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Freakonomics Blog

A New Revenue Source for Journalism?

Felix Salmon recently proposed an interesting new profit source for newspapers like The New York Times. Citing the Times‘s recent expose on Walmart and the resulting drop in the company’s share price, Salmon wonders why the company doesn’t charge companies for early access to big stories: 

[S]houldn’t the NYT, which can always use a bit of extra revenue, take advantage of the fact that its stories can move markets so much? Not directly: I’m not suggesting that the New York Times Company should start buying out-of-the-money put options on Mexican corporates in advance of its own stories. But how much would hedge funds pay to be able to see the NYT’s big investigative stories during the trading day prior to the appearance of the story? It’s entirely normal, and perfectly ethical, for news organizations, including Reuters, to give faster access to the best-paying customers.


Traffic Pollution: A Silent Killer in the U.K.?

A new study claims that traffic pollution “is more than twice as deadly as traffic accidents.”  Scientists Steve Yim and Steven Barrett “estimate that combustion exhausts across the U.K. cause nearly 5,000 premature deaths each year,” writes Roland Pease. “The pair also estimate that exhaust gases from aeroplanes cause a further 2,000 deaths annually.”  The study also points out that pollution travels:

Of the 19,000 annual U.K. deaths estimated, 7,000 are due to pollutants blown in from the continent. In London, European pollutants add 960 deaths each year to the 2,200 caused by U.K. combustion fumes.

But the international trade in deaths goes both ways. More than 3,000 European deaths can be attributed to U.K. emissions the authors say.

Yim and Barrett estimate that premature deaths are costing the U.K. billions of dollars a year, and suggest reducing black carbon and nitrogen oxide emissions and investing in public transportation.

(HT: Naked Capitalism)


UK Game Show Golden Balls: A New Solution to the Prisoner’s Dilemma

Several years ago, Felix Oberholzer-Gee, Joel Waldfogel and Matthew W. White, published a fascinating empirical article about the prisoner’s dilemma game embedded in the short-lived U.S. game show “Friend or Foe.”  Their core findings:

Using data from two seasons of a television game show, we provide evidence about how individuals implement conditionally cooperative preferences. We show that (1) contestants forgo large sums of money to be cooperative, (2) players cooperate at heightened levels when their opponents are predictably cooperative, and (3) players whose observable characteristics predict less cooperation fare worse (monetarily) over time, as opponents avoid cooperating with them. 

I always thought it might be nice to update the study to test to see whether different kinds of “cheap talk” were more or less effective in establishing cooperation.


Stand-Up Gamblers

Anglicare, a Tasmanian welfare agency, has submitted a proposal to the Australian government’s inquiry into problem gambling that would require pokies (the Aussie version of a slot machine) players to stand up while playing.  “We don’t want to punish people, but there are things we can do to assist problem gamblers to get a break in play,” said Chris Jones, the CEO of Anglicare. “If they want a break, they can sit elsewhere, but they don’t need to take a seat in front of a machine.”  


Chicken Wing Pricing Redux

About a year ago, I blogged about how odd the pattern of chicken wing prices was at my local Harold’s Chicken Shack.  Here was what they were charging for their wings:

2-wing meal $3.03

3-wing meal $4.50

4-wing meal $5.40

5-wing meal $5.95

6-wing meal $7.00

It is quite odd because they gave you a big discount on the fourth and fifth wings, but charged you a lot for the sixth wing.  There were many incongruities throughout the menu.

Since that time, Harold’s has invested in a fancy new menu up on the wall above the bulletproof glass that protects the workers from the customers.  I’ve also invested in a fancy new phone that actually takes pictures, unlike the phone I carried a year ago.  So this time, instead of having to write down all the prices, I just snapped a photo.


Affirmative Action: Changing Stereotypes

In a new article for Vox, Karla Hoff, a senior research economist at the World Bank, presents an argument for affirmative action.  Hoff argues that stereotypes can be self-fulfilling, and affirmative action represents an important tool for changing stereotypes and correcting inequality in the long-term:

For economists to ignore the factors that affect how we process information as part of the interpretation of economic change would be as wrong as to ignore the evolution of technology itself. Ideology shapes what we see and how well we perform. Ideology can give rise to “equilibrium fictions.” In our framework, changes in power, technology, and contacts with the outside world matter not just directly but because they can lead to changes in ideology. 

Hoff highlights a natural experiment in India that changed perceptions of female leadership over the course of ten years:


Let's Quit Together

If you’ve heard our podcast “The Upside of Quitting,” you’ll know that we think that strategic quitting has its place. A new paper looks at the peer effects of quitting. From the introduction:

Quitting is an important issue but its determinants have not received extensive research. Quitting lets an individual benefit from alternative opportunities but it usually also has costs, either monetary or moral, or both. There are also many reasons to believe that quitting is affected by social interactions and by observing others’ quitting decisions. This is particularly the case when thinking about quitting addictive behavior.

The researchers paid 104 undergrads to work for up to 75 minutes: a compulsory 15 minute followed by 60 minutes in which the participant could stop working at any time. Researchers Julie Rosaz, Robert Slonim, and Marie Claire Villeval found that if workers are not alone and allowed to interact with each other, they are more prone to quit at the same time:


When Assisted Suicide Goes From Theory To Practice

Time magazine has a poignant story (which is gated) and video (which is available) on Dr. Peter Goodwin, one of the advocates who helped get assisted suicide laws in place in Oregon and Washington.

Goodwin himself, at the time of the interview, suffered from a degenerative disease that was in the process of killing him and had to decide whether he wanted to take his own life. 

The interview is the last one he gave before his death.


Solar Subsidies

We are installing over 30 solar panels on our roof. The City of Austin currently offers a rebate up to $15,000 of 60 percent of the cost, and the federal government gives a 30 percent credit on the remainder.  With those subsidies the rate of return on our own investment is 17 percent, making this is a superb deal for us.

A neighbor in the Netherlands has 4 solar panels on his roof, a strangely small number.  I asked why.  His answer:  The Dutch government pays up to €1500 if you install a solar installation.  Each solar panel costs him €450, with a fixed cost of about €200 for the installation. Thus his average rate of return on his 4 panels is about 25 percent, a great investment. 


Why Don’t People Run Out Of Gas Anymore?

Blog reader Becky Roser sent an interesting email recently:

My father pointed out something interesting the other day – almost no one runs out of gas anymore. When gas was $0.60 a gallon, he maintains it happened all the time. Now that it’s $4.00, you almost never see it. I have vague memories of my father running out of gas when I was very young, but I’ve never done it. What changed?


The Inflation of Everything

Inflation is a term most often employed to describe prices.  A too-high inflation rate results in a devalued currency. But what about the inflation of other things in our world? The Economist reports on this trend:

Price inflation remains relatively subdued in the rich world, even though central banks are busily printing money. But other types of inflation are rampant. This “panflation” needs to be recognised for the plague it has become.

Take the grossly underreported problem of “size inflation”, where clothes of any particular labelled size have steadily expanded over time. Estimates by The Economist suggest that the average British size 14 pair of women’s trousers is now more than four inches wider at the waist than it was in the 1970s. In other words, today’s size 14 is really what used to be labelled a size 18; a size 10 is really a size 14. 


The Cities of America's Future

Writing in Foreign Policy, James Manyika, Jaana Remes, and Javier Orellana of the McKinsey Global Institute argue that cities in general and particularly smaller cities will power the new U.S. economy:

It is America’s large cities, and particularly the broad swath of middleweights, that will be the key to the U.S. recovery and a key contributor to global growth in the next 15 years. Large cities in the United States will contribute more to global growth than the large cities of all other developed countries combined. We expect the collective GDP of these large U.S. cities to rise by almost $5.7 trillion — generating more than 10 percent of global GDP growth — by 2025.


Acemoglu and Robinson Answer Your Questions

Last week, we solicited your questions for economist Daron Acemoglu and political scientist Jim Robinson, who just published a new book called Why Nations Fail: The Origins of Power, Prosperity, and Poverty and are now blogging on a variety of interesting development topics.

Their thoughtful responses below cover everything from robber barons to the artificial construction of African nations to whether the race of a country’s leaders determines its success.  A big thanks to Daron, Jim, and all our readers for another great Q&A.  

First, a note from Daron and Jim: “We thank everybody for these excellent questions and comments. We had to pick a few to be able to provide detailed answers.


Football Freakonomics: How Do Players' Body Clocks Affect Their Performance?

I have been lucky enough to visit the secret lair at the NFL’s headquarters where each year a crew of industrious people try to come up with an NFL schedule that pleases every team, player, TV network, fan, mayor, police department, religious official, and sports pundit in America.

This is of course impossible.

But they do try their best, and in today’s Times there’s a nice article by Judy Battista about how this year’s schedule was made by the NFL’s Howard Katz and his team.

After you look over the 2012-13 schedule, you might also want to take a look at the latest Football Freakonomics video we’ve done for the NFL Network. It considers the “body clock” factor on teams’ schedules:


Question of the Day: What Are Your Best — and Worst — Retail Experiences?

We’re working on a new Freakonomics Radio piece about what might best be called “retail etiquette.” It was inspired in part by this blog post, about how the quantity and quality of employees affects a company’s bottom line; and by this e-mail from a listener named Dawn Nordquist:

I’ve noticed that, at the beginning of the podcasts, a short banter between the two of you is included regarding thanking the listening audience.  Thanking the listening audience aside, what are your thoughts/observations on thanking in commercial transactions?  I have recently been struck by how often I am not thanked when purchasing something.


A Tourist in Cuba

Chris Turner explores Cuba’s current economic situation through the lens of a Canadian tourist:

Canada is probably the second most important economic ally Cuba has after Venezuela, which supplies more than 60 percent of the island’s oil. (China exports more stuff to Cuba, but the Chinese don’t show up daily by the multiple charter-flight-loads to hand out gifts and pour hundreds of millions of dollars into the Cuban economy.) Cuba is our largest trading partner in the whole of Central America and the Caribbean. We export a range of commodities to Cuba — sulphur, wheat, copper wire — and we are the second-largest buyer of Cuban exports, particularly sugar, nickel, fish, citrus fruits, and tobacco. That’s over $1 billion in total trade.


An Economics Lesson from Law and Order SVU

I watched a Law and Order SVU re-run last night, remarkably one that I hadn’t seen before. In the episode, an infant dies of measles contracted from another child whose parents refuse to vaccinate her.  (Infants are not vaccinated against measles.)  This is a classic case of whether concerns about potential negative externalities outweigh the desire to keep the government from dictating private behavior (vaccination). We already permit both approaches: we mandate vaccines for children to enter public school, and allow parents (as in this TV show) the choice of not vaccinating pre-schoolers.  


Economies of Scale in the Cocaine Industry

Brian Palmer of Slate reports that cocaine prices have dropped significantly in the past three decades due to economies of scale. As drug traffickers have become more organized (in processing, transport, and retail networks), the price of cocaine has plunged:

Since [the end of the 1980s], the price has dropped more slowly, down to approximately $140 for a gram of pure cocaine in 2007. (That’s almost 80 percent less than it cost in 1982.)


Tax Deductions or Tax Expenditures?

Chances are, you’re going to spend tonight finalizing your taxes, making sure that you ferret every last deduction. And probably pretty pleased to be getting these deductions; but when you dig in a bit deeper, you may not be so sure — at least that’s what Betsey Stevenson and I argue in our latest column.

In fact, tax breaks are no different from either government handouts, or federal mandates, whether evaluated in terms of your finances, the government’s finances, or incentives:

Instead of looking at all the breaks for mortgage interest, health care, retirement savings and so on as deductions, picture the government writing you a check for each item. This equivalence between tax deductions and government spending leads economists to call them “tax expenditures.” Reformers have hit on an even more pointed description: spending through the tax code.


Did Women and Children Really Go First?

Here’s a new study to keep in mind if you go to see the 3D rerelease of James Cameron’s Titanic. Economist Mikael Elinder and Oscar Erixson analyzed data from 18 maritime disasters from 1852 to 2011, and found that the old wisdom of “women and children first” isn’t quite what happens. From the abstract:

Our results provide a new picture of maritime disasters. Women have a distinct survival disadvantage compared to men. Captains and crew survive at a significantly higher rate than passengers. We also find that the captain has the power to enforce normative behavior, that the gender gap in survival rates has declined, that women have a larger disadvantage in British shipwrecks, and that there seems to be no association between duration of a disaster and the impact of social norms. Taken together, our findings show that behavior in life-and-death situation is best captured by the expression ‘Every man for himself.’


The Retirement Robbery

Since putting email back in its corral, I’ve turned some recovered time to reading actual books in print — the latest being Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers by Ellen E. Schultz. If a nation of sheep shall beget a government of wolves, then the lesson from Retirement Heist is that today the shears are sharpened with numbers.

Retirement Heist is, as one blurb describes, a “meticulously researched and gripping as a crime thriller.” Each chapter explains, with detailed research data and outrage-generating examples, yet another method corporations use to steal retirement benefits and mask the theft behind accounting shenanigans. It is one of the few books (since Cadillac Desert) to describe outrageous behavior so well that I threw it across the room.


Cheating for Charity

New research indicates that people may be more likely to lie when a charity benefits from their dishonesty. A group of researchers led by Alan Lewis at University of Bath investigated this in their paper “Drawing the line somewhere: An experimental study of moral compromise” (ungated here). From the paper’s abstract: 

In a study by Shalvi, Dana, Handgraaf, and De Dreu (2011) it was convincingly demonstrated that psychologically, the distinction between right and wrong is not discrete, rather it is a continuous distribution of relative ‘rightness’ and ‘wrongness’. Using the ‘die-under-the-cup’ paradigm participants over-reported high numbers on the roll of a die when there were financial incentives to do so and no chance of detection for lying. Participants generally did not maximise income, instead making moral compromises.


What Teachers Think About Girls' Math Skills

A disheartening new study by Catherine Riegle-Crumb and Melissa Humphries finds that teachers discount the math skills of white females, even when girls’ grades and test scores indicate a comparable level of skill.  Here’s the abstract:

This study explores whether gender stereotypes about math ability shape high school teachers’ assessments of the students with whom they interact daily, resulting in the presence of conditional bias. It builds on theories of intersectionality by exploring teachers’ perceptions of students in different gender and racial/ethnic subgroups and advances the literature on the salience of gender across contexts by considering variation across levels of math course-taking in the academic hierarchy. Analyses of nationally representative data from the Education Longitudinal Study of 2002 (ELS) reveal that disparities in teachers’ perceptions of ability that favored white males over minority students of both genders are explained away by student achievement in the form of test scores and grades.


A Bar With Changing Prices

Reader Thomas Barker writes in about a bar called D Street in Encinitas,CA. that prices its drinks based on demand:

I was recently at a bar for 25-cent wing night that I had not gone to in a while and saw something I thought you guys would be interested in. It was a drink price index ticker and they had them on TV’s all over the bar. It seemed that if a drink wasn’t ordered in a 15-minute time span the drink would go down a few cents. When we showed up my friend had his eye on an irish car bomb which was over $5 at the time, in the hour or so we were there it went down to his target range of about $3.75. As soon as his was ordered it jumped back up over $4.


Markets in the Air

I stumbled on this nifty business idea, Nanny in the Clouds, to create a market in the air for nannies. Think match.com, but for wanna-be-nannies and parents on airplanes.

A clear market failure: people on flights with kids want some help; other people on flights want to make some money taking care of kids. Social norms don’t really allow for instantaneous markets to appear (“hey, for $10 I’ll watch your kid for the next two hours so that you can take a nap” is unlikely to get many takers, I suspect). But prearranged, where the norm adheres to our expectations in the babysitter market, and we have a market helping make trades otherwise not made.  

Here is how it works: Sign up on the website, put in the flight you’re going to take, and see if any parents (nannies) signed up and are looking for a nanny (parent who wants a nanny) on the same flight. Negotiate your rates directly, and pay Nanny in the Clouds $10 if the match is made.


Wondering Why Nations Fail? Bring Your Questions for Daron Acemoglu and James Robinson

When it comes to economic ideas, Daron Acemoglu never thinks small. Widely acknowledged as one of the most insightful economists alive, Daron seems to have brilliant things to say about any and all things economic.

When you have that sort of gift, you might as well go after the biggest problems imaginable.  Thus his latest book, Why Nations Fail, written with Harvard political scientist James Robinson.

It is an awesome piece of work.  So full of ideas and wisdom, but still so easy to read.  I just love it.  Daron and Jim have agreed to take your questions about their new book, so please leave them in the comments section below.  To get you started, here’s the table of contents:


A Different Kind of Price War: D.C.'s Watergate Gas Station

There’s a gas station near the Watergate Hotel in Washington, D.C. that famously sells very expensive gas. Reporters flock there for the standard sky-high gas price story, and residents have long suspected that the station doesn’t actually want to sell gas. 

According to a Washington Post article, those residents have the right idea. Apparently, the pricing puzzle at this gas station boils down to a dispute between two gas moguls trying to oust each other.


Yes, I Just Paid $1,600 for a Set of Encyclopaedia Britannica

Encyclopaedia Britannica has declared that its latest print edition will be its last; from here on out, everything will be digital. Jim Romenesko rounds up coverage from the Times, the Chicago Tribune, and elsewhere. I am not much of an impulse buyer, but when I read that there were only 800 sets remaining — that’s what they say, at least — I jumped right in and paid nearly $1,600 to have a set shipped to my home in New York.