Search the Site

Freakonomics Blog

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.


Differential Pricing in Higher Education

The New York Times of March 30 reported that a California junior college planned to set two levels of tuition for some of its classes.  Many colleges set differential tuition based on in-state residence, level of class, or type of course.  But this plan would have explicitly set tuition differentially in order to fund additional offerings that would not otherwise be provided.  Essentially, the college was trying to move up the supply curve of courses, recognizing that demand far exceeds supply at the current (very low) tuition level.  The plan generated an outcry among people bothered by the pricing of education and was “indefinitely postpone[d].” But higher education requires resources; and if taxpayers refuse to pay taxes but insist on services, this seems like a perfectly reasonable way of meeting demand.  I expect that, as in so many areas, California will once again lead the nation, this time into an expansion of additional differential pricing of course offerings in higher education.


Which Way Does Your Blog Lean?

A new paper by Aaron Shaw and Yochai Benkler looks the differences between left- and right-wing political blogs during the summer of 2008.  From the abstract:

An examination of the top 155 political blogs reveals significant cross-ideological variations along several dimensions. Notably, the authors find evidence of an association between ideological affiliation and the technologies, institutions, and practices of participation. Blogs on the left adopt different, and more participatory, technical platforms, comprise significantly fewer sole-authored sites, include user blogs, maintain more fluid boundaries between secondary and primary content, include longer narrative and discussion posts, and (among the top half of the blogs in the sample) more often use blogs as platforms for mobilization.


A New Solution to Rising Tuition Costs

We’ve blogged in the past about the college tuition inflation. Now some students think they may have a solution.  FixUC, a student organization based at UC Riverside, wants the university to stop charging tuition and instead take 5 percent of students’ yearly salaries for the 20 years after graduation.  “Charging students when they don’t have money doesn’t make sense,” says Chris LoCascio, the group’s leader. “In 20 years, our plan would double the amount of money coming into the UC system.”


Abundance Authors Diamandis and Kotler Answer Your Questions

We recently solicited your questions for Peter Diamandis, founder and CEO of the X Prize Foundation, and journalist Steven Kotler. They are co-authors of the new book Abundance: The Future Is Better Than You Think. Below are their answers about the need for jobs (it’s not what you may suspect), the distribution of wealth, and the technological breakthrough that led the price of aluminum to plummet. Thanks to everyone for participating. 

Q. How did you come up with the book’s cover art? It’s very eye-catching — but not obviously related to the subject matter. –nobody.really

A. The cover is actually directly related to the book’s message. The book is “wrapped” in aluminum foil and the story of aluminum is what opens Abundance. In short, during the early 1800s aluminum was considered the most valuable metal in the world. This is why the capstone to the Washington Monument is made from aluminum, and also why Napoléon III himself threw a banquet for the king of Siam where the honored guests were given aluminum utensils, while the others had to make do with gold.


The Thinking Liberal?

It seems that the stereotype of the “thinking liberal” may have some truth.  New research (summarized in the BPS Digest) finds that “low-effort” thinking about a given issue is more likely to result in a conservative stance.  Here’s the abstract:

The authors test the hypothesis that low-effort thought promotes political conservatism. In Study 1, alcohol intoxication was measured among bar patrons; as blood alcohol level increased, so did political conservatism (controlling for sex, education, and political identification). In Study 2, participants under cognitive load reported more conservative attitudes than their no-load counterparts. In Study 3, time pressure increased participants’ endorsement of conservative terms. In Study 4, participants considering political terms in a cursory manner endorsed conservative terms more than those asked to cogitate; an indicator of effortful thought (recognition memory) partially mediated the relationship between processing effort and conservatism.


A New Kind of Toilet Paper

Our podcast “The Power of Poop” explored a variety of uses of human waste, including fecal bacteriotherapy (or a “transpoosion”), a poop-powered car, and homes heated with human waste. 

Now there’s another use. From Israel’s Ynetnews:

Dr. Refael Aharon of Applied CleanTech has developed a system capable of turning stinking sewage into a renewable and profitable source of energy. How?

About 99.9% of the drainage which comes out of our homes and flows through pipes is water. The remaining 10% are comprised of solid substances which can be used for the production of cellulose, which is used to produce paper.


Time for a "Brave New Math"?

Channeling some of the logic in our “Health of Nations” podcast, Peter Marber argues in World Policy Journal that it’s time for a “brave new math.” Marber takes issue with economists’ ongoing reliance on old measures of economic health — GDP, inflation, and unemployment:

Traditional measures point to an American economy that’s up even when Americans are feeling down. Across Europe and in Japan, there is also a sense of confusion over current economic directions—a universal sense that the numbers that have been our staples are increasingly meaningless to everyday people.

Newspapers, radio, and television routinely spout headlines about key statistics on GDP, inflation, and employment—astonishingly influential indicators computed in the United States by the government’s Bureau of Labor Statistics and in capitals around the world. Most seem to have little correlation with the realities on the street. 


Could It Be That U.S. Farm Policy Isn’t Making Us Fatter?

Leaders of the food reform movement insist on a wholesale remaking of U.S. agriculture, blaming government policy for industrial farming that supposedly adds food miles to our diets and inches to our waistlines. But their solution, a system of local “foodsheds,” wouldn’t save on greenhouse gas emissions and may well be worse for the environment, an argument advanced by economists here and elsewhere. Now it also seems that the federal farm program blamed for worsening obesity has actually kept us skinnier. 

That is the finding of agricultural economists Bradley Rickard, Abigail Okrent, and Julian Alston, who report (ungated) in Health Economics that “agricultural policies have discouraged food consumption and mitigated the effects of other factors that have encouraged obesity.”


Exploitation in College Sports: It's Not Just Football and Basketball

When we think of money and college sports, we tend to think only about basketball and football.  In fact, defenders of the excesses we see in those sports – with respect to salaries to coaches and university expenditures – argue that these sports are necessary to support all the other teams universities field. People often argue that outside of football and basketball, athletes in other sports don’t generate enough revenue to justify their scholarships. 

A recent paper by Leo Kahane (editor of the Journal of Sports Economics) challenges this line of thinking.  Kahane’s paper looks at college hockey, which will hold the Frozen Four this week in Tampa, Florida (really, Tampa).  This is college hockey’s championship, an event which doesn’t get quite the same attention as the NCAA Final Four for men and women. (Perhaps also because people don’t associate hockey with Tampa?)


How to Crowd-Fund an Economics Book

Eva Vivalt, an economist, is looking for financial backers to fund her book on Kickstarter. Along with a group of students from Georgetown and GWU, Vivalt is conducting meta-analyses of various aid programs. Here’s her project summary:

Have you ever wondered whether aid programs actually work? Wouldn’t it be useful to know how effective programs are in achieving their objectives (e.g. reducing poverty, improving health, improving education)? This book will review the quantitative evidence on the effectiveness of aid programs in a very thorough and rigorous way, using meta-analysis. After explaining this method and its merits, each of ten chapters will apply it to a different type of aid program. Throughout, the lessons that we can draw from these analyses will be discussed using plain English. 


Déjà Vu All Over Again

The same folks who stunned the world in 1972 with a prediction that economic growth would soon cease because of resource constraints are back again, predicting resource constraints will lead to global depression in 2030.  Growth did not end by 1990, and it will not end in 2030.  As before, prices will change to make economizing on increasingly scarce resources good business policy; and, as before, technology will change to lead businesses and consumers to substitute away from relatively scarce resources. 

The interesting question is why this same nonsense continues to get so much attention.  Is it that people forget the absurdities of the past arguments? Or do we have a substantial, never-satisfied demand for schadenfreude? Regardless, this stuff is just as bad economics as it was when The Limits of Growth first appeared.


Are High-Cost Hospitals Better Hospitals?

A new working paper (ungated here) by Joseph J. Doyle, Jr., John A. Graves, Jonathan Gruber, and Samuel Kleiner exploits the random assignment of ambulances to emergency care patients to determine whether higher-cost hospitals achieve better outcomes. From the abstract:

Ambulances are effectively randomly assigned to patients in the same area based on rotational dispatch mechanisms. Using Medicare data from 2002-2008, we show that ambulance company assignment importantly affects hospital choice for patients in the same zip code. Using data for New York state from 2000-2006 that matches exact patient addresses to hospital discharge records, we show that patients who live very near each other but on either side of ambulance-dispatch boundaries go to different types of hospitals. Both strategies show that higher-cost hospitals have significantly lower one-year mortality rates compared to lower-cost hospitals. We find that common indicators of hospital quality, such as indicators for “appropriate care” for heart attacks, are generally not associated with better patient outcomes. On the other hand, we find that measures of “leading edge” hospitals, such as teaching hospitals and hospitals that quickly adopt the latest technologies, are associated with better outcomes, but have little impact on the estimated mortality-hospital cost relationship. We also find that hospital procedure intensity is a key determinant of the mortality-cost relationship, suggesting that treatment intensity, and not differences in quality reflected in prices, drives much of our findings. The evidence also suggests that there are diminishing returns to hospital spending and treatment intensity.

The authors conclude that their results “should give policy makers some pause before assuming that spending can be easily cut without harming patient health, at least in the context of emergency care.”


Today Only: Buy Your Own Town

A small town in Wyoming is going up for auction today. Buford, Wyoming, has just one resident — Don Sammons — and he’s putting the town up for sale. From the official auction description:

The Buford, Wyoming, auction represents a unique opportunity to acquire an entire town, along with the Buford Trading post, an income-producing convenience and fuel store. Included in the auction are 10+/- acres of land, five buildings, United States Post Office P.O Box, liquor license, inventory, furnishing, tools, plow and 3 vehicles. There is also a Union Wireless cellular tower with lease, and parking area previously used by an overnight shipping company for night time trailer switches. 

The online auction starts at 2 p.m., E.S.T. The opening bid has been set at $100,000, with a required deposit of  $50,000.

(HT: Katherine Wells)


Who Lived in Your House in 1940?

Here’s a splendid diversion if you’re a data nerd, a history buff, or even just like good detective work: Tell the story of the family that lived in your house in 1940. 

A bit more background.  If you are in the United States, you probably remember participating in the Decennial Census in 2010.  These forms are kept confidential for 72 years—roughly an average American’s life span.  But this same rule means that today (actually, a couple of days ago), the 1940 Census results became public information.  The good folks at the National Archives have scanned all of these census forms, and put them all online. With a bit of work, you should be able to find your house—or if you are in a newer neighborhood, perhaps a neighboring house.


In Defense of Two-Handed Economists

My latest Bloomberg View column with Betsey Stevenson is now online:

Here’s something you don’t often hear an economist admit: We have very little idea where the economy will be next year.

Truth be told, our best guesses just aren’t very good. Government forecasts regularly go awry. Private-sector economists and cutting-edge macroeconomic models do even worse.

Our objective isn’t to beat up economists. Rather, we want to make the point that when we recognize our shortcomings, we’re forced to confront the enormous uncertainty that lies ahead.  And appropriate humility about the economy changes how we think about policy.


Calorie Logic

In a recent column in the New York Times, Jane Brody quotes a nutrition professor lamenting the fact that “restaurants have resisted her suggestion to serve half the amount of food for about a third the price.”  The professor might have thought more about economic behavior. (Even if she had suggested cutting the price to half for one-third the food, it still would not have been good economic analysis. The labor costs of preparing and serving half the food are probably nearly identical to those of serving the full amount.)  


How Is Keith Olbermann Like a Teenage Brazilian Soccer Stud?

There may be several appropriate answers to the question posed in the headline, but after reading Howard Kurtz‘s account of Olbermann’s split with Current TV in the Daily Beast, only one came to mind.

If you believe Olbermann’s camp — yes, that’s an “if” worth thinking about — the conflict came down to a simple issue: while Current was willing to pay its new anchorman $50 million, it wasn’t willing to spend the money to bring his show up to a professional standard:


Are America's Schools Failing … or Thriving?

An article published in the American Journalism Review last week by Paul Farhi argues that despite the popular narrative, America’s schools aren’t doing so badly. He writes:

Some schools are having a difficult time educating children – particularly children who are impoverished, speak a language other than English, move frequently or arrive at the school door neglected, abused or chronically ill. But many pieces of this complex mosaic are quite positive. First data point: American elementary and middle school students have improved their performance on the Trends in International Mathematics and Science Study every four years since the tests began in 1995; they are above the international average in all categories and within a few percentage points of the global leaders (something that few news reports mention). Second data point: The number of Americans with at least some college education has soared over the past 70 years, from 10 percent in 1940 to 56 percent today, even as the population has tripled and the nation has grown vastly more diverse. All told, America’s long-term achievements in education are nothing short of stunning.


Copying Is Not Theft

Last week, the New York Times ran an interesting and important op-ed by Stuart Green, a law professor, who argues that although illegal downloading of songs or videos from the Internet may be wrong, it’s not really “theft” in the sense that the term has been understood historically in the law. Nor is it theft according to the moral intuitions of ordinary people (as Green’s own research with psychologist Matthew Kugler shows), who draw a sharp distinction between online file sharing and ordinary theft, even when the economic value of the property taken is the same. 


A $640 Million Lottery Jackpot and a Lot of "Skewness"

The press and the streets in the U.S. are buzzing today about the world record $640 million lottery jackpot that will be drawn tonight at 11pm in Atlanta, GA. 

This excitement is what economists call “skewness.” The odds of winning have been quoted as 175 million to 1 — yet all of us are hoping to be that one. We explained the irresistible appeal of skewness (and the lottery) in our Freakonomics Radio podcast “The No-Lose Lottery.” In that episode, we also introduced a new financial product called Prize Linked Savings accounts — an idea that utilizes skewness for saving. We also explained why lottery commissioners would probably hate it.


The Consequences of Athletes in Bikinis

What do girls think when they see their favorite soccer start posing in Sports Illustrated in a bikini instead of a soccer jersey?  A new study, summarized by the BPS Research Digest, surveyed girls after they viewed five images of either “female athletes in a sporting context in their full sporting attire,” “female athletes in a sexualized context,” or “bikini-clad magazine models given random names.” Here’s the BPS Digest:

The key finding is that the girls and undergrads who viewed the sexualized athlete images tended to say they admired or were jealous of the athletes’ bodies, they commented on the athletes’ sexiness, and they evaluated their own bodies negatively. Some also said they found the images inappropriate. The participants who viewed the bikini-clad glamour models responded similarly, except they rarely commented on the inappropriateness of the images, as if they’d come to accept the portrayal of women in that way…


America: Training Ground for Dictators?

Foreign Policy examines America’s role as a training ground for those who would plot coups around the world.  For example, Yahya Jammeh, current president of the Gambia, reportedly attended a military police training course in the U.S. prior to his 1994 bloodless coup:

Jammeh promised that his would be a “coup with a difference” and that he would stand down “as soon as we have set things right.” Eighteen years later, he is still in power.


Canada Kills Its Penny; Can We Please Be Next?

If you’ve been reading this blog for a while, you may know that I am devoutly anti-penny. This includes a rant on 60 Minutes in which I argue that the penny should be killed off, as inflation has rendered it worse than worthless. 

The U.S. government remains unpersuaded, but our good neighbors to the north are about to take the leap (following the lead, it should be said, of several other countries).


Will the NBA Allow Ads on Jerseys?

One of our earliest Freakonomics Radio podcasts wondered whether the NFL might someday sell ads on players’ game-day uniforms (there is already sponsorship on practice jerseys). After all, it’s common practice in soccer, even in the U.S.

As Bloomberg Businessweek reports, the NBA might beat the NFL to the punch:

What’s not so certain is what a jersey deal is really worth. Front Row Marketing Services, whose parent company, Comcast-Spectacor, runs 11 regional sports networks and owned the Philadelphia 76ers until last fall, figures the annual cost to companies to place their logos on uniforms would range from $1.2 million to $7.5 million per year, depending mainly on the market where the team plays.

A study by Horizon Media last year put the annual value of the television exposure of the space across an NBA jersey’s chest in a range from $4.1 million for the L.A. Lakers to $300,000 for the Minnesota Timberwolves. [David] Abruytin [sic], whose IMG arranged the partnership deal between the NBA and its official automotive partner Kia Motors, says those numbers are probably low. He estimates the Lakers could fetch $10 million to $15 million per year.


Early Retirement: Bad For Your Health?

Retirement ages have been trending up, as governments struggle to deal with escalating financial burdens. That might be sad news for would-be retirees — but maybe they’ll change their mind if they look at this new research from Andreas Kuhn, Jean-Philippe Wuellrich, and Josef Zweimüller. They examine the effects of early retirement on a sample of Austrian blue-collar workers:

We find that a reduction in the retirement age causes a significant increase in the risk of premature death – defined as death before age 67 – for males but not for females. The effect for males is not only statistically significant but also quantitatively important. According to our estimates, one additional year of early retirement causes an increase in the risk of premature death of 2.4 percentage points (a relative increase of about 13.4%; or 1.8 months in terms of years of life lost). In line with expectations, we find that IV estimates are considerably smaller than the simple OLS estimates, both for men and for women. This is consistent with negative health selection into retirement and underlines the importance of a proper identification strategy when estimating the causal impact of early retirement on mortality. Our results also indicate that the causal effect of early retirement on mortality for females is zero, suggesting that the negative association between retirement age and mortality in the raw data is entirely due to negative health selection. There are several reasons why male but not female blue-collar workers suffer from higher mortality (eg women may be more health-conscious and adopt less unhealthy behaviours than men; they may be more active after permanently exiting the labour market due to their higher involvement in household activities).