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Freakonomics Blog

The Boss Effect: Study Shows Chinese Recognize Their Boss's Face Before Their Own

A small study published in the journal PLoS One, titled “Who’s Afraid of the Boss,” reveals key cultural differences in the way people react to their superiors. The study notes a particularly stark difference between Chinese and Americans. Researchers in both countries showed subjects a rapid series of photographs, asking them to press a button either when they recognized themselves or their boss. The abstract states:

Human adults typically respond faster to their own face than to the faces of others. However, in Chinese participants, this self-face advantage is lost in the presence of one’s supervisor, and they respond faster to their supervisor’s face than to their own.

Americans, on the other hand, are predictably different in light of a cultural emphasis on independence rather than collectivism.


The Church of Scionology: Yuengling Beer Gallery

For the Freakonomics Radio hour-long special “The Church of Scionology,” Stephen Dubner and producer Suzie Lechtenberg traveled to Pottsville, PA for a day to chat with CEO scion Dick Yuengling at his brewery.
Yuengling is the oldest brewery in America – currently run by Dick, who is the fifth generation to do so. One of his daughters will likely be the sixth-generation CEO, and the seventh-generation is apparently already in training. Here are some photos from the trip.


The Markets are Mad: Is High-Frequency Trading Making Things Worse?

Thursday’s 423-point gain by the Dow marked the first time ever that the industrial average has posted four consecutive days of 400-point moves. Less than two weeks into August, there have already been six trading days that saw triple-digit swings this month. While the recent sell-off has been swift (the Dow is off more than 12% since July 21), it’s also been choppy. Volatility is back in a big way. The VIX Index, also known as the fear index, has shot up recently, nearly doubling over the last week. The VIX tracks the expected price of a range of protective S&P 500 options over the next 30 days.
While your average investor generally hates volatility, there are those who feed off it, namely high-frequency traders. These are the guys who use complex algorithms and super-fast computers to scour the markets for tiny price differentials, often executing trades in microseconds (one millionth of a second). The more volatile the market, the easier it is for them to make money jumping in and out of stocks across exchanges.
Now, it’s not quite fair to lump all high-frequency traders together. They don’t all necessarily do well in volatile markets. While some are killing it, there are certainly others who’ve been getting killed; it all depends on their strategy. But generally, traders need two things: 1) a price, and 2) movement. Recently, they’ve had plenty of both.


FREAK-est Links

This week, why being a king is the most dangerous job in history, an etiquette group in Germany wants to ban workplace air-kissing, Jonathan Stark’s social experiment with a Starbucks card, anti-technology terrorists attack in Mexico, and why Google and Wikipedia are bad for our memory.


This Week in Corn Predictions: The USDA Got it Right (Almost)

We’ve been having some fun recently at the expense of people who like to predict things. In our hour-long Freakonomics Radio episode “The Folly of Prediction” — which will be available as a podcast in the fall — we showed that humans are lousy at predicting just about anything: the weather, the stock market, elections. In fact, even most experts are only nominally better than a coin flip at determining a future outcome. And yet there remains a huge demand for professional predictors and forecasters.
Earlier this week, Stephen Dubner and Kai Ryssdal chatted about this on the Freakonomics Radio segment on Marketplace. The question remains: “should bad predictions be punished?”
As mentioned in the segment, the U.S. Department of Agriculture’s August crop yield report came out today. The result? Not bad actually. The corn yield forecast was revised downward by just 1.3% from its estimate last month. That’s a considerable improvement over last year’s big miss, when the August corn yield report had to be revised downward by almost 7%.


The (Accidental?) Wisdom of Yogi Berra

I’m back to inviting readers to submit quotations whose origins they want me to try to trace, using my book, The Yale Book of Quotations, and my more recent researches.
Jordan asked:

“Okay, but did he say the quotation in question?” [i.e., did Yogi Berra actually say, “I never said most of the things I said.” From three weeks ago.]

According to the ever-helpful Yale Book of Quotations, Sports Illustrated, March 17, 1986, quoted Berra as saying “I really didn’t say everything I said.”


The Divergence of Fatherhood: Feast or Famine

A recent report by Gretchen Livingston and Kim Parker at the Pew Research Center explores the ways that American fatherhood has evolved over the last 50 years, particularly as it relates to the time fathers spend with their children. Since the mid-twentieth century, fatherhood has split in two distinct directions, they say: fathers either spend significantly more time with their kids, or live totally apart from them.

Fathers who live with their children have become more intensely involved in their lives, spending more time with them and taking part in a greater variety of activities. However, the share of fathers who are residing with their children has fallen significantly in the past half century.

In 1960, only 11% of American children lived apart from their fathers. Today, that share has risen to 27%, while the share of children living apart from their mothers has increased only modestly, from 4% in 1960 to 8% in 2010.


Why California's Push for Rooftop Solar is a Foggy Idea

Would you trust your neighbors with billions of dollars of public money to invest in a clean energy future? If you live in California, this isn’t a hypothetical question.
California Gov. Jerry Brown last month announced his intention to rely on “tens of thousands of little decisions” by Californians to develop a 12 giga-watt renewable energy infrastructure by 2020. In remarks at a UCLA clean energy conference, Brown embraced distributed solar generation in order to avoid the pitfalls that often encumber large-scale renewable energy projects, including the capital costs of transmitting energy from far-flung deserts and hilltops. Furthermore, rooftop solar panels and Cameron-esque windmills also pose little threat to desert tortoises or sacred Native American sites, so they are less apt to be caught up in the kind of litigation that has delayed major renewable projects.
But energy policy that relies on distributed generation has its drawbacks. Perhaps most notably, it forsakes economies of scale. It also places infrastructure investment decisions in the hands of homeowners, who, as this space has suggested, may not make socially optimal—or even individually rational—choices.


The Beekeeper Dilemma

Beekeepers transport their hives from field to field and make money helping farmers, orchardists and others pollinate their crops. (See the wonderful old paper by Steven N.S. Cheung, “The Fable of the Bees: An Economic Investigation,” Journal of Law and Economics, 1973.)
There are now indications that colony collapse, the current plague of the industry, may result from too-frequent moves of hives and the resulting greater exposure to more varieties of pathogens. The beekeeper thus faces a trade-off: increase revenue by moving hives around, but incur a potential cost of collapse; or move hives less and make less revenue, but reduce the potential risk. From what I’ve been told, different beekeepers make different choices, depending in part on their assessments of the risk of colony collapse and their degree of risk aversion.
[HT: SK-L]


Cohabitation in the U.S. has Doubled Since the Mid-1990s

A recent study by the Pew Research Center titled “Living Together: The Economics of Cohabitation,” finds that rates of cohabitation in the U.S. have gone up significantly over the last 15 years. Authors Richard Fry and D’Very Cohn use census data from heterosexual couples who (unlike many of their homosexual counterparts) have a choice between getting married, or simply living together unmarried. Fry and Cohn write:

Cohabitation is an increasingly prevalent lifestyle in the United States. The share of 30- to 44-year-olds living as unmarried couples has more than doubled since the mid-1990s. Adults with lower levels of education—without college degrees—are twice as likely to cohabit as those with college degrees.

Perhaps you already guessed that – the pressure to get married isn’t quite the same as it was 50 years ago. What’s more interesting though is that the level of education makes a big difference as to how the median household income of cohabiters measures up against their married counterparts.


Interpreting the Fed: How Did it Lower Rates This Time?

I’ve found a lot of the recent discussion about the Fed to be, frankly, confused. So I thought it worth trying to put the issues into a broader context.
Read the Fed’s latest statement, and you’ll see many of the themes I’ve talked about recently. They’ve learned that the economy is not only weak, but that—as I’ve been forecasting for some time—“economic growth so far this year has been considerably slower than the Committee had expected.” Turn to the labor market, and they somewhat dryly note “a deterioration in overall labor market conditions.” And while they won’t use the word double dip, they do note that “downside risks to the economic outlook have increased.” Also, “inflation has moderated.” So there’s plenty of room for them to try to goose the economy. But how?


How Rolling Dice Helps Save Leopards

Researchers working in South Africa are using a rolled-dice trick to solicit honest answers from farmers suspected of illegally killing leopards and hyenas. The trick uses randomized response, a method developed in the 1960s to eliminate people’s bias toward giving evasive answers. The basic idea is to prompt honest answers to sensitive questions (on topics such as sexual and even criminal behavior) by asking people to give an answer based on a random event. Researchers believe the resulting sense of confidentiality teases out truthful answers.
The study is called “Identifying Indicators of Illegal Behavior: Carnivore Killing in Human-Managed Landscapes,” and has been published by Britain’s Royal Society; here’s the abstract:


More on Porn and Rape: Does Internet Access Increase Sex Crimes?

Last week we wrote about a new Scientific American Mind cover story that makes the case for a link between internet pornography and lower cases of rape – something we’ve been skeptical of in the past, and remain so today.
A new study from researchers in Norway and the Netherlands offers evidence that suggests the opposite effect, that higher levels of broadband access actually increase the rate of sex crimes.
The study is titled,”Broadband Internet: An Information Superhighway to Sex Crime?” Here’s a full version. And here’s the abstract:


Freakonomics Poll: Are you a Scion?

We had a poll earlier this week that asked: should you give your kids the company? That’s the question of our latest podcast and hour-long Freakonomics Radio special “The Church of Scionology.” (You can download/subscribe at iTunes, get the RSS feed, or read the transcript here.) At this post’s publishing date, over 80% of those who voted chose that they would give their business to their children — if their heirs were competent and wanted the job.
The data on how many family businesses there are in the U.S. is sketchy; an often-quoted number is that 90% of all businesses are family businesses. But that comes from a paper written in the 1980s. A more reliable figure comes from Ronald C. Anderson and David M. Reeb; their 2003 paper measured founding family ownership present in 35% of firms in the S&P 500. Some estimates say that family businesses account for as much as 50% of the U.S. GDP.


Do Budget Cuts Cause More Riots?

The UK riots continue as PM David Cameron and the Metropolitan police flood London with 16,000 officers in hopes of calming the civil unrest.
Critics have suggested that this is the behavior of a generation that’s been ignored by the establishment. The anarchy on the streets of London has been attributed to high unemployment and disaffected youth, combined with a trigger event — the death of Mark Duggan, shot by police last Saturday.
A couple weeks ago, Jacopo Ponticelli and Hans-Joachim Voth put out their working paper “Austerity and Anarchy: Budget Cuts and Social Unrest in Europe, 1919-2009.” It uses cross-country data in the 90-year period to examine whether riots and civil unrest increase as governments cut spending. They found a positive correlation between social instability and budget cuts.


Should Bad Predictions Be Punished?

What do Wall Street forecasters and Romanian witches have in common? They usually get away, scot-free, with making bad predictions. Our world is awash in poor prediction — but for some reason, we can’t stop, even though accuracy rates often barely beat a coin toss.
But then there’s the U.S. Department of Agriculture’s crop forecasting. Predictions covering a big crop like corn (U.S. farmers have planted the second largest crop since WWII this year) usually fall within five percent of the actual yield. So how do they do it? Every year, the U.S.D.A. sends thousands of enumerators into cornfields across the country where they inspect the plants, the conditions, and even “animal loss.”
This week on Marketplace, Stephen J. Dubner and Kai Ryssdal talk about the supply and demand of predictions. You’ll hear from Joseph Prusacki, the head of U.S.D.A’s Statistics Division, who’s gearing up for his first major crop report of 2011 (the street is already “sweating” it); Phil Friedrichs, who collects cornfield data for the USDA; and our trusted economist and Freakonomics co-author Steven Levitt.


Why Adult Adoption is Key to the Success of Japanese Family Firms

What happens when the heir to a family business isn’t up to the job? Not great things, apparently. But the Japanese have a solution: adult adoption. Rather than hand the firm to a less-than-worthy blood heir, Japanese families often adopt an adult to take over. This tradition is the subject of Vikas Mehrotra‘s paper “Adoptive Expectations: Rising Sons in Japanese Family Firms,” which is featured in our latest podcast and hour-long Freakonomics Radio special “The Church of Scionology.” (You can download/subscribe at iTunes, get the RSS feed, listen live via the media player, or read the transcript here.)
America and Japan have the highest rates of adoption in the world – with one big difference. While the vast majority of adoptees in the U.S. are children, they account for just 2% of adoptions in Japan. The other 98% are males around 25 to 30. Mehrotra believes this is the key to one of Japan’s unique differences. Across the developed world, family firms under-perform professionally-run businesses. But in Japan, it’s the opposite. Japan’s strongest companies are led by scions, many of them adopted.


Do We Overvalue Our Desire to Live Among People of Our Own Race?

A new working paper from a quartet of economists proposes a new method of estimating how we value the “non-marketed amenities” of neighborhood choices such as avoiding pollution and living among people of our own race. The old static method, they say, underestimates our willingness to pay to avoid air pollution and crime, but overstates how much we value living near neighbors of our own race. Here’s the abstract:


From the Comments: A Market for Skipping Class

We got tons of responses to our Bleg last week on how professors should incentivize classroom attendance. Thank you everyone for your suggestions, a few concerns kept coming up in the comments:

  • Is the student a consumer?
  • Does attending class equate learning?
  • Are students a fair market to judge professors?
  • Do bonus/penalty systems work?

Most readers encouraged making the class interesting enough so that the professor is the sole incentive for students to show up. Others suggested an attendance incentive — ranging from points for showing up, to test questions handed out at the beginning of class — or a policy that puts students’ grades at risk for not showing up.


The Irony of the S&P Downgrade

At Columbia last year I took a class called “Modern Political Economy” from Ray Horton. One of Horton’s favorite things to say was that sooner or later, if the U.S. didn’t solve its debt issues through the political process, the world’s capitalists would do it for us — as in the debt markets would punish us for our profligate ways, and raise the cost of borrowing.
And yet, here we are: a ratings agency has downgraded our credit for the first time ever. But on the first day of trading, rather than going up, rates on our government debt fell to near record lows as money poured out of riskier assets in a flight for safety. When the markets closed last Friday, and the U.S. still had a AAA rating from S&P, the yield on the 10-year Treasury was 2.55%. It ended Monday down to 2.34%. The same thing happened during the stock market sell-off in the fall of 2008, when the rate on the 10-year Treasury went from around 4% to less than 2.5%. U.S. government debt is still the safest, most liquid market in the world. The S&P downgrade doesn’t change that. In fact, the immediate effect has been to make it safer. How strange.


Addicted to My Grandchildren

A visit with two grandchildren this weekend, then the other four next weekend, then the eight and five-year old without their parents. What a delight! But no very little kids—the kids are now ages 15 to 5. I miss having tiny grandchildren, and I know that if another were to come along it would be as much or even more fun than the first. I guess I’m addicted to grandchildren. Sadly in some sense (although my sons’ and their wives’ lives are complicated enough without their having more kids), my addiction is being cured by an enforced “cold-turkey” regimen—no more grandchildren are likely to be forthcoming. That’s the best way to cure an addiction. With the average age at first marriage being 28 for men and 26 for women, odds are that it will be 15 years until great-grandchildren arrive. The life expectancy of a 68-year-old male is 15 years, so there’s a decent hope of rekindling my addiction—next time to great-grandchildren.


ESPN's New QB Rating System: Who Benefits?

This season, ESPN has decided to challenge the NFL and roll out its own system for rating the play of quarterbacks. Its Total Quarterback Rating (QBR) is meant to be an improvement on the NFL’s official quarterback passer rating system, which was designed in the early 1970s and grades QB’s on four basic metrics: completion percentage, passing yards, touchdowns and interceptions.
The idea behind the QBR is to offer a more nuanced approach that teases out how a quarterback contributes to the success (or failure) of a particular play, and ultimately how he impacts the outcome of a game. For example, under the passer rating system, a ten-yard throw that a receiver turns into a 50-yard touchdown, rewards the quarterback exactly the same had he thrown the ball 50 yards into the endzone for a touchdown. The new system differentiates the two by taking into account the run after the catch, a familiar stat known as RAC to fantasy football players. The QBR also accounts for dropped passes, QB rushing yards, avoiding sacks, giving up fumbles, and something called a Clutch Index — which gives extra weight to plays when the game is on the line.


Operation Rolling Thunder: South Carolina's Annual Police Dragnet

Last week was the sixth annual Operation Rolling Thunder police crack-down in Spartanburg, SC. Each year, law enforcement from North and South Carolina converge on the Spartanburg interstate highways for a five-day dragnet aimed at drug trafficking. This year officers made 18 felony arrests, netting $215,000 of seized cash, 11 pounds of cocaine, and eight pounds of marijuana.

“The numbers are a bit lower than in the past, I’m proud of that, meaning they are staying out of Spartanburg County, which that is our desire,” said Sheriff [Chuck]Wright. “I try to tell everybody that every piece of drug paraphernalia or drug you can find and get off the street, that’s one more somebody’s son or daughter that’s not having to deal with that.


How Biased is the Media? Tim Groseclose, Author of Left Turn, Answers Your Questions

Last week we solicited your questions for Tim Groseclose, a political science professor at UCLA and author of the new book, Left Turn: How Liberal Media Bias Distorts the American Mind. The response was fast and furious. A total of 149 questions (and counting) were posed in the comments section. We selected 14 of them for Groseclose to answer, and he obliged us quite promptly. As always, thanks to all for participating.
 
Q. Why does liberal media bias exist in the first place? What would you suggest as a way that a) journalists could be more aware of their own bias and limit it in their reporting; or b) the profession of journalism could attract a more unbiased (or merely more representative) cohort? – Jack


What Would Happen if NASCAR Tried Right Turns?

With the exception of a few road course races, most of the NASCAR races are held on ovals. The cars always race counter-clockwise on the ovals, meaning the cars only turn left.
Given all the attention that learning and expertise has been getting, I’m deeply curious as to what would happen if for one race NASCAR went in the opposite direction, so that it was all right turns. I understand that they would probably have to do a lot of work to the cars, because the cars must be optimized for left turns, but put that aside. Would lap times be appreciably worse because the drivers would have trouble cornering? Would there be more crashes? Would the same drivers excel?
I think NASCAR should give it a shot. It would generate a lot of interest. I suspect, both among hardcore NASCAR fan and more casual sports fans.
I’ve even got the obvious name for the race: The Rite Aid 400.


Freakonomics Poll: Should You Give Your Kids the Company?

That’s the question we asked in our latest podcast and hour-long Freakonomics Radio special “The Church of Scionology.” You can download/subscribe at iTunes, get the RSS feed, listen live via the media player above, or read the transcript here.
We posed this question to some true American scions: Dick Yuengling of Yuengling beer — a fifth-generation CEO — would answer yes. Two of his daughters work at the family brewery right now, and one will likely succeed him in running it. On the other hand, musician Peter Buffett — son of Warren — would answer differently.


Dutch Subway Slide: An Exercise in Efficiency

Leave it to the Dutch to turn a playground feature into public-transit innovation. Next time you’re tripping down a set of dirty, crowded subway stairs in your city, just remember that there’s a better way. The Dutch are calling it a “transit accelerator.”


A Lottery Loophole (Sorry, Now Closed) in Massachusetts

In the Boston Globe, Andrea Estes and Scott Allen write about how people have been taking advantage of a statistical quirk in the rules of an obscure Massachusetts Lottery game called Cash WinFall. A Michigan couple in their 70s, Marjorie and Gerald Selbee, spent three days buying more than $600,000 in Cash WinFall tickets from two convenience stores in Sunderland, Mass. Their timing was purposeful:

For a few days about every three months, Cash WinFall may be the most reliably lucrative lottery game in the country. Because of a quirk in the rules, when the jackpot reaches roughly $2 million and no one wins, payoffs for smaller prizes swell dramatically, which statisticians say practically assures a profit to anyone who buys at least $100,000 worth of tickets. During these brief periods – “rolldown weeks’’ in gambling parlance – a tiny group of savvy bettors, among them highly trained computer scientists from MIT and Northeastern University, virtually take over the game. Just three groups, including the Selbees, claimed 1,105 of the 1,605 winning Cash WinFall tickets statewide after the rolldown week in May, according to lottery records. They also appear to have purchased about half the tickets, based on reports from the stores that the top gamblers frequent most.


Why the Market Meltdown is Crazy

After Thursday’s massive stock market sell-off, a lot of people are talking about how we may be experiencing another year like 2008. I’m going to get right to the point: that’s impossible. Here’s what was happening in 2008:
A) Housing bust: housing prices were already down 20-40% off of their highs.
B) Financial crisis: two major banks had gone bankrupt and every other bank was at risk.
C) Mark-to-market accounting was ruining bank balance sheets.
D) The uptick rule had been abolished on short-selling.
E) We were already in a recession.
Let’s fast forward to right now and walk through those items plus a few more. But first, a reminder to follow me on Twitter.


If Handing Off a Family Business to the Next Generation, What's the Key Thing to Avoid?

What’s the difference in performance between a family business where the CEO hands off leadership to a member of the family versus an outside CEO? That’s one of the questions our latest podcast, “The Church of Scionology,” tries to answer. (You can download/subscribe at iTunes, get the RSS feed, or read the transcript here.)
Stanford economist Francisco Pérez-González has looked at the data to try to figure this out. (His paper “Inherited Control and Firm Performance” can be found here). He compiled data from 335 management transitions across a number of industries with concentrated ownership or founding family involvement. He compared 112 blood-related successions to 213 unrelated ones. Here, first, is a breakdown of successions by industry, and by family-handoff within industries: