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Freakonomics Blog

The Startup Party

There’s a new political party in town: it’s primarily focused on creating more political parties.  Jared Hardy recently wrote to us about Startup Party USA, the “first 3+ political party in the United States.  From the website:

Tired of only voting for a party duopoly? Join the Startup Party USA to change our elections away from duopolist rule. Startups aren’t just for monetary profit.

The Startup Party USA intends to be the first 3+ political party in the United States. A 3+ political party is one with the primary mission of reforming voting rules so that even more parties have an equal and fair chance at winning elections. To accomplish this, we must first eliminate winner-take-all or “first past the post” voting everywhere in the USA.


Where Does "Character" Come From?

A new working paper (abstract; PDF) by James Heckman and Tim Kautz looks at the relationship between “character” and student achievement as measured by test scores. Long story short: achievement tests don’t necessarily measure what will often matter most once students hit the real world.

This paper reviews the recent literature on measuring and boosting cognitive and noncognitive skills.  The literature establishes that achievement tests do not adequately capture character skills–personality traits, goals, motivations, and preferences–that are valued in the labor market, in school, and in many other domains. Their predictive power rivals that of cognitive skills.  Reliable measures of character have been developed.  All measures of character and cognition are measures of performance on some task.  In order to reliably estimate skills from tasks, it is necessary to standardize for incentives, effort, and other skills when measuring any particular skill.

Character is a skill, not a trait.  At any age, character skills are stable across different tasks, but skills can change over the life cycle. Character is shaped by families, schools, and social environments.  Skill development is a dynamic process, in which the early years lay the foundation for successful investment in later years.


The Marketing of Dogfish

In New England, cod and haddock are overfished and, according to WBUR, fishermen and restaurant owners are seeking cheaper and more plentiful fish like dogfish. Fish wholesalers are therefore working to promote the dogfish’s image. According to WBUR, dogfish is already used in cafeterias at some local universities and hospitals — and local lawmakers are now pushing the federal government to help by buying dogfish for prisons and military rations. What genius marketing: “Dogfish: Tasty enough for schools, hospitals, C rations, and even prisons.”


What's the Best Way to Deliver Food Aid?

The question of how best to deliver food aid is a controversial one.  In recent years, economists like Dean Karlan and Ed Glaeser have suggested that direct cash transfers are the most direct, efficient means of delivering aid to struggling families in the U.S. and elsewhere.  In response to the debate, the International Food Policy Research Institute (IFPRI) collaborated with the U.N. World Food Program (WFP) on several studies. Here’s the Ecuador study comparing the effects of aid in the form of cash, food baskets, or supermarket vouchers.  And here’s a summary of their findings in Ecuador, Niger, Uganda, and Yemen, which were also discussed at a recent IFPRI seminar:

Findings revealed that there is no one “right” transfer modality. The relative effectiveness of different modalities depends heavily on contextual factors such as the severity of food insecurity and the thickness of markets for grains and other foods. In three countries (Ecuador, Uganda, Yemen), cash had a relatively larger impact on improving dietary diversity as did vouchers in Ecuador, but in the fourth country (Niger), food had a larger impact on dietary diversity. Cash assistance was always significantly more cost-effective to deliver. In fact, researchers determined that if they repeated the study, but only distributed cash, they could feed an additional 32,800 people with the same project budget.


For N.B.A. Hopefuls, Zip Code Matters

We’ve blogged before about the (relatively small) effect of birth month on athletic excellence.  But how does birth location affect a potential athlete? In The New York Times, Seth Stephens-Davidowitz  calculated the probability of getting to the N.B.A. by Zip code. He found that players like LeBron James, born to a low-income teenage mom, are the exceptions to the rule:

I recently calculated the probability of reaching the N.B.A., by race, in every county in the United States. I got data on births from the Centers for Disease Control and Prevention; data on basketball players from basketball-reference.com; and per capita income from the census. The results? Growing up in a wealthier neighborhood is a major, positive predictor of reaching the N.B.A. for both black and white men. Is this driven by sons of N.B.A. players like the Warriors’ brilliant Stephen Curry? Nope. Take them out and the result is similar.


Encouraging Pessimism for Greater Savings?

During the Social Security lecture to my class of 500 freshman, most expressed disbelief that the program would exist when they retire.  Like a young colleague of mine, they were sure they would never collect.  

Wrong!  I can’t see the program being abolished.  It is very popular, and its potential bankruptcy is one of the most easily dealt with policy problems we face:  just raise the age for regular benefits by one year in each of the next four quinquennia, raise the taxable base for FICA, and voilà — problem solved.

But perhaps my students’ pessimism is a good thing.  If they believe this, and act on their beliefs, they will set aside more for their private pensions — saving more. Given the low American saving rates over the last few decades, maybe I should encourage their pessimism!


On Suicide and Guns

We’ve blogged quite a bit about suicide and put out an hour-long podcast on the topic. The podcast featured an interview with Matt Wray, a sociologist who studies America’s “suicide belt.” He described the type of American most likely to kill himself:

WRAY: So, yes the Inner Mountain West is a place that is disproportionately populated by middle-aged and aging white men, single, unattached, often unemployed with access to guns. This may turn out to be a very powerful explanation and explain a lot of the variance that we observe. It’s backed up by the fact that the one state that is on par with what we see in the suicide belt is Alaska.

DUBNER: All right, so now you can get a picture of the American who’s most likely to kill himself: an older, white male who owns a gun, probably unmarried and maybe unemployed, living somewhere out west, probably in a rural area. 

A new paper (gated) by Alex Tabarrok and Justin Briggs further examines the connection between firearms and suicides. Tabarrok summarizes their findings at Marginal Revolution:


The Industrialization of the Artisanal Revolution

The New York Times reports that Etsy, the website that sells handmade artisanal products, will now allow its sellers to manufacture products. The reason for the shift? It’s too hard to scale up when everything’s handmade:

But last month, Etsy announced new policies that would allow sellers to apply to peddle items they produced with manufacturing partners, as well as to hire staff and use outside companies to ship their goods — all provided that the sellers demonstrated the “authorship, responsibility and transparency” intrinsic to handmade items.


Don’t Remind Criminals They Are Criminals

Psychologists have long argued about the power of priming, i.e the power of subtle cues and reminders to influence behavior.  For instance, there are a number of academic papers that find that if you make a woman write down her name and circle her gender before taking a math test, she will do substantially worse than if she just writes her name.  The idea is that women perceive that they are not good at math, and circling their gender reminds them that they are women and therefore should be bad at math.  I’ve always been skeptical of these results (and indeed failed to replicate them in one study I did with Roland Fryer and John List) because gender is such a powerful part of our identities that it’s hard for me to believe that we need to remind women that they are women! 

In an interesting new study, “Bad Boys: The Effect of Criminal Identity on Dishonesty,” Alain Cohn, Michel Andre Marechal, and Thomas Noll find some fascinating priming effects.  They went into a maximum security prison and had prisoners privately flip coins and then report how many times the coin came up “heads.”  The more “heads” they got, the more money they received.  While the authors can’t tell if any one prisoner is honest or not, they know that on average “heads” comes up half the time, so they can measure in aggregate how much lying there is.  Before the study, they had half the prisoners answer the question “What were you convicted for?” and the other half “How many hours per week do you watch television on average?”  The result: 66 percent “heads” in the treatment where they ask about convictions and “only” 60 percent “heads” in the TV treatment. 


Thirty Squats for a Free Subway Ride

This month, Moscow is offering free subway rides to passengers who can do 30 squats. It’s part Olympic fever, part healthy-lifestyle promotion, via the Wall Street Journal (and be sure to check out the pictures):

Moscow city officials are now offering free rides on the subway to any passenger who does 30 squats before crossing the ticket barrier to enter the metro in an effort to promote physical fitness and sports, according to Russian state media reports.

Each squat will be counted by a special machine marked with the Olympic logo that will be placed next to electronic ticket vending machines.

“We wanted to show that the Olympic Games is not just an international competition that people watch on TV, but that it is also about getting everyone involved in a sporting lifestyle,” Alexander Zhukov, president of the Russian Olympic Committee, was quoted by state-run news wire RIA-Novosti as saying.


Do Game-Theory-Playing Traffic Lights Reduce Congestion?

That is what the headline of this fascinating article says. Here is a quote from the news report:

In lay language,” [Samah] El-Tantawy said in a U of T news release, “the [traffic lights] act as a team of players cooperating to win a game — much like players in a soccer match, where each player endeavors to score, but at the same time considers the ultimate goal of the entire team which is winning the match.

According to the article, travel times were reduced by 26 percent, which is fantastic, and which is what matters.

This doesn’t, however, seem to have much to do with game theory. Game theory is about one of two things: strategic behavior or finding sustainable equilbria. But the traffic lights don’t care about their own private utility.  There is no sense in which they are actors at all, as traffic lights just do what you tell them to do.  In economic terms, there is a central planner who sets the rules which the traffic lights obey. This new scheme provides a new and better set of rules (which, again, I emphasize is great), but I don’t think game theory should get the credit!

(Related: see our “Jane Austen, Game Theorist” podcast.)


A Silver Lining to Unemployment?

Friday’s labor-force data brought liberal outcries, and a comment from Ben Bernanke, that the drop in labor-force participation indicates unemployment is really much higher, and the economy in worse shape, than the 7.3 percent unemployment rate might indicate.  It is true that participation for men is at a postwar low and has decreased by 3-1/2 percentage points since the 2007 cyclical peak; and women’s participation stopped rising in 1999 and has fallen by 2 percentage points since the peak.

Is this so bad? Yes, if labor-force leavers are desperate to work and just get discouraged.  But perhaps no; perhaps it has taken the Great Recession to get Americans to realize that we shouldn’t be working harder than people in other rich countries and should be enjoying more leisure.  If this is so, perhaps there’s a silver lining in what so many people view as the economic doldrums of the last three years.


Transaction Costs: The American Way

The rest of the world likes to say that everything in America is big: the cars, the CO2 emissions, the buildings, even the hamburgers. The farce at the U.S. government’s website for enrollment in health insurance under the so-called Affordable Care Act (ACA) shows that we also supersize our transaction costs.

In a news report from NPR, Alaska Public Radio Network, and Kaiser Health News, even a computer programmer who had also created websites needed many attempts over many weeks to use the site to enroll for health insurance. And she still awaits the enrollment confirmation (with luck in the new year, said the radio version of the report). If it arrives, she gets affordable health insurance ($110 instead of $1200 per month), but then still has the joy of dealing with an insurance company and the claim paperwork.


Finally, I Was Right About Something

Seven years ago, I blogged about how nonsensical many airline rules and regulations seemed to be.

At the very top of my list was the prohibition on the use of electronics before takeoff and landing. The FAA finally gave into logic on this one, and airlines have been remarkably speedy in instituting the change.

(If you go back and look at the post, you will see that another thing I railed against was the announcement about “in the unlikely event of a water landing.”  There is no doubt this announcement is a complete waste of time, but not long after the post went up, Captain Sullenberger pulled off a water landing.  Thanks for nothing, Sully!)


Can the Right Music Get You Out of a Traffic Ticket?

Aaron Pilkington, an officer trainee at Air Force Officer Training School in Montgomery, Ala., writes to say:

I was driving down the road the other day with a fellow trainee, pointing out to him that the particular road along which we were driving always has police officers hiding out and catching people speeding. Just as I said that, sure enough, we saw a police car pull out with lights on and pull someone over.  My friend, Bill, said that he wondered if the song “Sweet Home Alabama” would work in Alabama. I asked him to elaborate.

My friend, who is from Rhode Island, explained that a couple of years ago he was speeding and got pulled over by a police officer.  He said that the song “Sweet Home Alabama” was on the radio and that somehow the officer let him off on a warning.  Some time later, he was pulled over again and had the song on his iPod.  In the time between being pulled over by the police officer and the officer walking up to his window, he pulled the song up on his iPod and left it on loud enough to be heard by the police officer, but not too loud.  Again, success.  He said this happened one more time just a couple of months ago in Florida and that he now always has at the ready a CD with the song “Sweet Home Alabama,” just in case he gets pulled over again.


A 12-Step Program for Fuel Subsidy-aholics

Back when blog posts were composed with reed styluses on clay tablets, I put up a couple of posts (here and here) on fuel subsidies in the developing world. These are generally 1) fiscally ruinous; 2) terrible for the environment and traffic congestion;  3) highly regressive with regard to wealth distribution; and 4) market-distorting by artificially promoting fuel-guzzling industries. So I made the case that this is a pretty foolish public policy, in fact one of the worst I can think of. It’s up there with tobacco subsidies, the Concorde, pretty much everything the North Korean government has ever done, and our government’s failure in spending a paltry $615,000 taxpayer dollars for UC Santa Cruz students to digitize priceless Grateful Dead photographs, t-shirts and concert tickets.

Given the problems with fuel subsidies, I promised a third post on what to do to eliminate them. But since I have a day job, and being a professor is much more difficult than it looked when I was undergrad, I’ve procrastinated on putting this last post up. However, engineering student Kishore from India wrote asking where part three is, and customer satisfaction is a goal here at Freakonomics. Besides, no doubt governments around the world have been waiting impatiently for my post before they start dismantling their fuel subsidies, so here it is.

Given the damning case against fuel subsidies, and a rising swell of opinion that they are counterproductive on many levels, why don’t these policies go away? The IMF (see this) and I offer several reasons:


A Great View If You Like Parking Lots

In our podcast “Parking Is Hell,” we explored how the overwhelming demand for parking space has a lot of downsides. One big problem is that city centers can feel as if they’re practically held hostage by parking lots and garages. I was in Minneapolis the other day, and here are four pictures taken from the window of my hotel room. It’s not exactly a view that makes the heart skip … 


Product Placement at Universities

Public higher education in the U.S. is not in good shape—and the main reason is lack of funds.  States will not increase their funding, and often they severely limit tuition increases.  My university appears to have hit upon a solution:  product placement and direct advertising.  The new computer building, the Gates Building, is part of the Dell Computer  Science Center, and has a Dell logo and signs for eBay and PayPal in front of the building.

But why stop here?  Five hundred students stare at me for 1-1/4 hours 28 times each fall semester.  The university could ask me to advertise—wear a cap, or a t-shirt, just like a tennis star—showing the product of whichever companies bid the most for the rights to advertise on my apparel during class.  While I would probably insist on some of the royalties, the bilateral monopoly between the university and me would surely raise funds for the university.  With enough professors required to do this, public universities could alleviate some of their financial problems. No doubt readers have similar clever ideas for product placement that would help fund public universities, albeit at some cost in dignity.


Pirate Economics, Somali Edition

An Economist article looks at a new study by the International Criminal Police Organization, United Nations Office on Drugs and Crime and World Bank on the economics of Somali piracy, including pirate earnings:

The authors interviewed current and former pirates, their financial backers, government officials, middlemen and others. They estimate that between $339m and $413m was paid in ransoms off the Somali coast between 2005 and 2012. The average haul was $2.7m. Ordinary pirates usually get $30,000-75,000 each, with a bonus of up to $10,000 for the first man to board a ship and for those bringing their own weapon or ladder.

The article also explores the financing and profit of pirate expeditions, and how ransom money trickles down:


An Economist's Tipping Strategy

I have a friend with whom I regularly eat out at restaurants and from time to time we disagree on how much to tip.  Traditionally, I have been a hard-wired 20% tipper.  But since studying the racial effects of taxi-cab tipping, I’ve been more attracted to tipping less – sometimes closer to 15%.  This has at times created disagreements between my friend and I on how much to tip.  He always wants to tip 20%.  But when we’ve disagreed, we’ve always resolved the issue by tipping the larger amount.  We always split the bill—including the tip—50/50. 

But a few weeks ago, my friend and I were eating dinner and experienced exceptionally bad service.  The server twice put in the wrong order and charged us for items that we had not ordered.  I suggested that we reduce our tip to 10% (I note that while I’m high maintenance in many aspect of my life, I’m not persnickety about restaurant service and the last time I reduced my tip to 10% was probably more than 1000 restaurant meals ago).  My friend agreed that the server had made these errors (and indeed, the sever himself acknowledged that the service was subpar),  Nevertheless, my friend still wanted us to leave a 20% tip. 


Fighting Over the Width of Airline Seats

From Reuters:

Airbus this week called for an industry standard that would provide for a seat at least 18 inches wide in economy cabins, but its U.S. arch-rival Boeing says it should be for airlines to decide.

As you can imagine, there is a lot of money at stake here:

Boeing says its revamped “777X” will hold 406 people based on economy seats over 17 inches wide and set out 10 in each row.

Airbus says the competing version of its A350 will carry 350 people in 18-inch-wide economy seat laid out 9 abreast.

But it’s more than a battle between two companies. It’s a battle between the past and the present:


What Do You Want to Know About Fighting Poverty With Cash Payments?

If you happen to be in New York on Mon., Nov. 11, you might want to come see Richard Thaler and Dean Karlan talk about “using evidence and behavioral economics to fight poverty.” The event (info here) is run by the Innovations for Poverty Action, of which Karlan is president. I will moderate the Thaler-Karlan discussion — which means I get to ask them any questions I want about whether and why it is a good idea to fight poverty by giving cash directly to poor people rather than the traditional means of directing aid toward institutions and hoping that it trickles down fruitfully. (There are, of course, more options than just those two.)

In our recent podcast called “Would a Big Bucket of Cash Really Change Your Life?,” we looked at whether a windfall helps a family across the generations. The short answer, at least in the case of the 19th-century land lottery that we discussed: no.


With So Much Food, Why Do So Many People Go Hungry?

Writing for Foreign Policy, John Norris explores this question: why does hunger still kill “more people every year than HIV/AIDS, malaria and tuberculosis combined” when one-third of the food produced for human consumption is wasted?

In the developing world, Norris writes, actual consumers waste little food:

Instead, much more of the food waste in the developing world comes further upstream in the production process.

Crops are inefficiently farmed with outdated tools, and often harvested early because farmers are under economic and climactic duress. To get meat, fruits, vegetables and fish to market in the developing world often means navigating lousy roads, using warehouses without proper refrigeration, facing greater vulnerability to pests, and any number of other factors that drive up spoilage and losses. A gallon of milk doesn’t last nearly as long when it is transported in a can that ends up sitting in the hot sun under a banana leaf.

It’s a different picture in the developed world:


The Cheater's High

A new paper in the Journal of Personality and Social Psychology (abstract; PDF) explores “the cheater’s high.” The authors are  Nicole Ruedy, Celia Moore, Francesca Gino, and Maurice E. Schweitzer. Here’s the abstract:

Many theories of moral behavior assume that unethical behavior triggers negative affect. In this article, we challenge this assumption and demonstrate that unethical behavior can trigger positive affect, which we term a “cheater’s high.” Across 6 studies, we find that even though individuals predict they will feel guilty and have increased levels of negative affect after engaging in unethical behavior (Studies 1a and 1b), individuals who cheat on different problem-solving tasks consistently experience more positive affect than those who do not (Studies 2-5). We find that this heightened positive affect does not depend on self-selection (Studies 3 and 4), and it is not due to the accrual of undeserved financial rewards (Study 4). Cheating is associated with feelings of self-satisfaction, and the boost in positive affect from cheating persists even when prospects for self-deception about unethical behavior are reduced (Study 5). Our results have important implications for models of ethical decision making, moral behavior, and self-regulatory theory.


How Does the Economy Actually Work? Ray Dalio Explains

Ray Dalio is the founder of Bridgewater Associates, known to some as “the world’s richest and strangest hedge fund.” He has appeared on this blog before, talking about the upsides of negative feedback. Now Dalio has put together a beguiling 30-minute video that tries to explain how the U.S. economy actually works. Don’t be ashamed if you find out a lot you didn’t know — as Dalio makes clear, most policy makers don’t know much about the economy either.


Are We Heading Toward a Reinsurance Bubble?

As a topic, “shadow insurance” may have a certain MEGO quality — that’s “My Eyes Glaze Over” — but a new paper called “Shadow Insurance” (abstract; PDF) by Ralph S.J. Koijen and Motohiro Yogo is well worth a look:

Life insurance and annuity liabilities of U.S. life insurers were $4,068 billion in 2012, which is substantial even when compared to $6,979 billion in savings deposits for U.S. depository institutions (Board of Governors of the Federal Reserve System 2013). However, there is little research on life insurer liabilities, especially in comparison to the large banking literature. The reason, perhaps, is the traditional view that life insurer liabilities are safe (and boring) because they are more predictable, longer maturity, and less vulnerable to runs. Hence, all of the interesting action is on the asset side, where life insurers take on some investment risk. This paper shows that developments in the life insurance industry over the last decade shatters this traditional view. As a consequence of changes in regulation, life insurers are now using reinsurance to move liabilities from operating companies that sell policies to less regulated and unrated shadow reinsurers. These shadow reinsurers are captives or special purpose vehicles in U.S. states (e.g., South Carolina and Vermont) or offshore domiciles (e.g., Bermuda, Barbados, and the Cayman Islands) with more favorable capital regulation or tax laws. In contrast to traditional reinsurance with third-party reinsurers, there is no risk transfer in these transactions because the liabilities stay within the same holding company.


Question of the Day: Why Don't Companies Advertise on Homeless People?

Callum Linley, an 18-year-old reader from Melbourne, Australia, writes to say:

So why aren’t there companies lining up to advertise on homeless people?

My guess is it’s an image problem – not wanting to be associated with the “failure” of being homeless. But wouldn’t that be compensated by the fact you could put forward the idea that you are a socially responsible and sympathetic company who cares for the less fortunate?

Well, the world already has given us Bumvertising and homeless people as wi-fi hotspots, and I wouldn’t be surprised if homeless advertising has shown up on TV (hey Simpsons and Family Guy and South Park fans etc., let us know). But how would you answer Callum’s question?  Does it fall into the category of:

a) Questions that are so obvious that they don’t need an answer; or

b) Questions that should be asked more often, but aren’t; or

c) Something else entirely.


What the President Does — and, Importantly, Doesn't — Do

Between the N.S.A./Merkel mess and the ObamaCare mess, it seems a good time to ask a question we’ve asked in the past: just how much does the President of the United States really matter? Our original podcast on the topic came out in 2010; we overhauled the episode in 2012, adding interviews with Donald Rumsfeld and Austan Goolsbee.

As Jon Stewart puts it so well in the video below, if the President is out of the loop on Merkel eavesdropping and his namesake healthcare law, just what loops is he in? I do not mean to cast aspersions on President Obama himself (although you are free to cast away). I mean to highlight the possibility that we assign way too much weight to the role of the President generally.

What are the odds that you agree with my argument? Who knows. What are the odds that, even if you do agree, you will disagree once it’s time to elect the next President, and we get caught up once again in our Great Man Theory of Voting?