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Help Wanted: Techno Superstars Looking to Work on Some Freakonomics-Inspired Start-ups in Chicago

I’ve got a lot of smart friends, and they come up with some pretty good ideas.  (I even have an idea myself once in a while!)

Occasionally, these ideas take the form of potential internet businesses.  Although we have incubated some interesting businesses up until now, there is too much talking and not enough doing.

It is time for that to change, and we want to open up  a little Chicago office to pursue these ideas.

We need some superhuman talent to make it a success. 

If you think you have what we are looking for, send a resume to stelios@greatestgood.com, and let’s get the fun started!


Dump Algebra

Being a good teacher, I like to think, requires a curious and freethinking mind. A supporting example is Andrew Hacker, described by a former Cornell colleague as “the most gifted classroom lecturer in my entire experience of 50 years of teaching.” His book Higher Education?: How Colleges Are Wasting Our Money and Failing Our Kids—and What We Can Do About It, co-authored with Claudia Dreifus, convinced me that tenure is harmful. His latest broadside, “Is Algebra Necessary?”, in last Sunday’s New York Times, is as provocative.

He argues that we should stop requiring algebra in schools. Despite the vitriol in several hundred comments (“We read them so you don’t have to.”), he is right.


Woulda, Coulda, and the Real Story Behind the Redeem Team

ESPN.com recently offered a somewhat confusing article comparing the 2012 U.S. Men’s Olympic basketball team to the 1992 Dream Team.  The headline of the article – “LeBron: We Would Beat Dream Team” – makes it clear that LeBron James believes the 2012 team would defeat the 1992 Dream Team. 

The first line of the story, though, makes a somewhat different claim: “LeBron James has joined Kobe Bryant in saying that he believes this year’s Team USA Olympic men’s basketball team could beat the 1992 Dream Team.”

And then further in the article, we see…

James’s comments echoed those of Bryant, who two weeks ago made a similar proclamation.

“It would be a tough one, but I think we would pull it out,” Bryant said at a news conference. “People who think we can’t beat that team for one game, they are crazy. To sit there and say we can’t, it’s ludicrous. We can beat them one time.”

Bryant appeared to soften those comments a bit Friday, telling reporters, “I didn’t say we were a better team. But if you think we can’t beat that team one time? Like I’m going to say no, that we’d never beat them.

“They are a better team. The question was ‘Can we beat them?’ Yes we can. Of course we can.”


The Olympics and the Doctors

A New England Journal of Medicine article explores the history of the Olympic Games as an object of “medical scrutiny,” with some interesting highlights:

Physicians have been interested in the Olympics for many reasons. In the 1920s, they probed the limits of human physiology. One group studied the Yale heavyweight rowers who won gold in Paris. An ingenious contraption revealed that at their racing speed — 12 mph — the eight men produced four horsepower, a 20-fold increase over resting metabolism (1925). A 1937 study published in the Journal showed that athletes at the 1936 Berlin games consumed 7300 calories each day (1937).

Of course, physicians are currently most fascinated by the effects and progress of performance-enhancing drugs:


You Never Know Who Listens to the Same Podcast as You

A podcast listener named Susan Guttentag, an associate professor of pediatrics at the Children’s Hospital of Philadelphia, writes in to say:

I was compelled to email you after the following incident on our recent visit to Whitefish, Montana.  My husband and I had finished a terrific bike trip through Glacier and Waterton Parks, and we were spending a couple of extra days in Whitefish, a very lovely town in the Flathead River Valley. We noticed that there was a terrific hike to the top of the local ski resort on Big Mountain and decided to venture out. Sadly, the trail starting point was a hefty distance away — too far to tack onto what proved to be a 4 h hike to the top– but the lodge did not provide shuttle service to this area.  My husband suggested that we — wait for it — hitchhike!  In nearly 53 years on the planet, I had never once hitchhiked but my husband is 6’3″ so I thought “why not?” I had listened to your podcast on hitchhiking and was somewhat comforted by the data.


Why Do Patent Holders Sometimes Pay Patent Copiers?

Like a lot of products, pharmaceuticals get knocked off. And when that happens to a drug that’s protected by a patent, the next event is unsurprising: a lawsuit brought by the patent holder. But there is a very unusual twist in the pharma world. When the dust settles, quite frequently it is the major pharmaceutical firm that is paying the company that has knocked off their patented drug.

In one recent case involving Cipro, a widely-used antibiotic with annual sales exceeding $1 billion, Bayer (the patent owner) paid $400 million to a generic drug maker, Barr Laboratories, to settle their patent dispute. Why would the patent holder make such a huge payment to the knockoff artist, and not the other way around?


Calling In The Troops

A headline on the UK news talked about complaints that the government is using an additional 3500 soldiers to help with security at the Olympics.  Why complain?  The security seems crucial; and given that the soldiers are being paid anyway, and were not going to be deployed elsewhere, the opportunity cost of their time does not seem very high.  (I’m assuming that the British Army is not maintained permanently larger for use in security in such events.)  This seems much more efficient than hiring some temporaries for security, who might not be as well-trained and who would require pay.


The Case For Climate Engineering Research: A Guest Post By SPICE Researcher Matthew Watson

This is a guest post by Matthew Watson, a lecturer in geophysical natural hazards at the University of Bristol and the lead researcher for the Stratospheric Particle Injection for Climate Engineering project (SPICE), whose experiments are currently on hold. He blogs at The Reluctant Geoengineer.

The Case For Climate Engineering Research
By Matthew Watson 

As project lead for the SPICE project (Stratospheric Particle Injection for Climate Engineering), I have been on quite a journey over the last eighteen months. SPICE is important, challenging, socio-politically charged, and high-profile: a heady mix for a youngish researcher like me. It looks to answer the question “Can we emulate the cooling observed after large volcanic eruptions to ameliorate the worst effects of global warming?” Despite playing to my apparent Messiah complex, the trials and tribulations of steering the project through rough seas has been more than enough to keep my feet on the ground. That is a challenge that faces all who research such grand things. 


Are Corporate Fines High Enough to Make a Difference?

The last three months have seen several large corporate fines levied in response to various high-profile financial scandals, but an article in The Economist asks if fines are still not high enough to actually deter crime:

The economics of crime prevention starts with a depressing assumption: executives simply weigh up all their options, including the illegal ones. Given a risk-free opportunity to mis-sell a product, or form a cartel, they will grab it. Most businesspeople are not this calculating, of course, but the assumption of harsh rationality is a useful way to work out how to deter rule-breakers.

Extremely high and extremely low fines both carry costs, so The Economist suggests a middle ground: fines that offset the benefits of the crime itself.


How We Perceive the Weather

A new study looks at how ideological and political beliefs affect people’s perceptions of the weather. The authors surveyed 8,000 people across the U.S. between 2008 and 2011 and found that while floods and droughts were remembered correctly, temperature changes were a different story. From Ars Technica:

In fact, the actual trends in temperatures had nothing to do with how people perceived them. If you graphed the predictive power of people’s perceptions against the actual temperatures, the resulting line was flat—it showed no trend at all. In the statistical model, the actual weather had little impact on people’s perception of recent temperatures. Education continued to have a positive impact on whether they got it right, but its magnitude was dwarfed by the influences of political affiliation and cultural beliefs.

And those cultural affiliations had about the effect you’d expect. Individualists, who often object to environmental regulations as an infringement on their freedoms, tended to think the temperatures hadn’t gone up in their area, regardless of whether they had. Strong egalitarians, in contrast, tended to believe the temperatures had gone up.


Pop Culture Introspection, Part II: What Do Hip-Hop/Pop Song Mash-ups Teach Us?

Every once in a while, there is a mash-up that combines a pop-type song with a hip-hop add-on.  I’m not talking about songs like the odd new B.O.B./Taylor Swift duet, but rather, songs that exist on their own, and then get a hip-hop upgrade.

I’m sure there are many examples, but there are only two that I can think of off the top of my head.

The first is “Numb/Encore“, in which a popular Linkin Park song (“Numb”) gets Jay-Z lyrics laid over it.  Here are they lyrics from the original Linkin Park song “Numb”:

I’m tired of being what you want me to be
Feeling so faithless lost under the surface
Don’t know what you’re expecting of me
Put under the pressure of walking in your shoes
(Caught in the undertow just caught in the undertow)
Every step that I take is another mistake to you
(Caught in the undertow just caught in the undertow)
And every second I waste is more than I can take

I’ve become so numb I can’t feel you there
I’ve become so tired so much more aware
I’m becoming this all I want to do
Is be more like me and be less like you

Compare the adolescent angst of those lyrics with the words that Jay-Z lays over it such as:


Pop Culture Introspection, Part I: Why Do the Couples From The Bachelorette Do So Much Better Than Those From The Bachelor?

 Of the sixteen The Bachelor shows, only four relationships from the show lasted at least a year.  Only two couples are still together.  In contrast, five of the seven The Bachelorette seasons led to relationships that lasted at least a year. (Although only two of the couples are still together.)

Why the difference? Just chance, or does it tell us something about men, women, and relationships?


The Secret Consensus Among Economists

If you follow the economic policy debate in the popular press, you would be excused for missing one of our best-kept secrets: There’s remarkable agreement among economists on most policy questions.  Unfortunately, this consensus remains obscured by the two laws of punditry: First, for any issue, there’s always at least one idiot willing to claim the spotlight to argue for it; and second, that idiot may sound more respectable if he calls himself an economist. 

How then can the quiet consensus compete with these squawking heads?  A wonderful innovation run by Brian Barry and Anil Kashyap at the University of Chicago’s Booth School Initial on Global Markets provides one answer: Data.  Their “Economic Experts Panel” involves 40 of the leading economists across the US who have agreed to respond on the economic policy question du jour.  The panel involves a geographically and ideologically diverse array of leading economists working across different fields.  The main thing that unites them is that they are outstanding economists who care about public policy.  The most striking result is just how often even this very diverse group of economists agree, even when there’s stark disagreement in Washington. 

That observation is the starting point for my latest column with Betsey Stevenson: 


Coffee in Berlin

The local coffee shop and bakery near my apartment in Berlin charges €1 for an excellent cup of coffee.  The similar shop near my office, but on a main tourist street, charges €1.99 for an equal quality cup.  Similar quality coffee can be had for €1.50 at a bakery one block from my office in another direction, in a less touristy area with many office buildings.  I can explain the €0.50 difference from my local shop to the third shop as cost-based discrimination: I assume higher real-estate prices generate it.  The €0.50 difference between the two shops near my office must be mainly due to demand-based discrimination:  Tourists are unwilling to search, implicitly have a low demand elasticity and are an easy mark for the shopkeeper.


Piracy's Next Frontier

While pirate attacks worldwide are down so far this year, Foreign Policy reports that Africa’s blackbeards seem to have shifted their attention to West Africa and Indonesia, where attacks have increased. From a new report from the International Maritime Bureau:

The decline in Somali piracy, however, has been offset by an increase of attacks in the Gulf of Guinea, where 32 incidents, including five hijackings, were reported in 2012, versus 25 in 2011. In Nigeria alone there were 17 reports, compared to six in 2011. Togo reported five incidents including a hijacking, compared to no incidents during the same time last year.

The IMB report emphasized that high levels of violence were also being used against crew members in the Gulf of Guinea. Guns were reported in at least 20 of the 32 incidents. At least one crew member was killed and another later died as a result of an attack.


Is There a Better Prostitution Policy?

Sam Lee of NYU and Petra Persson of Columbia send an e-mail:

We have written a research paper [“Human Trafficking and Regulating Prostitution”] that theoretically analyzes the impact of prostitution laws on voluntary sex work and sex trafficking. The central message of the paper is a new policy proposal (see Q6 below). Here are some of the questions we ask and the answers we find:

Q1: Which regulatory approach, legalization or criminalization, is more effective against trafficking?
A1: Neither. Either approach can increase or decrease trafficking, depending on the appeal of voluntary sex work, which in turn depends on things such as the female-male wage gap.

Q2: What about studies that document higher trafficking inflows into countries that legalize prostitution?
A2: In the presence of sex tourism (which is, for example, non-negligible for Germany, Spain, and the Netherlands), the increase in trafficking in the legalizing country can be more than offset by a decrease in trafficking in the neighboring countries. Thus, overall, trafficking can actually decrease.


Fooling Houdini Author Alex Stone Answers Your Questions

Alex Stone, author of the excellent new book Fooling Houdini, was kind enough to take questions from blog readers – and there were some tough ones! Here are his answers:

Q. If you are a highly skilled — but evil — magician, and wanted to use your skills for financial gain through criminal means (or at least highly unethical means), what do you think would be the most profitable routes to take? –Derek

A. Wall Street.

Q. Why is it that magicians are almost all men. Why are there so very few women magicians? –Eric M. Jones

A. I don’t really know, but I think it’s high time for that to change.


Garbage and the Herd Mentality

In our recent podcast “Riding the Herd Mentality,” we discussed how the actions of people around you significantly affects your behavior. A new paper studies garbage and litterers, and whether more garbage begets more garbage. Researchers Robert Dur and Ben Vollaard collected data for three months in a densely populated residential area in Rotterdam for some 4,000 households. The abstract:

Field-experimental studies have shown that people litter more in more littered environments. Inspired by these findings, many cities around the world have adopted policies to quickly remove litter. While such policies may avoid that people follow the bad example of litterers, they may also invite free-riding on public cleaning services. This paper reports the results of a natural field experiment where, in a randomly assigned part of a residential area, the frequency of cleaning was reduced from daily to twice a week during a three-month period. Using high-frequency data on litter at treated and control locations before, during, and after the experiment, we find strong evidence that litter begets litter. However, we also find evidence that some people start to clean up after themselves when public cleaning services are diminished.


Question of the Day: Should We Just Let Murderers Do Their Thing?

A reader named Mark Kozel writes to say:

I heard that Chicago will be pouring up to $14 million into police overtime to prevent murder and violent crime.

It got me thinking: is it cheaper to prevent this kind of crime, or to just let it happen and clean up the mess afterwards?

It would be hard to find many people, even economists, who would arguing that “just letting it happen” isn’t an outcome that society should even think about accepting.


Auction Theory and LIBOR

An article in The Economist argues that a little auction theory might solve some of the British Bankers’ Association (BBA) current LIBOR problems:

Some of LIBOR’s failures also have echoes in auctions. Traders at involved banks are accused of aligning their LIBOR estimates in an attempt to affect the final rate. They were able to cross-check what others had done, since the BBA makes individual estimates public. These traders had, in effect, formed a “bidding ring,” analogous to a sort of cartel that is familiar to observers of auctions.

Fortunately, a variety of economists have researched how to break bidding rings.  Their findings suggests that, in addition to relying on actual data (instead of estimates) and creating penalties for false bidding, the LIBOR system would benefit from a few changes focused on the weaknesses of bidding rings:

Once banks’ LIBOR bids actually have some commitment value, the system should focus on the weaknesses that auction cartels are known to have. The cartel-enforcement problem would be more acute if the BBA increased the number of submitting banks and kept those bids private. The entry of outsiders should be actively encouraged, by allowing other lenders to banks (money-market funds, say) to submit estimates, too.


Jimmy the Lock or Break the Window?

My first full day in Berlin and I’m off for a great run in 60-degree weather.  Only problem:  I take my office key, which looks very much like my apartment key.  I return to discover I’m locked out and stand around for an hour on the street in my running shorts  (since there is no information about a house supervisor or any other contact).  Fortunately, a painting crew arrives.  I ask one fellow to help me break a window (the apartment is on the ground floor). He says OK, but it would probably cost me €300 to have it repaired; instead, he claims he can jimmy the lock and will do so for €80. I am dubious, but after 45 minutes of hard work, he succeeds (without damaging anything).  He was pleased. He may have earned producer surplus of at least €60, as I doubt that he earns as much as €20 (untaxed!) for 45 minutes of work.  I’m delighted, got about €220 of consumer surplus, since I would have had to pay that much extra to break the window. This is what exchange is about — both sides gain.


Worried About Unemployment? Find a "High Touch" Profession

Writing for Slate, Ray Fisman (who’s been on the blog before) explains why “the bottom 20 percent of American families earned less in 2010 than they did in 2006, the year before the recession began”:

There are two broad shifts that account for much of this decline: globalization and computerization. From T-shirts to toys, manufacturing jobs have migrated to low-wage countries like Vietnam, Bangladesh, and of course China. Meanwhile, many of the tasks that might have been done by middle-income Americans employed as bookkeepers or middle managers have been replaced by spreadsheets and data algorithms.

Fisman argues that in order to succeed in the new economy, American workers need to shift away from construction and manufacturing jobs to “high touch” professions. “If jobs are being lost to low-wage Indians and computer programs, then what today’s worker needs is a set of skills that offers the personal touch and judgment that can’t be provided by a machine or someone 12 time zones away,” writes Fisman.


Price Controls in the NBA Force Teams to Find Different Ways to Keep Their Stars

The NBA free agent market opened this month and the moves making headlines include:

Steve Nash signing with the L.A. Lakers
Ray Allen signing with the Miami Heat
Jason Kidd signing with the New York Knicks
Deron Williams re-signing with the Brooklyn Nets

And then there is the Dwight Howard saga. 

Each of these stories appears to be summarized by a familiar line: 

Big star signs in Big Market. 


A Geoengineering Tryout

We’ve written a good bit (in Chapter 5 of SuperFreakonomics and also the blog) about potential geoengineering solutions to global warming. This summer, with the SPICE geonengineering trials on hold in the U.K., two scientists are getting ready to try out a small-scale experiment in the U.S. From The Guardian:

Two Harvard engineers are to spray sun-reflecting chemical particles into the atmosphere to artificially cool the planet, using a balloon flying 80,000 feet over Fort Sumner, New Mexico.


The Copyright Wars Come to the Obama-Romney Campaign

Last week, the Obama campaign released this sharp-elbowed political ad featuring Mitt Romney’s off-key rendition of “America the Beautiful.” And the Romney campaign promptly issued a sort of knock off — an ad featuring President Obama singing Al Green’s “Let’s Stay Together.”  The Romney ad uses the song to criticize Obama’s allegedly too-cozy relationship with lobbyists and campaign fundraisers. 

We can’t show you the Romney ad, as it’s been pulled from YouTube.  Why?  Because BMG Rights Management, the music publisher that owns the copyright in “Let’s Stay Together,” has sent YouTube a copyright takedown notice under the Digital Millennium Copyright Act, and YouTube has complied.

And we also can’t show you the original news footage of Obama singing — that’s also been taken down from YouTube following BMG’s copyright complaint.  The Obama ad featuring Romney’s singing is still up there – fortunately for the Obama campaign, “America the Beautiful” is a very old song (first released in 1910) and so the copyright has expired and the song is in the public domain.


A Bill of Goods? Assessing the Transportation Legislation

Do you want the good news, or the bad news… or the bad news… or the bad news… 

Okay, in this post let’s start off on the bright side. At a time when the two parties cannot agree on the menu at the Congressional cafeteria, the Republicans and Democrats have found something they can agree on. After three years of debate and nine temporary stopgap extensions, Congress and the President have enacted new transportation authorization legislation. This bill divvies up the gas tax money, plus some miscellaneous revenue from other sources (more on this later), and funds and regulates the federal surface transportation program for the next 27 months. 

In many respects, this is a pretty remarkable achievement. Things could have been worse: on the same day that the transportation agreement was announced, the Supreme Court handed down its ruling on healthcare. Compared to the stark partisanship surrounding that issue, when it came to transportation, John Boehner and Harry Reid held hands around the campfire and sang Kumbaya.


How Surprise Changes Your Appetite for Risk

From LiveScience:

According to new research from psychologist Heath Demaree, of Case Western Reserve University in Cleveland, Ohio, people who’ve experienced surprising outcomes in various situations — whether those outcomes were good or bad — are less likely to take risks in the future. In other words, it’s not whether you win or lose, but whether the outcome is expected. People appear to decrease their risk-taking levels after experiencing any surprising outcome — even positive ones.

“Surprising events are known to cause animals to stop, freeze, orient to the surprising stimulus and update their schemas of how the world works,” Demaree said. “Our recent research suggests that surprising events also cause people to temporarily reduce risk-taking.”


Wall Street Cheating

A new survey of 500 financial service professionals in the U.S. and the U.K. finds that 26 percent of survey respondents “had observed or had firsthand knowledge of wrongdoing in the workplace” and almost 25 percent “believed that financial services professionals may need to engage in unethical or illegal conduct in order to be successful.”  

Depending on your worldview, you may read that previous paragraph and think, Oh my goodness, that’s outrageous! Or, conversely, you might think Only 26 percent?!