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Freakonomics Blog

Why It Pays to Pay Employees More

We blogged a while back about how some retail firms succeed by hiring more, not fewer, floor employees, and by treating them particularly well. Among the examples: Trader Joe’s and Whole Foods; among the counterexamples: Michael’s.

This prompted an e-mail from Hal Varian, Google’s chief economist. (If you don’t know of Hal you should, as he’s an impressive and fascinating guy — check out the Q&A he did here a few years back.) His e-mail reads:

Saw your piece about Trader Joe’s et al.  Here’s one reason to pay people more than their market wage (from my textbook):

Gabor Varszegi has made millions by providing high-quality service in his photo developing shops in Budapest. (See Steven Greenhouse, “A New Formula in Hungary: Speed Service and Grow Rich,” New York Times, June 5, 1990, A1.)

Varszegi says that he got his start as a businessman in the mid-sixties by playing bass guitar and managing a rock group. “Back then,” he says, “the only private businessmen in Eastern Europe were rock musicians.” He introduced one-hour film developing to Hungary in 1985; the next best alternative to his one-hour developing shops was the state-run agency that took one month.


The Beastie Boys Lawsuit: An Existential Question About Intellectual Property

The day before Beastie Boy Adam Yauch’s untimely death from cancer, a lawsuit was filed in New York accusing him and his bandmates of illegal sampling. What’s unusual about this case is that the samples in question supposedly appeared on the 1989 album Paul’s Boutique. An obvious question is why almost 25 years went by before anyone decided to sue. 

The reason?  The alleged samples can’t actually be heard by the ordinary listener. Which raises a kind of existential question about intellectual property. If no one can tell that something is copied, is it still illegal to copy it? And if so, why?

Let’s assume for the sake of argument that the samples in question exist. They are snippets of songs by Trouble Funk, a 80s era go-go band. Trouble Funk’s complaint declares that the way the Beastie Boys sampled the tracks “effectively concealed to the casual listener” the fact that they are samples at all.  And it was “only after conducting a careful audio analysis” that Trouble Funk even knew for sure that they had been sampled. 


Kevin Durant Impersonates Russell Westbrook for Sprint

If you have been watching the NBA recently – and with the playoffs going on, you should be – you may have seen the following ad for Sprint.

Often people don’t pay attention to what people say in ads.  But this one – starring Kevin Durant of the Oklahoma City Thunder – has a very interesting opening line: “Man I was double-teamed.  With no one to pass it to, so I pulled up and hit the shot for the win…” 

Let’s think about this for the moment. Durant says he has two defenders on him (i.e. he is double-teamed).  That means – if the other team is playing the standard five players, there are three more defenders on the court. And if Durant has four teammates on the court (and that would be standard), there must be someone open. But Durant says that there is no one to pass it to. 

Hmmmm…. 


The New Yorker Geoengineers Itself

Michael Specter has written a good and interesting New Yorker article about the history and current state of geoengineering, called “The Climate Fixers: Is There a Technological Solution to Global Warming?”

Let me rephrase:

Michael Specter has written a good and interesting New Yorker article about the history and current state of geoengineering, called “The Climate Fixers: Is There a Technological Solution to Global Warming?,” which is essentially a New Yorkerized version of Chapter 5 of SuperFreakonomics, all the way down to the Mount Pinatubo explosion and the reliance on scientists Ken Caldeira and Nathan Myhrvold.


Is Eyeglass Recycling a Waste of Money?

Recycling your old eyeglasses may make you feel better, but, in Bloomberg View, Virginia Postrel argues that it’s actually a waste of money.  Postrel tracks the journey from eyeglass donation box to final destination — glasses are first shipped to their destination, where they’re sorted and evaluated for usefulness (only 7 per cent of donations are actually useable).  The numbers aren’t pretty.


The Train, The Train! Federal Transportation Legislation: Be Careful What You Wish For

Hi all! Sorry I haven’t been writing much of late; I’ve been dealing with the minor matters of filing a dissertation and finding myself gainful employment. The first step is complete: I get to call myself a doctor now, though it is a source of considerable disappointment to my friends that after almost eight years of study I’m not the kind of doctor who can prescribe them medical marijuana. The second step is complete too: I’ll be joining the faculty at Clemson University in South Carolina as an assistant professor in the fall. I’m thrilled to be going to Clemson as I think very highly of the department, the setting, and winning college football.

Anyway, I’m going to try to get back in the habit of writing more regularly, this time about my dreams for transportation—which are turning out to be nightmares. Like one of those stories where a genie gives you three wishes and every one of them boomerangs. Or even better, a bad episode of Fantasy Island:


The Future of USAID

Foreign Policy has published an interesting interview with Rajiv Shah, a United States Agency for International Development (USAID) administrator and former Gates Foundation employee.  Here’s Shah on his efforts to bring a business-like mentality to USAID:

I’ve tried to bring that business-like rigor and the tendency to ask questions — some would say I ask far too many questions — to make sure that when we’re spending taxpayer resources, we’re doing it with that absolute focus that we are making an investment against generating a result.


Question of the Day: How to Stop Restroom Sabotage?

A reader named Olaf Winter writes in with a problem that perhaps you all can help solve?

Hello Dubner & Levitt,

During a Parent Teacher Association meeting in my son’s high school in Essen, Germany, I heard complaints about a growing problem with unbelievably dirty toilets, or to be more precise, with the problem of adolescent girls smirching, soiling, polluting, dripping and littering at the restrooms.

I’m talking about unrolled packs of toilet paper stuffed into the toilet; about smearings on the walls (with pens in the best case). I forgo the more unsavory details. You probably have an idea of what I mean. The school I am talking about is one of the best schools in town. It is a newly built complex with beautiful architecture, lots of space and light. The pupils have an upper-middle-class background. And still, when they are in the restroom at least some of them behave like savages.


How to Be ExxonMobil

Foreign Policy interviews Steve Coll about his new book Private Empire, which is about ExxonMobil’s ongoing dominance. Coll explains the company’s competitive strategy, which it relies on when competing against other companies for African contracts as well as with state-owned oil companies in the Middle East:

I also think that the way they win these deals in a place like Chad or Papua New Guinea or Angola is, in effect, they go to the host country and say: “Look, we recognize that you can deal with the Chinese, and you’ll get soft loans and guns and things that you think are more valuable than what we can offer you, but what you’ll also get is really lousy project management. You’ll get less oil pumped, you’ll get less royalties, you’ll get less taxes, so you’ll end up net poorer. Why not come work with us under our rule of law, under a really straightforward contract? And what our record shows is that you’ll end up with more cash faster — and then you can use that cash to buy whatever guns you want? But you’ll have the money to carry out what ever plans you have; and we’re reliable, we’ll come in on time.”


Carrots or Sticks? Handicapped Parking Edition

I’m convinced that shame can in many cases provide stronger incentives than a monetary penalty uncertainly enforced.  At a parking place in Luxembourg, the sign on the handicapped parking places reads: “Here is parking for a very handicapped person or a very inconsiderate (unscrupulous) person.”  This might motivate a lot of people better than a $50 fine should they happen to get caught parking there.


The Ongoing Battle Between Technology and Human Behavior

“It is conventional wisdom that it is possible to reduce exposure to indoor air pollution, improve health outcomes, and decrease greenhouse gas emissions in the rural areas of developing countries through the adoption of improved cooking stoves,” write Rema Hanna, Esther Duflo, and Michael Greenstone in their new working paper “Up in Smoke:  The Influence of Household Behavior on the Long-Run Impact of Improved Cooking Stoves” (abstract; Washington Post coverage).

But, as the scholars discovered, what seems like an obvious technology fix doesn’t always work. Because, remember, human behavior can be a lot harder to change than we think.

Or, put another way: bummer.


Raghuram Rajan on the Recession

In Foreign Affairs, Raghuram Rajan (who’s appeared on this blog before) writes about the causes and lessons of the Great Recession:

In fact, today’s economic troubles are not simply the result of inadequate demand but the result, equally, of a distorted supply side. For decades before the financial crisis in 2008, advanced economies were losing their ability to grow by making useful things. But they needed to somehow replace the jobs that had been lost to technology and foreign competition and to pay for the pensions and health care of their aging populations. So in an effort to pump up growth, governments spent more than they could afford and promoted easy credit to get households to do the same. The growth that these countries engineered, with its dependence on borrowing, proved unsustainable.


Bring Us Your Freakonomics Questions for Another Radio FAQ

It’s time again to record another FAQ podcast (that’s “FREAK-quently Asked Questions”), and we need your help!

Every once in a while, we solicit questions from Freakonomics readers and answer them on Freakonomics Radio. Levitt always has a great time doing this, as evidenced by his answers to why “I don’t know” is so hard to say or why we vote (or don’t).

So fire away in the comments section below, and keep up with the podcast at iTunes or via the RSS feed to see if your question gets answered.


Kentucky Derby 2012

Every year I post Kentucky Derby picks.

Every year they turn out to be terrible.

Every year I vow I will not embarrass myself again next year.

Every year two or three loyal readers email me and ask why I didn’t post my picks this year, so then I post picks after all.

So, against my better judgment, here they are.

Education and Ambition

When it comes to educational attainment, good intentions aren’t enough.  New research, led by Liz Todd of Newcastle University, looks at schemes to increase the educational attainment of low-income children by changing “aspirations and attitudes“:

“For more than 10 years national and local policy has focused attention on raising aspirations. But there is no evidence that if you want to impact on the attainment of lower-income pupils that changing attitudes and aspirations is the way to go. There is an urgent need to change direction,” says Todd.  “It’s not that aspirations aren’t important. It’s not about turning them on but keeping them on track. It’s highly unlikely that any child starts school wanting to be unemployed.”


Should "TailSpotting" Be on Your Stock-Research Checklist?

From a new working paper by David Yermack, an economist at NYU/Stern, called “Tailspotting: How Disclosure, Stock Prices and Volatility Change When CEOs Fly to Their Vacation Homes” (abstract; older version in PDF):

This paper shows close connections between CEOs’ vacation schedules and corporate news disclosures.  I identify vacations by merging corporate jet flight histories with real estate records of CEOs’ property owned near leisure destinations.  Companies disclose favorable news just before CEOs leave for vacation and delay subsequent announcements until CEOs return, releasing news at an unusually high rate on the CEO’s first day back.  When CEOs are away, companies announce less news than usual and stock prices exhibit sharply lower volatility.  Volatility increases immediately when CEOs return to work. 


Why Can't We All Just Get Along? Bring Your Questions for Righteous Mind Author Jonathan Haidt

“Morality, by its very nature, makes it hard to study morality,” writes the social psychologist Jonathan Haidt. “It binds people together into teams that seek victory, not truth. It closes hearts and minds to opponents even as it makes cooperation and decency possible within groups.”

His new book is called The Righteous Mind: Why Good People Are Divided by Politics and Religion and it is absorbing on so many levels. (It addresses some of the same ideas in a Freakonomics Radio episode called “The Truth Is Out There … Isn’t It?”) Here’s a Times review; here’s one from the Guardian.

I’m pleased to say that Haidt has agreed to take questions on his topic from Freakonomics readers, so ask away in the comments section and as always, we’ll post his answers in short order.


The Appeal of the Middle

New research (summarized by the BPS Research Digest) from Paul Rodway, Astrid Schepman, and Jordana Lambert demonstrates that people seem to prefer items located in the middle:

“In replication of the centre-stage effect, it was found that when participants were presented with a line of five pictures, they preferred pictures in the centre rather than at either end,” the authors write. “This applies when the line of pictures was arranged horizontally or vertically and when participants selected from five pairs of identical socks arranged vertically.”  

The authors also discuss the policy implications of their work:

“If item location influences preference during the millions of purchasing choices that occur every day, it will be exerting a substantial influence on consumer behaviour. Moreover, choices from a range of options are made in many other contexts (e.g. legal and occupational), and it remains to be investigated whether the central preference remains with other formats and whether it extends to other types of decision.”


The Twitter I.P.A.

Almost a year ago, we posted here about patent trolling – when individuals and firms use patents as a tool to extract settlements out of defendants who wish to avoid expensive patent litigation, even when the target thinks it can ultimately win.

Because they can be so valuable, patents are a big source of litigation, especially in the tech industry. Apple and Samsung have been at each other’s throats over smartphone patents, as have Apple and Motorola. Microsoft has been battling with Motorola over whether its Xbox violates Motorola’s patents, and Microsoft has also threatened smartphone maker HTC.  Oracle sued Google, claiming Google’s Android cellphone operating system infringed on Oracle patents.  Microsoft sued Barnes & Noble, claiming that its Nook e-reader violates Microsoft patents. Apple and Google are now eyeing each other warily over “slide to unlock” technology that Apple has patented and accuses Google of copying in its Android smartphone operating system. Google, as a defensive move, paid $12.5 billion to buy Motorola’s portfolio of nearly 25,000 patents. 


Tourist Drug Ban in the Netherlands

As of May 1, it is illegal for foreigners to buy soft drugs in three border provinces of the Netherlands. This new constraint is especially restrictive in Maastricht, which lies only 20 miles from the larger German city of Aachen and only 60 miles from Brussels, Belgium. Before May 1, foreign “drug tourists” flocked to the 14 “coffee houses” in the city, paying €3 or so for a joint and lighting up (since this activity is illegal in neighboring countries). In protest against the law, all 14 houses have closed.


New Lawyers in New York Must Give First 50 Hours Free

Fascinating article in today’s Times, by Anne Barnard:

Starting next year, New York will become the first state to require lawyers to perform unpaid work before being licensed to practice, the state’s chief judge announced on Tuesday, describing the rule as a way to help the growing number of people who cannot afford legal services.

The approximately 10,000 lawyers who apply to the New York State Bar each year will have to demonstrate that they have performed 50 hours of pro bono work to be admitted, Chief Judge Jonathan Lippman said. He said the move was intended to provide about a half-million hours of badly needed legal services to those with urgent problems, like foreclosure and domestic violence.


One Less Reader

A reader writes:

You should do an article about how pop-ups drive people away from websites, even after the viewer opts out.  You can start with me and how I won’t be returning to your site, or reading your next book, or promoting it by word-of-mouth, because of your annoying “recommended for you” pop-up.

Do not respond to this email.

Sincerely,
XXXXXXXXXXXXXX


Why Fruit and Veggies Aren't Obesity Cure-Alls

RAND reports on a healthy eating dilemma:

Is eating more fruits and vegetables the key to reducing obesity? A recent RAND study of more than 2,700 adults found that calorie intake from cookies, candy, salty snacks, and soda was approximately twice as high as the recommended daily amount. Consumption of fruits and vegetables, on the other hand, is only 20% shy of recommended guidelines.


Cutting Class, With the School's Help

Via the Globe & Mail: it used to be that when you wanted to cut class, you’d have to get a friend to sign you into class, or you’d have to beat your parents home to delete any incriminating messages on the answering machine. But those methods are bush league compared to a recent California initiative. United Press International reports that 50 high school students were caught colluding with a school administrator in an attendance scam:


Hamermesh’s Corollary

In the last minutes before we depart to the airport, our clothesdryer breaks down, potentially leaving our housesitter high but not dry.  Murphy’s Law states: “Anything that can go wrong will go wrong.” This well-known aphorism ignores the crucial fact that things go wrong at different times, and that the opportunity cost of our time varies.  I don’t mind if things break down when I have time to worry about and solve the problem.  But that doesn’t happen.  


The Chinese Haven't Bought All Our Stock Markets, Have They?

Maybe my computer thinks I am in China (but I am not; I am in New York).

Maybe a Chinese hacker is just having a laugh (it has happened before).

Maybe the Chinese have bought all of our stock markets (although I seriously doubt it).

Or maybe, for whatever reason, Yahoo! Finance is simply some coding issues. Because when I checked the markets this morning, they seemed to have been renamed: 


Messing With Memory

New research finds that it’s alarmingly easy to create false memories for people, even when they know an event didn’t happen.  Psychologists Andrew Clark, Robert A. Nash, Gabrielle Fincham, and Giuliana Mazzoni conducted a three-stage experiment: 

In Session 1 participants imitated simple actions, and in Session 2 they saw doctored video-recordings containing clips that falsely suggested they had performed additional (fake) actions. As in earlier studies, this procedure created powerful false memories. In Session 3, participants were debriefed and told that specific actions in the video were not truly performed. Beliefs and memories for all critical actions were tested before and after the debriefing.