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Freakonomics Blog

Should We Stop Children From Learning to Cheat?

A Freakonomics Radio listener named Sandra Elsen writes:

Today, I went to my son’s kindergarten.  He attends the local International School (what the Realtor described as the “Hippy-Dippy” school, lol), in a semi-rural area, just outside of the city in a middle-class town.

There, I was asked to help them learn a new game. The concept was simple:  a six-sided block had three 1’s and three 2’s marked on each side.  They had to trace the number that was rolled on their worksheet.  Roll, trace.  Once five of one number was achieved, either the firetruck or the firefighter (pictured at the bottom of the sheet) “won.”  The teacher indicated it was a “race” to see which picture would win.


Is the "Bing It On" Challenge Lightweight?

Microsoft has now responded, with a blog post and a letter, to my post about an experimental study that I coauthored with Yale Law School students Emad Atiq, Sheng Li, Michelle Lu, Christine Tsang, and Tom Maher.  Our paper calls into question the validity of claims that people prefer Bing nearly two to one.

In response to several commenters: I do not work for and do not have any consulting relationship with Google.

Microsoft claims that our study is flawed because it relied on their own blind comparison website.  They now say that “Bing It On” is meant to be a “lightweight way to challenge people’s assumptions about which search engine actually provides the best results.”  To be sure, companies often use fantastical or humorous scenarios for free advertising. However, Microsoft’s television commercials present the site as a credible way that people can learn whether they prefer Google or Bing.  These commercials show people who discover that they really prefer Bing to Google.  The challenge site that they created is either sufficient to provide insights into consumer preferences or it isn’t.  The advertisements give the impression that the challenge site is a useful tool.  Microsoft can’t have it both ways.  If it is a sufficient tool to “challenge people’s assumptions,” then it is sufficient to provide some evidence about whether the assumed preference for Google is accurate. 


What Can the Olympics Teach Us About Closing the Achievement Gap?

John List and Uri Gneezy have appeared on our blog many times. This guest post is part of a series adapted from their book The Why Axis: Hidden Motives and the Undiscovered Economics of Everyday Life. List also appeared in our recent podcast “How to Raise Money Without Killing a Kitten.”

If you look at two pictures of two athletes: One is beaming, the other doesn’t seem too sure what she’s feeling. Which do you think won the silver? Which the bronze? Easy, right? Silver is better than bronze, so the smiling girl on the right must have won the silver. Which do you think won the silver? Which the bronze? Easy, right? Silver is better than bronze, so the smiling girl on the right must have won the silver.


Should H&R Block Hire Models to Increase Charitable Giving?

Our recent podcast “How to Raise Money Without Killing a Kitten” represented the launch of a fund-raising campaign for Freakonomics Radio. Let me say a few things about the campaign:

1. Wow! Listeners have so far responded way, way, way better than Levitt predicted they would in the podcast — so: 1a) Thanks!; and 1b) Nice job in proving a pretty smart guy very wrong.

2. Some of your comments and e-mails noted that WNYC’s fund-raising site doesn’t allow for contributions via PayPal, text, Flattr, Bitcoin, etc. That is true. Hopefully some of these avenues will be added over time. Some of you also noted that the podcast already has advertising, so why are we also asking for contributions from listeners? Good question. Short answer: WNYC is the funding producer of our podcast, and as such is responsible for paying all our producer and engineer salaries, studio time, field-recording costs, music-licensing costs, bandwidth, and a million other things, like the transcription of interviews (for every minute of talking that ends up in the podcast, we’ve probably got about five minutes of interview tape). We are grateful for the advertisers on our podcast, but that revenue is not nearly enough to produce the podcast. That’s why we came to you, our listeners, for additional support.


The Nobel Prize Goes to an Odd (but Worthy) Economic Trio

I awoke yesterday to the happy news that two of my friends won the Nobel Prize in economics.*

Gene Fama was one of the three recipients.  He and I share two important beliefs about the world.  First, we value empirical research in economics — i.e., getting deep into the data to understand what is going on.  Second, we both believe that golf should be played quickly!  So every weekend, at least once, Gene and I get up before the sun rises and get in 18 holes (walking) in about 2.5 hours.  Gene is 74 years old — he didn’t take up golf until his sixties, and I’ve seen him post a scorecard with multiple birdies on it. 

Gene believes deeply and fundamentally in markets, which is why pairing his prize with Robert Shiller, a market skeptic, is quite odd.  But Shiller is a wonderful economist — someone whose work I read a lot and was inspired by early in my own career — and I’m glad he was chosen.


The Opportunity Cost of an Email

There’s a midterm this week in my class of 550 students, and I have been deluged with emailed questions, many procedural, that are covered in the online daily class summary. (For example, is the test being given in class?)  In the old days, when students came to office hours to ask questions, I wouldn’t have gotten most of these queries.  Regrettably, a student’s opportunity cost of emailing is much less than the cost of an office visit.

Why don’t I raise the cost to students by refusing to answer these emails?  If I thought that would deter all such questions and visits, I would refuse. But even if 20 percent of the emails translate into student visits, I’m better off answering the emails, since each takes me at most 1/5 as long as dealing with the question face-to-face in my office.  This is annoying, but I believe I save time this way.


The Science May Be Settled, But the Economics Isn’t

The world’s scientists affirmed last week their increasing certainty—95% confidence—that humans are causing global warming by emitting greenhouse gases.

With human culpability all but certain and the potential for warming by 4.5°C in 100 years, economists can’t decide what should be done about it, or even whether any substantial effort should be undertaken to stop it.

In delivering a keynote address to a large group of economists this summer, Harvard’s Marty Weitzman described climate change as a hellish problem that is pushing the bounds of economics.

A year earlier, addressing an annual meeting of environmental economists, MIT professor Robert Pindyck suggested there was no strong economic argument for costly, stringent policies to halt expected warming. In contrast to the near certainty of climate science predictions, Pindyck said the economics of climate change is not well charted and that the case for aggressive climate policy relies on assumptions not supported by consensus.


Should I Send $550 Back to Ford?

My family liked our new Ford C-Max hybrid so much that we bought a second one just a few months later.  But in between the two purchases, I learned something that made me think that in buying the second car I might also be buying a cause of action. 

Before the second purchase, I learned that Richard Pitkin of Roseville, Calif., had brought suit against Ford for overstating the C-Max’s fuel efficiency.  It apparently is too good to be true that a C-Max can achieve 47 mpg both in the city and on the highway.  

Sure enough, two weeks ago, two $550 checks arrived in the mail because Ford had dropped its official mileage estimate from 47mpg to 43mpg.  Ford calls the money a “goodwill payment.” 


The Long-Term Effects of Birth Control

A new working paper (PDF; abstract) by Martha J. Bailey, an economics professor at the University of Michigan, analyzes the effects of increased access to birth control in the 1960s and 1970s:

This paper assembles new evidence on some of the longer-term consequences of U.S. family planning policies, defined in this paper as those increasing legal or financial access to modern contraceptives. The analysis leverages two large policy changes that occurred during the 1960s and 1970s: first, the interaction of the birth control pill’s introduction with Comstock-era restrictions on the sale of contraceptives and the repeal of these laws after Griswold v. Connecticut in 1965; and second, the expansion of federal funding for local family planning programs from 1964 to 1973. Building on previous research that demonstrates both policies’ effects on fertility rates, I find suggestive evidence that individuals’ access to contraceptives increased their children’s college completion, labor force participation, wages, and family incomes decades later.


What Can a Ball and a Bucket Teach Us About Why Women Earn Less Than Men?

John List and Uri Gneezy have appeared on our blog many times. Now they have written a book, The Why Axis: Hidden Motives and the Undiscovered Economics of Everyday Life. (The title, by the way, was crowdsourced on this blog). Below is the first in a series of guest posts adapted from the book; Gneezy spoke about this research in our podcast “Women Are Not Men.”

What can a Ball and Bucket Teach Us About Why Women Earn Less than Men?
By Uri Gneezy and John List

The sign on the road leading to the city of Shilong in the Khasi hills of northeast India had a puzzling message: “Equitable distribution of self-acquired property rights.” Later we’d find out that the sign was part of a nascent men’s movement, as the men in the Khasi society were not allowed to own property. We’d traveled across the world in search of such a parallel universe—one where men felt like “breeding bulls and babysitters”—because evidence in the U.S. was starting to point to a massive gap in preferences towards competition between the genders and we wanted to understand the reason why.

Our plan was to take a simple game to a matrilineal society (the Khasi) and patrilineal society (the Masai in Tanzania) and give participants just one choice: Earn a small certain payment for their performance in the game or earn a much bigger payment for their performance, but only if they also bested a randomly chosen competitor. The game we settled on? Tossing tennis balls into a bucket 3 meters away.  The experiment was conducted with Kenneth Leonard as a coauthor.


Which Foods (and Drinks) Get Better as You Eat More, and Which Get Worse?

A reader named Robb Stokar wrote in with the following question: “Which foods and/or drinks have the greatest diminishing marginal returns and which have the greatest increasing marginal returns?”

Wonderfully, Robb answered the question himself:

Diminishing food:  pancakes. Those first few bites of syrup-y and butter-y goodness are like angels singing. Then, about 1/2 way through, finishing the stack becomes a chore. And if you actually finish the stack, hello food coma. (Credit for the origin of this idea goes to my brother, Jason.)

Diminishing drink: Bloody Mary. First few sips are great, but by the bottom of the glass much of the spice has settled and you get a watery mouthful of pepper and celery salt.

Increasing drink: wine or whiskey, provided very little ice. Wine is self-explanatory, but some advocates say a little water “opens up” the whiskey and a cooler temperature eliminates that alcohol “bite.” I agree.

Increasing food: Indian or something similarly spiced. I believe that with each successive bite, the diner gets a better flavor profile and you can fully appreciate the dish.


The Retraction Penalty

In a new working paper called “The Retraction Penalty: Catastrophe and Consequence in Scientific Teams” (gated), Ginger Zhe Jin, Benjamin Jones, Susan Feng Lu, and Brian Uzzi explore a fascinating research question:

What are the individual rewards to working in teams? This question extends across many production settings but is of long-standing interest in science and innovation, where the “Matthew Effect” [a.k.a. “the rich get richer and the poor get poorer” suggests that eminent team members garner credit for great works at the expense of less eminent team members. In this paper, we study this question in reverse, examining highly negative events – article retractions. Using the Web of Science, we investigate how retractions affect citations to the authors’ prior publications. We find that the Matthew Effect works in reverse – namely, scientific misconduct imposes little citation penalty on eminent coauthors. By contrast, less eminent coauthors face substantial citation declines to their prior work, and especially when they are teamed with an eminent author. A simple Bayesian model is used to interpret the results. These findings suggest that a good reputation can have protective properties, but at the expense of those with less established reputations.

To me, this finding is a bit surprising at first glance but, upon second glance, not really — but still fascinating.

If you are even a little bit interested in this topic and don’t know about the Retraction Watch website, you should. A few recent examples:


Why Don't More Men Pursue Female-Dominated Professions?

A reader named Albert Hickey writes:

I’m a father of three girls and I’m into technology. I keep hearing that there is a major bias toward men in STEM (Science, Technology, Engineering and Maths) at college and in the workforce.  I also regularly see blog posts, videos, interviews and podcasts where women are discussing how this is not right and that we need to have more equality in STEM. All good and more women in tech would be a good thing as women are major users of technology.

But it struck me that I have near heard of men fighting for more men to study traditionally female-dominated subjects or jobs like primary-school teacher, nurse, PR officers and therapists.

Why are women fighting for more women to do STEM while men are not fighting for more men to be therapists?

My quick response to him:

I’m guessing it’s b/c of the wage differential but you are right, it’s worth asking.

Albert wrote back with more detail:


No Camping in Faculty Offices

A student appears to have enclosed the commons: for the last two weeks, he has camped in a small public area in the vestibule of a suite of faculty offices, making it unusable for other students to meet in groups (its use in all previous years).  Believing that this is a public area, and absent my colleagues saying anything, I asked the chap to vacate the place to allow others to use it.  This is a classic case of the difficulty of maintaining property rights in a public setting with no way of enforcing public ownership other than moral suasion. This may be more of a problem in universities than in businesses, given what I find as the self-selection into faculty jobs of people who want to avoid confrontation.


Predicting the End of the Government Shutdown

Flip Pidot, co-founder and CEO of the American Civics Exchange, writes to let us know that the exchange has recently added cash prizes to their political prediction markets and is currently running two parallel government shutdown prediction markets, allowing for an interesting experiment:

At American Civics Exchange, we’ve just begun to implement cash prizes in our political prediction market (a sort of interim maneuver on our way to regulated exchange-traded futures).

For the government shutdown, we’re running two parallel markets – one in which traders buy and sell different shutdown end dates (with play money), yielding an implied odds curve and consensus prediction (below), and another in which traders simply log their best guess as to exact date and time of resolution (with no visibility into others’ guesses), with the closest prediction winning the real-money pot.


Book Review: Malcolm Gladwell's David and Goliath

Malcolm Gladwell’s latest — David and Goliath: Underdogs, Misfits, and the Art of Battling Giants – came out this week.   Like every other book by Gladwell, it is already a best-seller. And having read – and very much enjoyed — the book, I can see why. Gladwell once again presents a variety of interesting stories, this time centered on the question of whether underdogs are as disadvantaged as we believe (the opening story on David and Goliath – which makes this observation – is worth the price of admission).   My sense – from the few reviews I have seen – is that critics have primarily focused on whether the argument they think Gladwell is making is valid.  I am going to argue that this approach misses the fact that the stories Gladwell tells are simply well worth reading (i.e., these stories are interesting and make you think). 

The range of stories Gladwell presents is quite impressive. From the opening biblical story to a discussion of the number of students in a school classroom, the impact of dyslexia, the curing of leukemia, the battle for Civil Rights, French revolutionaries during World War II, etc… One has to wonder: where does Gladwell find these stories?


With Age Comes (Economic) Wisdom

A new study seems to confirm the adage that older means wiser, at least when it comes to making decisions about economic matters. From ScienceDaily:

To conduct their research, [Ye] Li and his colleagues recruited a group of 336 people — 173 younger (ages 18 to 29) and 163 older (ages 60 to 82) — and asked them a series of questions that measured economic decision making traits. They also administered a battery of standard fluid and crystallized intelligence tests.

These traits included temporal discounting (how much people discount future gains and losses), loss aversion (how much the valuation of losses outweigh gains of the same magnitude), financial literacy (understanding financial information and decisions) and debt literacy (understanding debt contracts and interest rates).

They found the older participants performed as well or better than the younger participants in all four decision-making measures. The older group exhibited greater patience in temporal discounting and better financial and debt literacy. The older participants were somewhat less loss averse, but the result did not reach standard levels of significance.

“The findings confirm our hypothesis that experience and acquired knowledge from a lifetime of decision making offset the declining ability to learn new information,” Li said.

(HT: R.E. Riker)


How Cost Impacts College Applications

A new NBER paper (abstract; PDF) by Amanda Pallais looks at how small fees impact the application behavior and outcomes of low-income students. Using data from the ACT, she found that an increase in the number of free score reports that students were permitted to send to colleges resulted in students sending their scores to a wider range of colleges, with low-income students attending more selective colleges. These outcomes were surprising because the non-free score reports were a mere $6. The abstract:

This paper estimates the sensitivity of students’ college application decisions to a small change in the cost of sending standardized test scores to colleges. Using confidential ACT micro data, I find that when the ACT increased from three to four the number of free score reports that ACT-takers could send, the fraction of test-takers sending four reports rose substantially while the fraction sending three fell by an offsetting amount. Students simultaneously sent their scores to a wider range of colleges. Using micro data from the American Freshman Survey, two identification strategies show that ACT-takers sent more college applications and low-income ACT-takers attended more selective colleges after the cost change. The first strategy compares ACT-takers before and after the cost change, controlling for time trends and covariates, and the second estimates difference-in-difference regressions using SAT-takers as a control group. Back-of-the-envelope calculations suggest that by inducing low-income students to attend more selective colleges, the policy change significantly increased their expected earnings. Because the cost of sending an additional (non-free) ACT score was merely $6 throughout, this sizable behavioral change is surprising and suggests that students may use simple heuristics in making their application decisions. In such a setting, small policy perturbations can have large effects on welfare.


Challenging the Bing-It-On Challenge

Did you find this blog post through Bing?  Probably not—67% of worldwide searches go through Google, 18% through Bing.  But Microsoft has advertised in a substantial TV campaign that — in the cyber analog to blind taste testing — people prefer Bing “nearly 2:1.”  A year ago, when I first saw these ads,  the 2-1 claim seemed implausible.  I would have thought the search results of these competitors would be largely identical, and that it would be hard for people to distinguish between the two sets of results, much less prefer one kind 2:1.

When I looked into the claim a bit more, I was slightly annoyed to learn that the “nearly 2:1” claim is based on a study of just 1,000 participants.  To be sure, I’ve often published studies with similarly small datasets, but it’s a little cheeky for Microsoft to base what might be a multi-million dollar advertising campaign on what I’m guessing is a low six-figure study. 

To make matters worse, Microsoft has refused to release the results of its comparison website, Bingiton.com.  More than 5 million people have taken the Bing-It-On challenge – which is the cyber analog to a blind taste test.  You enter in a search term and the Bing It On site return two panels with de-identified Bing and Google results (randomly placed on the right or left side of the screen).  You tell the site which side’s results you prefer and after 5 searches the site reveals whether you prefer Bing or Google. (See Below)

Microsoft’s soft ads encourage users to join the millions of people who have taken the challenge, but it will not reveal whether the results of the millions are consistent with the results of the 1,000.


In Praise of the Music in Freakonomics Radio

I think that our engineer/mixmaster David Herman does a fantastic job of making Freakonomics Radio podcasts sound great (no matter what you may think of all the talking that interrupts the music and other audio effects).

But there is of course a lot of heterogeneity in personal preferences. Here’s an e-mail we just received from a listener:

Heard your show for the first time yesterday on Tipping.  Loved all the speaking clips and analysis. HATED the musical interludes so much that we (my husband, kids and I) cannot fathom ever listening again unless they are removed. They gave us a bad headache and were so distracting from the content that we had to turn the show off before the end.  Please consider removing them. Thanks.

Afraid we just lost a family of listeners, as we won’t be removing all music from our episodes. Happy to say this is an uncommon complaint; much more common is an e-mail asking where to get hold of the music that appears. FWIW, every time we put out a podcast, the accompanying blog post includes a transcript of the episode which lists the music.


Who Wants a Haircut for $9.99?

The other day I was walking past this barber shop on Broadway in the upper 90’s. This sign caught my eye.

It made me wonder what kind of customer is willing to get a crewcut by an “apprentice barber.” Would you? Also, was there really an “apprentice barber” on standby only to handle the $9.99 cuts? Not likely. It did make me think back to when I was in grad school and needed a root canal, and took advantage of the cut-rate dentistry available at my school’s College of Dental Medicine. The root canal was performed by a student — it took many visits, was unbelievably painful, and kept me from returning to any dentist for several years.


Is Texting Good For Adolescents?

The short answer is yes, at least if the goal is to develop more offline friendships. That is the argument of Maria Koutamanis and co-authors in a study published in Computers in Human Behavior:

The first aim of this study was to investigate whether instant messaging (IM) influences adolescents’ ability to initiate offline friendships. The second aim was to study the validity of two underlying mechanisms that may account for this relationship: (a) the opportunities offered by IM to communicate with a variety of people, and (b) to disclose intimate information. A three-wave longitudinal study was conducted among 690 Dutch adolescents (10–17 years old). Results show that adolescents’ IM use increased their ability to initiate offline friendships over time. Furthermore, IM use indirectly increased adolescents’ ability to initiate offline friendships through the diversity of their online communication partners. These findings suggest that adolescents can practice social skills online and learn to relate to a variety of people, which, over time, may increase their ability to initiate offline friendships.

(HT: Kevin Lewis)


How Much of Our Success Should We Claim Credit For?

Our most recent podcast was called “Would a Big Bucket of Cash Really Change Your Life?” It showed that the winners of a 19th-century land lottery did not appear to convert their windfall into intergenerational wealth. This challenges the modern argument that cash transfers are one of the most effective ways of helping a poor family escape poverty — and, therefore, as we said in the podcast, might be seen as a depressing conclusion.

Judd Campbell from Odessa, Texas, wrote in to dispute the depressing part, and offer some worthwhile commentary:

I just finished listening to the latest podcast about the Georgia land lottery in the 19th century. I actually found it not to be depressing at all.

Here’s why:

1. It would be depressing to me to know that poverty has existed into modernity, and the solution would be a simple one-time transfer of wealth. Surely, we could have figured that out by now and eliminated poverty. Clearly, the issue is more complex than that, and thus we have an excuse for not developing a solution. Yet.

2. While I don’t consider myself wealthy, I do make a healthy salary and live in a comfortable home with 4 kids. There are a couple of things that I believe about my life, that may or may not be logical or factual, but provides me comfort:

a. My financial success is not due to my parents. I did it on my own. I did grow up in a comfortable home with loving and supportive parents, my father has a master’s degree, and I appreciate what they have provided me. But in my gut I feel like I achieved my own success. This podcast was uplifting, because it seems to confirm that I am responsible for my own success.

b. On the other hand, I feel like my financial success will help my children be financially successful. Even though I don’t give my parents credit for my success, I believe that I can influence my children to be successful.


Tom Collins Has Spoken

We recently published a post about what seemed like an aptonym — a researcher named Thomas Collins who’s been studying the chemical footprints of whiskeys. Does he in fact share a name with the cocktail Tom Collins, or does he stick to Thomas? Thankfully, Professor Collins (or someone doing a good impression of him) left a comment on the post:

I do go by Tom. I, too, heard every combination of comments about what my parents might have been drinking, etc. I made a deliberate choice, therefore, to study whiskeys rather than gin …

Cheers!


The Folly of Eminent Domain Takings of Failing Mortgage Loans

University of Arizona economist Price Fishback, who has been on this blog before, is one of the leading scholars of the economics of the New Deal. He has a great new set of insights to share on the U.S. mortgage mess. He’s also the co-author of the forthcoming book Well Worth Saving: How the New Deal Safeguarded Home Ownership, with Jonathan Rose and Kenneth Snowden.

 

The Folly of Eminent Domain Takings of Failing Mortgage Loans
By Price Fishback

Several cities around the country are considering using eminent domain to take control of troubled mortgages in their cities.  An Associated Press example of how the proposal will work calls for the city to use eminent domain to force the lender to accept $150,000 for a $300,000 mortgage on a home that has a current market value of $200,000.  The city would then refinance the loan while cutting the principal owed by the borrower to $190,000.    

Eminent domain requires a public purpose for the taking of an asset.   The public purpose claimed here is that property values and property tax revenues can be boosted by preventing a mass of foreclosure sales.  Real estate studies do show that increasing numbers of foreclosure sales are associated with lower housing values in nearby neighborhoods.  However, the spillover benefits of preventing foreclosures, tend to be focused on houses in nearby neighborhoods. 


Dismantling the Social Safety Net

One of the major complaints of right-wing politicians against the Affordable Care Act (Obamacare) is its imposed mandates that individuals obtain health insurance and that larger businesses offer health insurance to employees.  The professed opposition is to the mandates, per se.  It ignores the mandates that both employers and workers pay taxes for Social Security coverage—old-age, disability, Medicare, and unemployment compensation.  Mandates are not new—nor is “government interference” in private choices about private insurance.

Opposition to the ACA mandates is really just a stalking horse for the eventual dismantling of the American social safety net. If the new mandates were to be dropped (unlikely, thank goodness), I would expect that their opponents would quickly move on to removing mandates for other programs that have been in effect for 70+ years.


More Evidence on the Unreliability of Memory

Our podcast about false memory, “Sure, I Remember That,” featured the research of Steven J. Frenda, Eric D. Knowles, William Saletan, and Elizabeth Loftus. If you enjoyed that, you may want to check out Loftus’s recent TED talk about her research on embedding false memories in U.S. soldiers.  It focused on soldiers who had recently gone through “Survival School” training, during which they are “captured,” sent to a mock prisoner of war camp, and aggressively interrogated:

Psychiatrist Charles Morgan and his collaborators have been studying the effects of Survival School for a number of years. We worked together to conduct a study with the soldiers who’d gone through the training in which some would be fed erroneous information. Some have been exposed to misinformation about the “perpetrator” who conducted the hostile interview. They were showed a photograph of a man who was identified as the one conducting the interrogation, and were asked questions such as, “Did your interrogator give you anything to eat? Did he give you a blanket?” The trick was that the photograph was of a completely different person. When the soldiers were fed this misinformation, 84% of them later on went ahead and identified the person whose photograph was shown. All of them were, of course, mistaken.


How Much for a Margarita?

I was at a restaurant the other day which had an interesting feature: the two menus they gave us listed different prices for the same items. One menu quoted $12 per margarita and the other offered the exact same drink for $11.

For a split second I wondered whether the restaurant was carrying out some sort of pricing field experiment. I’m pretty sure, though, that wasn’t the case. Just regular old incompetence, I suspect.

I wouldn’t usually pay $11 or $12 for a margarita, but I was so curious in this circumstance that I went ahead and ordered one. (Well, actually, I ordered three by the time I was done.)

What was the true price? Strangely, it turned out not to be $12, or even $11. They charged me exactly $7.94 per drink.

Luckily, I didn’t know that in advance or I might have had a fourth margarita, which definitely would have been a bad idea.


Choosing Your Reward

Last spring, I blogged about the $5/day for in-house food purchases that many Sheraton hotels give guests who waive house-cleaning.  In some hotels, they offer a choice between the $5 and 500 frequent-guest points.  Which is better?  For infrequent guests like me, the $5 is better.  But in some of the best Sheraton hotels, it only takes 10,000 points to obtain a free night—i.e., 20 days of no house-cleaning.  If you are a frequent guest, that seems like a much better deal—the opportunity cost of one free night is $100, typically far below the price of a night.  The Sheraton’s offer creates a separation between infrequent and frequent guests, benefiting the latter (and giving people an incentive to become frequent guests). (HT: DJH)


Thanks to Freakonomics Blog Readers (Sort of), the Gneezy and List Book Finally Has a Title

A while back we held a contest for the new popular economics book written by Uri Gneezy and John List. The authors and their publishers picked some of their favorite title suggestions and then we ran a beauty contest to determine which title was most popular among blog readers. The deal was that the person who proposed the winning title would get $1,000. Another $1,000 was to be split between randomly selected beauty contest participants.

Before I tell you which title won, let me tell you about the naming of Freakonomics. We had such an impossibly hard time coming up with a good name until my sister Linda came up with “Freakonomics.” To make a long story short, the publishers hated that name for a long time, but finally gave in. The rest is history. Of course we were all just guessing — it would have been nice to have data, the way Uri and John did.

So what do the data say? The winner of the beauty contest, with 33 percent of the votes, was The Carrot that Moved A Mountain: How the Right Incentives Shape the Economics of Everyday Life. Congratulations to Ivy Tantuco who proposed that title and collected the $1,000 prize.(Congratulations also to Jenna Dargie and Melinda Reiss, who were the randomly chosen beauty contest winners and pocketed $500 each.)