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Freakonomics Blog

Is the Future Really "Better Than You Think"? Ask the Authors of Abundance

On an early episode of Freakonomics Radio, we interviewed Peter Diamandis, founder and CEO of the X Prize Foundation. He was a great (and inspirational) guest. Now he has written a book with journalist Steven Kotler called Abundance: The Future Is Better Than You Think. From the flap copy:

Since the dawn of humanity, a privileged few have lived in stark contrast to the hardscrabble majority. Conventional wisdom says this gap cannot be closed. But it is closing — fast. The authors document how four forces — exponential technologies, the DIY innovator, the Technophilanthropist, and the Rising Billion — are conspiring to solve our biggest problems.


Charts: Name That Rap Song

Like most economists, I spend much of my day analyzing data, distilling it into the perfect charts. And I also like to listen to music, while doing this.  The brilliant Elisabeth Fosslien has found a way to combine the two.  Yes: Rap Music in Charts. Brilliant! Here’s a chance to test your pop culture knowledge and chart reading skills. (Answers at the bottom.)


You Don’t Need to Be Bad to be Good in the NBA

The Portland Trail Blazers – a team that won 48 games in 2010-11 and was only three games below 0.500 this season – made two puzzling trades a couple of weeks ago.  Gerald Wallace was sent to the New Jersey Nets for two injured players and a first round pick in the 2012 draft.  And Marcus Camby was sent to the Houston Rockets for a second round pick and two players who had only played 158 minutes this year.

Camby and Wallace combined to produce more than 10 wins for the Blazers this season, and at the time of the trade their level of productivity led the team.  Given what the Blazers received back, it seems likely the Blazers just got worse.


Alcohol as Muse

New research indicates that alcohol, which many a moody poet has indulged in, may actually increase creativity. Psychologists Andrew F. Jarosz, Gregory J.H. Colflesh, and Jennifer Wiley recruited 40 males, got half of them a little tipsy on vodka, and then subjected them to the “Remote Associates Test,” which tests insightful thinking.  Their results, as summarized by the BPS Research Digest, were surprisingly good:


How Many Workers Is the Right Number for a Retailer? Stories from Trader Joe's, Michaels, and Whole Foods

A reader named Quinton White points us to an interesting article by Jim Surowiecki in The New Yorker about how retails firms are succeeding by hiring more workers and spending more money training and rewarding them. Surowiecki writes:

A recent Harvard Business Review study by Zeynep Ton, an M.I.T. professor, looked at four low-price retailers: Costco, Trader Joe’s, the convenience-store chain QuikTrip, and a Spanish supermarket chain called Mercadona. These companies have much higher labor costs than their competitors. They pay their employees more; they have more full-time workers and more salespeople on the floor; and they invest more in training them. (At QuikTrip, even part-time employees get forty hours of training.) Not surprisingly, these stores are better places to work. What’s more surprising is that they are more profitable than most of their competitors and have more sales per employee and per square foot.


The Deadweight Loss of David Foster Wallace's Tax

In his posthumous novel The Pale King, David Foster Wallace describes a fictional progressive sales tax in Illinois that imposes higher rates the larger the amount purchased.  Sounds good and fair — tax those who make larger purchases. Not surprisingly, it generates a substantial deadweight loss: People buy a few things, take them to their cars, then come back and buy more.  Auto dealers sell parts separately to reduce the average tax rate on consumers. If this sales tax was real, the deadweight loss would be borne especially heavily by low-wage people.  Those who feel pinched for cash but whose time is less valuable would be more likely to engage in tax-avoiding activities like repeated small purchases.  (HT to TW)


The X-Prize Comes to the Nursing Home

We once put out a podcast called “Reading, Rockets, and ‘Rithmetic,” about how competition and prizes help drive innovation. Among the examples were the federal education program Race to the Top; Google’s “20 percent time” policy; and the X-Prize Foundation, whose founder and chairman, Peter Diamandis, remains one of my favorite radio guests ever, full of vigor and wisdom and optimism. (We’ll soon be featuring a Q&A on this blog with Diamandis and Steven Kotler, coauthors of the new book Abundance: The Future Is Better Than You Think.)

I’m happy to report that I am hardly the only person to be inspired by Diamandis. We recently got the following e-mail from David Sedgwick, an executive with a nursing-home company called the Ensign Group.


False Positive Science: Why We Can't Predict the Future

This is a guest post from , a professor of environmental studies at the University of Colorado at Boulder. Check out Pielke‘s blogs for more on the perils of predicting and “false positive science.”

Sports provide a powerful laboratory for social science research. In fact, they can often be a better place for research than real laboratories because sports provide a controlled setting in which people make frequent, real decisions, allowing for the collection of copious amounts of data. For instance, last summer, Daniel Hamermesh and colleagues used a database of more than 3.5 million pitches thrown in major league baseball games from 2004-2008 to identify biases in umpire, batter, and pitcher decision making. Similarly, Devin Pope and Maurice Schweitzer from the Wharton School used a dataset of 2.5 million putts by PGA golfers over five years to demonstrate loss aversion – golfers made more of the same-length putts when putting for par or worse than for birdie or better.  Such studies tell us something about how we behave and make decisions in settings outside of sports as well.


Greece's New Currency

Greece is on its second bailout, with the possibility of a third bailout looming. The Guardian reports on a man in Greece who received groceries and tax services this month without spending a euro:

In return for his expert labour [as an electrician], Mavridis received a number of Local Alternative Units (known as tems in Greek) in his online network account. In return for the eggs, olive oil, tax advice and the rest, he transferred tems into other people’s accounts.


Who Owns Culture?

The question of who owns culture is a big one, especially when products associated with certain cultures or nations turn out to be very popular in the marketplace. Take espresso. In a famous scene from The Sopranos, Paulie Walnuts rants inside a Starbucks-like café as he watches the cash register ring with espresso orders: 

Paulie: The fuckin’ Italian people. How did we miss out on this? 

Pussy: What?

Paulie: Fuckin’ espresso, cappuccino. We invented this shit and all these other cocksuckers are getting’ rich off it. 

Pussy: Yeah, isn’t it amazing? 

Paulie: And it’s not just the money. It’s a pride thing. All our food: pizza, calzone, buffalo mozzarell’, olive oil. These fucks had nothing. They ate pootsie before we gave them the gift of our cuisine. But this, this is the worst. This espresso shit.

Pussy: Take it easy.  


More Demand, More Paintings

A sign on the wall at an exhibit of René Magritte paintings noted, “Magritte repeatedly painted variants of his subjects, mostly to satisfy demand in the art market.”  Even artists are selling their products, just as businesses do.  When the demand for their product increases, it calls forth a supply.  We also see this in popular literature, where a highly successful mystery writer winds up in a rut writing minor variations of an earlier hit.  Sadly for us economists, this doesn’t seem as easy to do—the premium is on originality and novelty; if today’s demand called forth minor repetitions in what we supply, we soon wouldn’t get the stuff published very well!


Freakonomics: What Went Right? Responding to Wrong-Headed Attacks

Warning: what follows is a horribly long, inside-baseball post that most people will likely have little interest in reading, and which I had little interest in writing. But it did need to be written. Apologies for the length and the indulgence; we will soon return to our regular programming.

*     *     * 

I. Going on the attack is generally more fun, profitable, and attention-getting than playing defense. Politicians know this; athletes know it; even academics know it. Or perhaps I should say that especially academics know it?

Given the nature of the Freakonomics work that Steve Levitt and I do, we get our fair share of critiques. Some are ideological or political; others are emotional.

We generally look over such critiques to see if they contain worthwhile feedback, or point to an error in need of correction. But for the most part, we tend to not reply to critiques. It seems only fair to let critics have their say (as writers, we’ve already had ours). Furthermore, spending one’s time responding to wayward attacks is the kind of chore you’d rather skip in order to get on with your work.

But occasionally an attack is so spectacularly ridiculous, so riddled with errors and mangled logic, that it’s worth addressing.

The following essay responds to two such attacks. The first one was relatively minor, a recent blog post written by a Yale professor. The second was more substantial, an essay by a pair of statisticians in American Scientist. Feel free to skip ahead to that one (at section III below), or buckle up for the whole bumpy ride.


Hypotheses for an Impact Study on a For-Profit Microlender

Through Innovations for Poverty Action, I am co-Principal Investigator on a randomized trial of the impact of Compartamos, a for-profit microlender in Mexico. Compartamos was the first microcredit organization to go public, and at IPO time had a market capitalization of US$1.5 billion.  Needless to say, that created a lot of buzz.  Several years later, we will soon be finishing a randomized trial to measure the impact on communities in the Nogales area in northern Mexico.We will be posting our hypothesis before we do the analysis, and encourage readers to do the same, for three reasons:


Are Bilingual Immigrants Healthier?

A new study by Ariela Schachter, Rachel Tolbert Kimbro, and Bridget K. Gorman found that strong English skills and native language skills are associated with better health for immigrants. Using language as an indicator of adaptiveness to a new country, the researchers set out to investigate the “healthy immigrant effect”:

The “healthy immigrant effect”—whereby immigrants initially appear healthier than the native-born, although with time in the U.S. their health status declines—continues to puzzle scholars. Acculturation, or the process by which immigrants adapt to a host country, is a primary explanation of this phenomenon.


End of Illness Author David Agus Answers Your Questions

We recently solicited your questions for David Agus, the oncologist author of The End of Illness. Now he’s back with answers, including: the numbers on taking aspirin, how to get the most from a doctor visit, and the top 10 actions to reduce your cancer risk. I can guarantee you that his answers will enlighten and thrill some people and enrage and confound others. Thanks to everyone for their participation, and especially to Agus for the thorough answers. 

Q. I’m a 4th year medical student, and I watched your interview on The Daily Show when it first aired and really took issue with the way you presented many of these things. It seemed that you simplified your “solutions” to the point that it may actually be dangerous for people to listen to what you suggested. For example, you implied that everyone should be taking aspirin.


Who Will Win the Most Medals in the 2012 Summer Olympics?

Dan Johnson, an economist at Colorado College, has been predicting Olympic medal counts for years with a model that uses metrics like population count, income per capita, and home-country advantage. In the past six Olympics, his model has a correlation of 93 percent between predictions and actual medal counts, and 85 percent for gold medals.

For the Games in London this summer, Johnson predicts that the U.S. Will be the top medal winner, followed by China, Russia, then Britain — the same order they finished in the 2008 Beijing Olympics.


Would Paying College Players Really Destroy Competitive Balance?

March Madness is in the air. Over the next few weeks the nation will be focused on the fortunes of 68 college teams.  And all this focus on a supposedly amateur sport generates tremendous amounts of money.  For example, in 2010 CBS and Turner Broadcasting agree to pay the NCAA $10.8 billion to broadcast these games for fourteen seasons. This money represents more than 90% of the NCAA’s revenues.

Since colleges and universities tend to be non-profit, who gets all this money?  One person who seems to benefit is John Calipari, head basketball coach at the University of Kentucky.  Last summer, Kentucky extended Calipari’s contract, with a new deal that will pay him $36.5 million across the next eight seasons. Contracts like this – which seem comparable to what an NBA coach might command — are somewhat surprising. As economist Andrew Zimbalist has observed, the revenues of college sports – although apparently immense – pale in comparison to what we see in professional sports. And that leads one to wonder how a coach in college can command such a salary.


Are Fake Resumes Ethical for Academic Research?

“Audit studies” have been popular in labor economics research for 10 years.  The researcher sends resumés of artificial job applicants in response to job openings. Typically there is a crucial difference in some characteristic of the person that indicates a particular racial/gender/ethnic or other group to which one person within a pair of resumés belongs while the other does not.  The differential response of employers to the difference in the characteristic implied by the resumés is taken as a measure of discrimination in hiring.

Is this ethical? 


The Rise of the Prize

This is a guest post by Vijay V. Vaitheeswaran, who is the China Business Editor of The Economist and author of the just-published book Need, Speed, and Greed: How the New Rules of Innovation Can Transform Businesses, Propel Nations to Greatness, and Tame the World’s Most Wicked Problems.

The Rise of the Prize
By Vijay V. Vaitheeswaran

Could the incentive prize be the most powerful and yet most underutilized tool we have to tame the wicked problems of the twenty-first century?

Prizes in themselves are nothing new, of course. The Longitude Prize — a purse of up to £20,000 — was offered by the British Parliament in 1714 for the discovery of a practical means for ships to determine their longitude. This was an enormous problem on the high seas, as the inability to work out longitude on the sailboats of the age often led to costly and deadly errors in navigation. The greatest minds of the British scientific academy wrestled with this problem, but could not crack it.


White House Economist Alan Krueger Answers Your Questions

We recently solicited your questions for Alan Krueger, chairman of the President’s Council of Economic Advisers. Below are Krueger’s answers, in which he talks about the Bush tax cuts, the American Jobs Act, and why NFL coaches should go for it on fourth down. Thanks to everyone for participating.

Q. The recovery from the recent recession has been great for corporate profits, but not so great for employment. I think that this is a natural result of the fact that when demand is insufficient, corporations focus on improving productivity rather than on producing more goods and services.

What can be done to increase employment? –Adam


How the NBA Takes Money From People Who Don’t Like Basketball

The Sacramento Kings will continue to exist. This week, the City Council approved a plan to finance a new home for the Kings in Sacramento. The price tag, though, is pretty steep.  The arena will cost $391 million, and $255.5 million will be coming from the city of Sacramento.   

Opponents of this plan – and there were just two on the nine-member Council – noted that sports arenas don’t provide much economic benefit. Furthermore, they questioned why public money should be given to a private business. 

As Councilwoman Sandy Sheedy – who voted no – observed: “This city is on the verge of insolvency. As far as I know, we still technically qualify for bankruptcy under federal law.”

Proponents of this plan, though, argued that this plan will create jobs and economic benefits.  And it was this argument that apparently persuaded the majority.

So we have two perspectives and one question: Do sports generate jobs and economic growth? 


Opera Toilet

Sometimes what might not seem like complements become such because of location. I came across a restroom in a Vienna underground station that had the sign “Opera Toilet” above the entrance. Clearly, the City must believe that natural bodily functions and listening to arias are complements, at least for customers in this most operatic of cities, the residence of Beethoven, Mozart and many Strausses. Presumably in Nashville now or soon, one will find the “Country Music Toilet.” What other such complements exist?


Women, Thinking About Relocating?

In honor of International Women’s Day, Foreign Policy has a roundup of five surprisingly good places to be a woman.  The Philippines, Spain, South Africa/Lesotho, Latvia, and Cuba all make their list. While it may be hard to believe that women fare well in the very same country that hosted a “Blonde Weekend” back in 2009, Latvian women are excelling . . .


What’s Hanging in Your Cubicle?

Last week, in honor of our “Dilbert Index” podcast about workplace morale, we asked readers to submit photos of their office spaces. Here’s what’s inside some of your cubicles: [slideshow auto=”on” thumbs=”on”]