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Freakonomics Blog

“Gayborhoods” and Heat Waves at This Year’s AEA Meetings

Jon Hilsenrath of The Wall Street Journal reports on the most offbeat papers of this year’s American Economic Association meetings.   One of our favorites — in light of our recent “Are Gay Men Really Rich?” podcast — is this one:

FIND A NEW “GAYBORHOOD” FOR BETTER HOUSING RETURNS

Janice Madden of the University of Pennsylvania and Matthew Ruther of the University of Colorado studied census tract data and the American Community Survey to examine the locations of gay male and lesbian partnerships in 38 large U.S. cities. They found that census tracts that start the decade with more gay men experienced significantly greater growth in household incomes and, in the Northeast and West, also greater population growth over the next decade than those census tracts with fewer gay men. Census tracts with more lesbians at the start of the decade saw no difference in population or income growth.

Another favorite examines the long-term outcomes of children conceived during heat waves.


The Coolest Child Care Program You’ve Never Heard Of

During World War II, U.S. women entered the workforce in record numbers — factories full of “Rosie the Riveters” producing planes and munitions for the war effort.  In response, Congress passed the Lanham Act of 1940, which administered and subsidized a large childcare system in 635 communities in the whole country except New Mexico from 1943-1946.  A new paper by Chris Herbst examines the effects of the Lanham Act; his research is particularly relevant in light of President Barack Obama‘s push for universal preschool.  “What’s intriguing about the Lanham Act is that it’s the U.S.’s first, and only, laboratory within which to assess universal child care,” writes Herbst in an email about the paper. “It may just be the coolest child care program you’ve never heard of.”  Here’s the abstract:

This paper provides a comprehensive analysis of the Lanham Act of 1940, a heavily-subsidized and universal child care program that was administered throughout the U.S. during World War II. I begin by estimating the impact of the Lanham Act on maternal employment using 1940 and 1950 Census data in a difference-in-difference-in-differences framework. The evidence suggests that mothers’ paid work increased substantially following the introduction of the child care program.


Air Force General Gone Wild

Our podcast “Government Employees Gone Wild” was about The Encyclopedia of Ethical Failure, a guide published by the U.S. Department of Defense that details the true stories of big screw-ups by government employees. We are guessing that this story of Air Force general Michael Carey‘s trip to Moscow will make it into next year’s edition. From The Washington Post:

The Air Force has just released its official report on its investigation into Maj. Gen. Michael Carey’s July trip to Moscow, which got him fired in October. Carey oversaw three wings of nuclear-armed intercontinental ballistic missiles, with 450 ICBMs in all. At the time, the dismissal was reportedly over personal misconduct during the official trip. But “misconduct,” it turns out, does not even come close.


How to Control Runaway Entitlement Spending

At the Becker-Posner blog, Richard Posner offers some ideas for amending the entitlements programs that are “threatening the long-term solvency of the federal government”:

Which leads me to the first of the only two practical ideas that occur to me for slowing the increase in entitlement expenditures relative to the size of the economy: a shift in emphasis in medical research from length of life to ability to live independently. Independent living means living without home care (whether by relatives, thus taking time from them that they could use more productively in other activities, including paid employment, or by paid care—paid by the government in many cases) and being able—and wanting—to work. Independent living can be fostered by focusing medical research on problems of vision, musculoskeletal problems (which impair mobility), obesity, and dementia, in preference to research on curing and preventing cancer, heart disease, and stroke. 


Charity "Shoppers" vs. Charity Investors

I like Indian food more than sushi. And I like sushi more than Italian food. When going out for dinner and choosing which to eat, does this mean I always choose Indian? Of course not. I’d tire of Indian food.

On my savings account, I like earning 3% interest more than 2%. And I like earning 2% more than 1%. Suppose three banks offer accounts identical except for the interest rate: would I always choose the 3% account? Or might I say, “Hey, 3% is boring, I think I’ll try 2%?” Of course not. I’d stick with the bigger payoff.

Yet when it comes to charitable giving, most people spread their money around. Why is this? And is it an effective strategy for helping people, or just a way to make ourselves feel good?  

I look at this three ways:

First, we might think that even the best charity can absorb and wisely spend only so much money — that the impact of our next dollar is lower than the impact of the first. So we give to several worthy causes. And this may be the prudent approach for huge givers like Bill & Melinda Gates, Mark Zuckerberg, and Warren Buffett — but most of us don’t have to worry about that.


Religion, Labor Supply, and Happiness

SuperFreakonomics looked at research by Douglas Almond and Bhashkar Mazumder on the birth effects of prenatal exposure to Ramadan. A new paper by Filipe Campante and David Yanagizawa-Drott looks at the economic effects of religious practices, a particularly relevant question this month:

We study the economic effects of religious practices in the context of the observance of Ramadan fasting, one of the central tenets of Islam. To establish causality, we exploit variation in the length of the fasting period due to the rotating Islamic calendar. We report two key, quantitatively meaningful results: 1) longer Ramadan  fasting has a negative effect on output growth in Muslim countries, and 2) it increases subjective well-being among Muslims.


College Campus Beer Pricing

There are three convenience stores in the student area west of the University of Texas campus.  Store A sells the most beer, and barely looks at student IDs; but it also charges the highest price of the three.  Store B is a bit stricter on fake IDs, refuses some underage students, and charges a lower price.  Store C has the best prices, but its clerks inspect IDs thoroughly. My student reports that nobody makes it through with a fake ID.  This near-campus oligopoly defines a new pricing strategy: lenience on IDs that is unsurprisingly related to the stores’ pricing policies. I wonder about differences in the characteristics of the patrons of the different stores.

(HT: JZ)


What Do You Want to Know About Bitcoin? And Do You Really Care?

We get a lot of e-mails with requests/suggestions for podcast and writing topics. These days, the most popular request by far is for  Bitcoin. I am still not sure we’ll do it but I’m thinking about it. If so, what do you want to know? Please be specific. Also: do you really care? It strikes me that, at the moment, Bitcoin is one of those things that a small number of people care about hugely but that most people couldn’t care less. (Freakonomics readers aren’t, of course, “most people.”) The rapid spikes and drops in value of course invites lots of news coverage but that is among the least-interesting aspects of a cryptocurrency, isn’t it?


The Non-Profit Journalism Keeps Coming

As the economics of high-end journalism continue to worsen, it is interesting — and, if you’re a fan of journalism, encouraging — to see how much non-profit journalism is being created. NPR is of course the most famous model but there’s also ProPublica, Pierre Omidyar‘s First Look Media, and a lot of other foundation- and philanthropist-funded projects.

Add to this list The Marshall Project, a “not-for-profit, non-partisan news organization dedicated to covering America’s criminal justice system.” It’s being launched by Neil Barsky, a former journalist, hedge-funder, and most recently film director. (He’s also a friend of mine, but don’t hold that against him.)

Here’s the rest of the Marshall Project’s mission statement:


More Predictions That Didn't Come True

Thank you, Politico (the Magazine), for taking a look back at various predictions for 2013 to see how they worked out.

In our “Folly of Prediction” podcast, we discussed how the incentives to predict are skewed. Big, bold predictions that turn out to be true are handsomely rewarded; but predictions that turn out to be false are usually forgotten. With the cost of being wrong so low, the incentives to predict are high.

In his Politico piece called “Crystal Balderdash,” Blake Hounshell doesn’t let us forget the bad predictions. A few examples:


Child Trafficking and the Internet

Chatting with a seatmate on a flight, I learned she was attending a conference, hosted by Shared Hope International, on domestic trafficking in minor children. Naively and optimistically, I asked if this problem has been diminishing.  No, quite the contrary.  Why?  The reason appears to be economic, having to do with technological change and technology transfer.  With the internet, it is much easier to engage in transactions — nothing needs to be done face-to-face, thus reducing the risk to traffickers. Also, organized crime is getting involved since the trade is so profitable, as at-risk children can be traded repeatedly (unlike an ounce of crack cocaine). With some modifications, an established drug network can be used as a child-sex network.  Disgusting, horrible, and a negative side-effect of technological progress.  (HT: JM)


Preschool for Everyone?

Earlier this year, President Obama announced a plan to provide public pre-K education to low- and middle-income children, a proposal that has provoked debate about the actual demonstrated benefits of early education.  As Freakonomics guest contributors John List and Uri Gneezy wrote here a few months ago, there’s a frustrating lack of information on how effective these kinds of programs are — although List and Gneezy are trying to rectify that gap with their Chicago Heights research project.

A new working paper (abstract; PDF) by Elizabeth U. Cascio and Diane Whitmore Schanzenbach attempts to shed some light on the question by analyzing the effects of universal public preschool programs in Georgia and Oklahoma, two states that have already implemented such programs.  Their findings are interesting: the programs seem to improve some outcomes for lower-income kids, but also result in higher-income families shifting kids from private to public preschool.  Here’s the abstract:


Why Family-Firm CEOs Underperform Professional CEOs

The topic of family businesses has long been of interest around here. Stephen Dubner wrote about it a few months ago, and our “Church of Scionology” podcast looked at the research on family firms.  A new working paper (abstract; PDF) from Oriana Bandiera, Andrea Prat, and Raffaella Sadun explores how the behavior of family firm CEOs differs from that of professional CEOs, and why the former seem to perform worse. If you had to sum it up in one word: sloth. From the abstract:


Is Academia Like a Drug Gang?

In Freakonomics, Dubner and Levitt wrote about how working for a drug gang is like working for McDonald’s. On LSE’s Impact of Social Sciences blog, Alexandre Afonso writes about how the academic labor market also resembles a drug gang:

Academic systems rely on the existence of a supply of “outsiders” ready to forgo wages and employment security in exchange for the prospect of uncertain security, prestige, freedom and reasonably high salaries that tenured positions entail….The academic job market is structured in many respects like a drug gang, with an expanding mass of outsiders and a shrinking core  of insiders. Even if the probability that you might get shot in academia is relatively small (unless you mark student papers very harshly), one can observe similar dynamics. 


U.S. Math Education Still in the Doldrums

Every three years, the OECD, in the PISA assessment, studies 15-year-olds around the world to measure performance in reading, mathematics, and science. The results of the 2012 PISA assessment, which had a particular focus on mathematics, just came out and the United States does not fare well: “Among the 34 OECD countries, the United States performed below average in mathematics in 2012 and is ranked 26th.” I worry not so much about the rank, but about the low absolute level of proficiency to get this rank.

The U.S. students’ particular strengths and weaknesses are even more distressing:

Students in the United States have particular strengths in cognitively less-demanding mathematical skills and abilities, such as extracting single values from diagrams or handling well-structured formulae. They have particular weaknesses in items with higher cognitive demands, such as taking real-world situations, translating them into mathematical terms, and interpreting mathematical aspects in real-world problems.


Cheaper Plumbing on Fridays

We received a postcard from our plumber offering service on Fridays with no service charge, explaining that they can offer this because the plumber will be in our area of town, thus saving drive time and fuel costs. We are better off, saving the $59 on the service charge; and the plumbing company acknowledges that the savings make it better off too. It’s not often you see a company that understands Pareto improvements this well. I invite other examples of commercial offers where the advertiser makes the mutual gains as clear as this.


Better Matching in Online Dating

Researchers led by Kang Zhao at the University of Iowa have devised a new matching algorithm for online dating sites. Business Insider summarizes the model’s advantages:

In the online dating context, an algorithm can get a good idea of my taste in partners by doing a similar comparison of me to other male users. Another male user of the site will have a similar taste in women to me if we are messaging the same women.

However, while this gives the algorithm a good idea of who I like, it leaves out the important factor of who likes me — my attractiveness to the female users of the site, measured by who is sending me messages.


A Baby Name That Really Tells You Something About the Parents

The underlying point of everything we’ve ever written about baby names is that the name is essentially the parents’ signal to the world of what they think of their kid — whether it’s a signal of tradition, religion, aspiration, affiliation, or whatnot.

Here is a very pure example of that principle: a baby named Colt .45 Stratemeyer. It’s via Jim Romenesko, from a birth announcement in the Tillamook (Oregon) Headlight-Herald:

Colt .45 Stratemeyer was born Nov. 26, 2013 at Tillamook Regional Medical Center. He weighed seven pounds, two ounces. He joins his older brother, Hunter Allen Stratemeyer, 3. Baby Colt’s parents are Joshua and Rebekah Stratemeyer of Toledo.

I assume the announcement is legitimate, though I can’t say for certain. I am guessing there are fiction writers out there who could write a short story or maybe even a novel with no more inspiration than this birth announcement.


Why Warren Buffett Rocks

A new NBER working paper (abstract; PDF) analyzes Warren Buffett‘s Berkshire Hathaway and the drivers of its stock market success. Beyond benefiting from Buffett’s ability to buy low and sell high, Berkshire has also been able to borrow cheaply: 

Berkshire Hathaway has realized a Sharpe ratio of 0.76, higher than any other stock or mutual fund with a history of more than 30 years, and Berkshire has a significant alpha to traditional risk factors. However, we find that the alpha becomes insignificant when controlling for exposures to Betting-Against-Beta and Quality-Minus-Junk factors. Further, we estimate that Buffett’s leverage is about 1.6-to-1 on average. Buffett’s returns appear to be neither luck nor magic, but, rather, reward for the use of leverage combined with a focus on cheap, safe, quality stocks. Decomposing Berkshires’ portfolio into ownership in publicly traded stocks versus wholly-owned private companies, we find that the former performs the best, suggesting that Buffett’s returns are more due to stock selection than to his effect on management. These results have broad implications for market efficiency and the implementability of academic factors.


Question of the Day: What Do You Want to Know About Interesting People?

We are setting up a new series of interviews for Freakonomics Radio in which we’ll identify interesting/accomplished/prominent people and ask them a series of Freakonomics-ish questions, ranging from their professional accomplishments to personal quirks. I am eager to hear your suggestions on both:

1) The people you’d want to hear from; and

2) What kind of questions you’d like to hear them asked.

No idea is too big/small, outlandish/traditional, etc.

Thanks in advance.


CSI: Art Edition

Forensic scientist Nicholas Petraco, who analyzed ashes in our podcast “The Troubled Cremation of Stevie the Cat,” is currently embroiled in a debate about a Jackson Pollock painting. From The New York Times:

On one side stands Francis V. O’Connor, a stately Old World-style connoisseur with a Vandyke beard and curled mustache, who believes erudition and a practiced eye are essential to judging authenticity. Mr. O’Connor, a co-editor of the definitive Pollock catalog and a member of the now-disbanded Pollock-Krasner Foundation authentication committee, said “Red, Black and Silver” does not look like a Pollock.

“I don’t think there’s a Pollock expert in world that would look at that painting and agree it was a Pollock,” Mr. O’Connor said at a symposium this month.


Paying More for the White Dress

In an article for The New York Times Magazine, Catherine Rampell  explores the “wedding markup.”  While planning her own wedding, Rampell was surprised by the lack of transparency in the wedding industry, even with all the wedding-related sites on the Internet:

Wedding vendors seemed to be trying to size me up to figure out how much I’m willing to pay; consumer advocates say this is a common practice, as is charging more for a given service for a wedding than for a “family function” or “corporate event.” Austan Goolsbee, an economics professor at the University of Chicago Booth School of Business, recalls that when he was married over a decade ago, one caterer initially quoted him about $60 a head, and then jacked up the price to about $90 per person after realizing the function was a wedding. These are forms of what economists call price discrimination; it sounds unfair, but it’s perfectly legal, and it’s easier to get away with in markets where there’s little price transparency and consumers are relatively uninformed.

Many of the industry experts Rampell interviewed attributed the markup to the fact that brides are usually less-informed “first-time shoppers,” and also to the “once-in-a-lifetime logic”:


The Fight to Eradicate Polio

In 2012, there were only 223 cases of polio in the world, as compared to 350,000 in 1988.  An excellent, thoroughly reported new article in Wired, by the Kabul-based Matthieu Aikins, explores what it will take to completely eradicate the disease — and it will take a lot:

The global campaign, decades in the making, has come down to this: an all-out, very expensive effort to eliminate the last few problem areas in some of the most troubled and undeveloped parts of the final three countries where polio is endemic: Afghanistan, Pakistan, and Nigeria. It is one of the most expensive and ambitious global health initiatives today, and it is tantalizingly close to victory. There are now just a few hundred cases of paralysis per year worldwide, down from roughly 350,000 when the campaign started in 1988. But going the final inch will require more than just good science and vast amounts of money—it will require a tremendous force of collective will.


What Will Robots Do to Property Values?

Our podcast this week is all about driving. Last spring, we had a podcast on driverless vehicles that heavily focused on its likely positive safety impacts. Over at Economix, economist Casey Mulligan explores another likely effect of both driverless cars and the drone delivery services that Amazon is experimenting with:  property values increase in urban centers.  Here’s Mulligan’s theory:

As technology helps with moving goods and people more cheaply, it might seem that urban real estate would give up some of its price premium because distance becomes less of an obstacle to economic transactions. Wouldn’t a driverless car cause some workers to sell their Manhattan apartments and commute to their jobs from more spacious homes in the suburbs or even rural New York State?


Some Evidence That Violent Video Games Reduce Actual Violence

A few weeks ago, we released a podcast called “Who Runs the Internet,” which included Levitt’s thoughts on whether online mayhem, including violent video games, may actually reduce real-world violence.  Here’s what Levitt had to say on the matter:

Maybe the biggest effect of all of having these violent video games is that they’re super fun for people to play, especially adolescent boys, maybe even adolescent boys who are prone to real violence. And so if you can make video games fun enough, then kids will stop doing everything else. They’ll stop watching TV, they’ll stop doing homework, and they’ll stop going out and creating mayhem on the street. 

The Times of Israel recently reported on a new study confirming Levitt’s theory:

The research, done by The Center for Educational Technology, asserts that video games — even violent ones — are beneficial for children on a scale much bigger than originally thought. The claims are in contradiction to other studies that found that extended gaming led to depression, anxiety and stunted social development, not to mention the physical effects brought on by long hours of sitting. Some studies have also linked between video games and increased violent behavior in children, arguing that simulated violence leads to real-life violence.


Teach to One's First Report Card

One of our first Freakonomics Radio podcasts was about an innovative New York City Department of Education pilot program called School of One. You can listen to the podcast here, but here’s the gist: “The School of One tries to take advantage of technology to essentially customize education for every kid in every classroom and help teachers do their job more effectively. “

School of One’s successor, Teach to One, just got its first-year report card from a Teachers College study. The program is thriving; some highlights of the study, from the press release: 

• Teach to One students started the 2012-13 academic year significantly below national averages

• The average gains of Teach to One students in sixth, seventh and eighth grades surpassed those made by students nationally by ~20%. The researchers said this is particularly noteworthy since participating schools would likely not have scored at the national average without Teach to One.  

• The average gains of Teach to One students in most demographic sub-groups outperformed national norms

• Teach to One students who started with the weakest mathematics skills made the greatest gains—50 percent higher than the national average.


A Tiny Improvement, But Still …

From a Freakonomics Radio listener named Luke Charley:

I am a 21-year-old male college student in Bismarck, ND. I listen to your podcast quite a bit, and I found the one about the energy saved by houses — I believe it was in the podcast titled “Riding the Herd Mentality.” Well, the weight room I frequent often had plates not racked back up after people were done working out. They would just leave them on the floor and it bothered me quite a bit. So I decided to write a sign saying, “Everybody else racks their weights, please do the same.” In the past two weeks since I have done that, every day when I have been in there, there were no weights on the floor! Applying what you learn on a podcast to a weight room is quite invigorating.

Way to go, Luke! Delighted this worked out (so far, at least) …


What's in an Americanized Name?

What’s in a name?  Steve Levitt and economists following on his work have examined how racial differences in given names generate (or don’t) differences in economic outcomes.  A new paper (PDF) by Costanza Biavaschi, Corrado Giulietti and Zahra Siddique shows that first names mattered for immigrants to the U.S. in the first half of the 20th century: people who Americanized their given names did better economically thereafter. 

But how to get around the possibility that those with more energy/ambition were more likely to change names—going from Giovanni to John or Zbigniew to Charles?  Answer:  use the complexity of the pre-change name to predict whether a person changes names; and this is a good predictor.