be called Pariah.

A couple weeks ago, Levitt and I went to Los Angeles to help pitch the show to the TV networks. Since we know nothing about TV, we tried to not talk too much and let Kevin, Brian, and Kelsey do their thing. And they did! Here’s the news, from Deadline.com:


Letter From Argentina: Does the Government Pay Your Nightclub Cover Charge?

A reader named Gustav, a.k.a. the Modern Nomad (a nice blog, by the way) writes to say:

Hi! I’ve just left Buenos Aires after a five-month long nomadic visit there. Reflecting on my time there, I remembered something an Argentine friend told me, and I think you might like the economic spirit behind it.

Gustav is right. I do like the economic spirit behind the story he tells, and I think you will too:

In short, this is a government scheme created to discourage driving under the influence. When you and your friends drive to a disco, you enter the club as normal and pay your entry. But when you leave, the group walks up to the cashier and presents the designated driver, sober and fit for driving. Everyone in the group gets their entry fee back at that point! The club then gets the lost money back from the government who, I presume, find it cheaper to pay the entry fee for clubbers in the company of designated drivers than have them in the hospitals. To me, this is a beautiful economic point of view where the practical reality and cost of things is more important than not to be seen ‘supporting clubbers.’


Will Amazon's Same-Day Delivery Model Hurt Newspapers?

In Nieman Journalism Lab blog post, Ken Doctor explores the possible effects of Amazon’s shift into same-day delivery on newspaper advertising revenues:

Here’s what most hurts most about the new Amazon threat: It aims directly at the one category of newspaper advertising that has fared the best, retail.

Classifieds has decimated by interactive databases. National has migrated strongly digital. Retail, which made up of just 47 percent of newspaper ad revenues 10 years ago, is now up to 57 percent of newspaper totals. Now that advertising, albeit in just a few markets initially, will have to compete with Amazon-forced marketplace change.

Doctor also considers the implications of the move for Google, cityscapes and shopping centers, and employment.

(HT: Marginal Revolution)


Speaking Ill of the Dead Apparently Okay if the Dead Worked for Chick-fil-A

We recently put out a podcast called “Legacy of a Jerk,” which deals in large part with the ancient injunction against speaking ill of the dead. For the most part, this injunction is still widely obeyed. So I was quite surprised to see what Mark Bittman recently wrote on his N.Y. Times blog:

Sysco is the latest food giant—it’s the largest food distributor in the country—to come out against gestation crate confinement of pigs. The National Pork Producers Council’s communications director was quoted in the National Journal saying: “So our animals can’t turn around for the 2.5 years that they are in the stalls producing piglets…I don’t know who asked the sow if she wanted to turn around.” Really.

Speaking of pigs, the VP of PR for Chick-fil-A dropped dead of a heart attack the week after the chain’s latest homophobia/anti-gay marriage scandal. Here’s an obit, and here’s more about him. Meanwhile, Chick-fil-A had record-breaking profits after its President, Dan Cathy, drew a line in the sand over same-sex marriage.

I read that “speaking of pigs” line three or four times to make sure I understood. At first I thought that Bittman was speaking metaphorically — that no one had in fact died. (But he did: the man’s name was Don Perry.) Then I thought maybe the Times page had been hacked, but that doesn’t seem to be the case either. FWIW, here’s a screenshot:


Are Economists as Biased as Everyone Else?

All nine nominees for office in the American Economic Association are from private universities, all from states on an ocean. (All but one member of the Nominating Committee was also on a coast.) Two are friends of mine, and all are good people, but: isn’t this evidence of reverse discrimination? Surely there are scholars from public universities, or from the several top-ten non-coastal private schools, who are at least as qualified.

Like others, we economists favor those like us. That’s the bad news—and it’s been shown in conferring other honorifics (Hamermesh and Schmidt, 2003). The good news is that, where it really matters—in judging scholarly papers for publication—economists are remarkably fair (Blank, 1991; Abrevaya and Hamermesh, 2012), ignoring an author’s affiliation, gender or prior reputation.

Given human nature of helping one’s friends, perhaps we should be congratulated for indulging ourselves only where it’s not important.


Does More Primary Care Increase Healthcare Costs Instead of Lowering Them?

Health care reformers often argue that increasing patients’ access to doctors (especially primary care doctors) can actually lower health care costs in the long run, as these doctors can help diagnose and manage conditions before they lead to more expensive treatments and hospitalizations. But a new paper by economists Robert Kaestner and Anthony T. Lo Sasso disputes that theory. Here’s the abstract:

By exploiting a unique health insurance benefit design, we provide novel evidence on the causal association between outpatient and inpatient care. Our results indicate that greater outpatient spending was associated with more hospital admissions: a $100 increase in outpatient spending was associated with a 2.7% increase in the probability of having an inpatient event and a 4.6% increase in inpatient spending among enrollees in our sample. Moreover, we present evidence that the increase in hospital admissions associated with greater outpatient spending was for conditions in which it is plausible to argue that the physician and patient could exercise discretion.

The authors further conclude that “the implication of these findings is that expanding health insurance, as recent federal reform (Patient Protection and Affordable Care Act) proposes, will be cost increasing.”


Obedience on the Job

On America’s first subway, Boston’s Green line, the middle doors stopped opening. When I asked the driver to open the doors, he said that he couldn’t: now all boarding and deboarding at the above-ground stops is through the narrow front door by the fare box. Ah, the MBTA: making up for the 23 percent fare hikes on July 1 with improved service!

Me: “The new policy slows the ride for everyone. Now passengers cannot board and pay their fares until all the deboarding passengers have left.”

Driver, shrugging: “It’s the new policy. I just do what my boss tells me to do. I don’t question.”

Me: “We could use some questioning.”

Driver: “Questioning isn’t part of my job. I just wait for my pay day.”


Are Good Manufacturing Jobs Bad News for Education?

Here’s a fascinating new working paper from Yale economist David G. Atkin, called “Endogenous Skill Acquisition and Export Manufacturing in Mexico” (abstract here; PDF of an earlier version here). The gist:

This paper presents empirical evidence that the growth of export manufacturing in Mexico during a period of major trade reforms, the years 1986-2000, altered the distribution of education.  I use variation in the timing of factory openings across municipalities to show that school dropout increased with local expansions in export manufacturing. The magnitudes I find suggest that for every twenty jobs created, one student dropped out of school at grade 9 rather than continuing through to grade 12.  These effects are driven by the least-skilled export-manufacturing jobs which raised the opportunity cost of schooling for students at the margin.

It makes sense, of course, that students on the margin might happily abandon school in favor of a good job. But is that necessarily a bad thing? How should a society balance jobs and educational ambition? And who should be thinking harder about this issue — India or China? Or perhaps the U.S.?


Inequality Across U.S. States

A Bloomberg article by Virginia Postrel explores a discouraging trend in income inequality.  For decades, incomes across states in the U.S. converged — i.e. poor states caught up to rich ones — just as Robert Solow‘s growth theory predicted:

Poor places are short on the capital that would make local labor more productive. Investors move capital to those poor places, hoping to capture some of the increased productivity as higher returns. Productivity gradually equalizes across the country, and wages follow. When capital can move freely, the poorer a place is to start with, the faster it grows.

That steady convergence, however, has stopped.  One possible explanation?  High housing prices in rich cities, caused by government regulation: