The Princeton economist Alan Krueger — he led the Council of Economic Advisers under Obama, and his research has been featured several times on Freakonomics.com — is among a group of scholars launching a new endeavor. It’s called the Music Industry Research Association, and they want you to come to their first conference, at UCLA, in August. Here’s their writeup: Starting with . . .
Christian Zimmerman of the Federal Reserve Bank of St. Louis has created the ultimate game for econ nerds: the RePEc Fantasy Economic league. “The IDEAS fantasy league allows you to pretend you are at the helm of an economics department,” explains the league’s website. “Your goal is to improve its ranking relative to other departments in the league. You can do this by trading economists and by choosing which ones to activate in your roster.” A Business Insiderarticle explores optimal strategy:
“In real life when you build a department, you want to hire people that are prospects,” Zimmermann said. “In this fantasy league, it’s just the same. You really want to acquire people that are going to be doing well in the next 10 years.”
In other words, you want the sleeper picks. Ask yourself: Who is going to cost 1 util and then put out some game-changing working papers?
Edwards agrees that you have to look for the rising stars. “It’s a Moneyball type strategy,” he said. “Looking for undervalued economists and trying to invest, or trying to divest in overvalued economists.”
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”:
When Jason Childs and his colleagues went about devising a new course in economics at the University of Regina, they wanted to find a focus that didn’t involve the overused and fictitious widget.
What they arrived at was a product that was historic and central to people’s lives – and something most undergraduate students are familiar with: beer.
Childs, an associate professor of economics, said the Economics of Beer course had 80 seats, and they were filled in about two weeks. The course began in early May and finishes near the end of June.
“Basically, it’s an exploration of some economics concepts, in particular microeconomic concepts, and the brewing industry,” he said. “Beer is a really neat example because it allows you to talk about just about every fundamental concept in economics.”
Tyler Cowen, who appears in these parts pretty regularly, writes in a Times column about the egalitarian core of the economics profession:
Economic analysis is itself value-free, but in practice it encourages a cosmopolitan interest in natural equality. Many economic models, of course, assume that all individuals are motivated by rational self-interest or some variant thereof; even the so-called behavioral theories tweak only the fringes of a basically common, rational understanding of people. The crucial implication is this: If you treat all individuals as fundamentally the same in your theoretical constructs, it would be odd to insist that the law should suddenly start treating them differently.
Cowen concludes by exploring a modern-day application of this putatively egalitarian core:
A distressingly large portion of the debate in many countries analyzes the effects of higher immigration on domestic citizens alone and seeks to restrict immigration to protect a national culture or existing economic interests. The obvious but too-often-underemphasized reality is that immigration is a significant gain for most people who move to a new country.
Elena Malik, communications chair of the 12th annual Carroll Round at Georgetown, writes to solicit applications for a worthwhile event:
The Carroll Round is an annual undergraduate international economics conference at Georgetown University that provides a unique forum for research and discussion among the world’s top undergraduates. Each year, we invite applications from students to present and discuss their work with peers, professors, and policy-makers invited to participate. This year we are honored to host guest speakers including Dr. John B. Taylor and Dr. Janet Currie. We are still recruiting applications from students.
This year’s Carroll Round will be held from April 18-21; more info here.
With the Presidential debate finished, we are officially in the final lap of America’s second-favorite spectator sport. (Yes, football is better than politics.) Of all the talking that Barack Obama and Mitt Romney will do by Nov. 6, you can bet that a great deal of their breath will be expended on economic matters. Because that’s what the President of the United States does, right — runs our economy?
Well, actually, no. The President has far less influence over the economy than people tend to think — as we’ve pointed out not once, or twice, but three times.
That, of course, won’t stop the candidates from talking about their plans to “fix” or “heal” or “restore” our economy — all of which imply that we are in an economic doldrums that is sure to pass. But what if it doesn’t? What if the massive economic growth the U.S. has experienced through most of our history is a thing of the past?
That’s the topic of our latest Freakonomics Radio onMarketplacepodcast. (You can download/subscribe at iTunes, get the RSS feed, or listen via the media player in the post.)
I’ve just gotten back home after a terrific few days at the Brookings Panel on Economic Activity. It’s my favorite gabfest of the year, featuring economic analysis that is both serious research, and also connected to ongoing policy debates. (OK, I’m biased–I’m an editor, and organize the conference along with Berkeley’s David Romer.) And while I think some of you may enjoy slogging your way through the latest papers, others may prefer your summaries simpler and lighter. So I went ahead and recorded a few short videos summarizing the papers. I hope you enjoy!
There’s a revolution underway in economics. It’s not due to the financial crisis, but rather something more mundane: Data, and computing power. At least that’s the claim that Betsey Stevenson and I make in our latest Bloomberg View column:
“Consider the stream of data you will create today. Your metro card will record what time you caught the train. Your Web browser will note how you go about your job, and how much you procrastinate. A mid-afternoon purchase at Starbucks will reveal your penchant for lattes and the occasional cookie. Your flow of e-mail traffic will trace out your professional and personal networks.
At the same time, computing power has made it extremely easy and cheap to analyze all the data you produce. An economist with a laptop can, in a matter of seconds, do the kind of number crunching it used to take a roomful of Ph.D.’s weeks to achieve. Just a few decades ago, economists used punch cards to program data analysis for their empirical studies.”
Two weeks ago, Harvard’s Raj Chetty gave a spectacular talk at the National Bureau of Economic Research, about what he called “The Transformative Potential of Administrative Data.” He documented that today’s cutting-edge research is based on crunching newly-available data from the vast databases which underlay our schools, welfare state and tax systems. I’m just as optimistic that new data coming online from the private sector will prove to be just as useful.
Over at the Big Think, eight young economists weigh in on the future of the profession, including our own Justin Wolfers. Here’s Justin:
Specifically, the tools of economics will continue to evolve and become more empirical. Economic theory will become a tool we use to structure our investigation of the data. Equally, economics is not the only social science engaged in this race: our friends in political science and sociology use similar tools; computer scientists are grappling with “big data” and machine learning; and statisticians are developing new tools. Whichever field adapts best will win. I think it will be economics. And so economists will continue to broaden the substantive areas we study.
I owe my favorite local bookstore, the Harvard Bookstore, for making another day for me. Wandering the tall, packed shelves on a warm and breezy evening, I ran across Schaum’s Outline of Principles of Economics. One subtitle on the cover: “964 fully solved problems.” The problems include, for example (from page 50): “True of false: As used in economics, the word demand is synonymous with need,” or “True or false: A surplus exists when the market price is above the equilibrium price.”
I didn’t long much for either answer.
Instead, as the U.S. mortgage market has, as James Kunstlerpredicted on October 10, 2005, imploded “like a death star” and dragged “every tradable instrument known to man into the quantum vacuum of finance that it create[d],” as euros flee from Greece, and as bank loans dry up in Spain, I wished that the 964 fully solved problems included one or two of the real problems.
Their thoughtful responses below cover everything from robber barons to the artificial construction of African nations to whether the race of a country’s leaders determines its success. A big thanks to Daron, Jim, and all our readers for another great Q&A.
First, a note from Daron and Jim: “We thank everybody for these excellent questions and comments. We had to pick a few to be able to provide detailed answers.
When it comes to economic ideas, Daron Acemoglu never thinks small. Widely acknowledged as one of the most insightful economists alive, Daron seems to have brilliant things to say about any and all things economic.
When you have that sort of gift, you might as well go after the biggest problems imaginable. Thus his latest book, Why Nations Fail, written with Harvard political scientist James Robinson.
It is an awesome piece of work. So full of ideas and wisdom, but still so easy to read. I just love it. Daron and Jim have agreed to take your questions about their new book, so please leave them in the comments section below. To get you started, here’s the table of contents:
One of the great experiences of my stint in grad school was taking Advanced Macro classes from a fellow who at the time was regarded as a promising young professor at MIT — Daron Acemoglu. It was well worth making the bike trip from Harvard, down Mass. Ave., to learn from him. He is surely the most productive economist alive. And his frequent collaborator Jim Robinson may just be the most interesting political scientist. Their joint research program — figuring out what works and what doesn’t in economic development — involves asking some of the most important questions any social scientist can ask.
According to the Higher Education Funding Council for England (HEFCE), there was a 10% increase in the number of students accepted to read physics by the university admissons services between 2008-09, when The Big Bang Theory was first broadcast in the UK, and 2010-11. Numbers currently stand at 3,672. Applications for physics courses at university are also up more than 17% on last year. Philip Walker, an HEFCE spokesman, said the recent spate of popular televisions services had been influential but was hard to quantify.
Hard to quantify, indeed.
FWIW, we’ve been told by a lot of youngish readers that Freakonomics and SuperFreakonomics led them to major in economics. John J. Siegfried addressed this possibility in a Journal of Economic Education paper called “Trends in Undergraduate Economics Degrees, 1991-2010”:
Every year, I have my 500 intro students write vignettes like those in my little book, Economics Is Everywhere. This year, I got one which is the most clever and original of the roughly 2,000 submitted in the past four years. It’s by my student Kourtney Kech, and appears below.
As a small child, I remember quite clearly, a book that my mother read and loved dearly.
The Lorax, by Seuss, a doctor of rhymes, provided us both with some great pre-sleep times.
The idea of scarcity is not that complex and is shown in great detail through Lorax’s text.
“We’re doing this because we think economists have a distorted role in policy debates,” said Brian Barry, the director of IGM. “When experts fight about minor points they get much more attention than when they broadly agree about important ones. And when they disagree about big issues, the reasons don’t often come through clearly. Sometimes, ideas that are shaky or on the fringe get passed off as mainstream.”
Is a desire to get picked up by the Freakonomics blog, or the dozens of similar outlets for funky findings, really driving work in psychology labs? Alternatively—though not really mutually exclusively—are there broader statistical problems with the field that let snazzy but questionable findings slip through?
Electric cars face new scrutiny after a fire in a Chevrolet Volt prompted a federal investigation into lithium ion batteries, even after U.S. regulators said their own crash test likely led to the blaze.
Accounting for more than half of the about 216,000 new cars sold sales in Israel by leasing to corporations, rental agencies are balking [at buying electric vehicles] because of uncertainty regarding the cars’ resale value. Mr. Bar said that he fears vehicles with switchable batteries might lose as much as 70% of their original value in four years instead of the typical 40% loss by gasoline-powered vehicles over the same period.
“It’s going to be a nice niche, a gimmick, for people who are environmentalists, and corporations who want to show they are saving the environment, but I don’t see a savings in costs,” Mr. Bar said.
Last week we posted about Harvard’s Nobel Prize Pool, where people could place bets predicting this year’s winner of the Nobel Prize in Economics for $1 per entry. The Harvard economics faculty ran the site for a few years, dubbing it, “the world’s most accurate prediction market.” Apparently, Harvard wasn’t too keen on the idea, as the following notice now appears on the site:
Unfortunately, we have been advised by Harvard University to immediately shut down the Nobel pool due to legal reasons, and we have decided to comply with this request. We will fully reimburse the money of all participants, and we apologize for any inconvenience this creates for you. All participants will be contacted by email.
For anyone who watched the site closely over the last week, do you remember the odds for the actual winners, Thomas J. Sargent and Christopher A. Sims?
The Danish policymakers who implemented the world’s first “fat tax” last week are remarkable not for their directness in addressing the growing Western challenge of obesity, but for their indifference to the plight of the poor, their deference to political correctness at the cost of economic efficiency, and their willingness to punish certain segments of society.
The Danes may have been the first, but headlines throughout the western world assessed the likelihood of other countries to follow, including this one. A fat tax in the U.S. (or the U.K. for that matter) would add to the growing thicket of regulations across local and federal jurisdictions intended to address weight gain and the external costs that obesity imposes on society— both through higher private insurance premiums and ballooning government outlays for the uninsured.
Whether the tax will improve health outcomes is an empirical question that won’t be answered for several years or more.
Next Monday, the Nobel Prize Committee will announce the recipient(s) of the 2011 Nobel Prize in Economic Sciences. If you think you know who’s going to score this year’s prize, head on over to Harvard’s Nobel Pool, “the world’s most accurate prediction market.”
Each entry will cost you $1; all entries and bets must be received by 11:59 PM on Sunday, October 9th. If you’re looking for inspiration, past predictions can be found here. And if you haven’t already, listen to our Freakonomics Radio podcast, “The Folly of Predictions,” to find out where we stand on the whole notion of predictions.
So Freakonomics readers, who are you betting on?
Our friend Joshua Gans, along with some colleagues, has launched a new blog devoted to the economics of digitization called digitopoly.org. Here, in a guest post, he explains the origins of the site, and what it’s all about.
By Joshua Gans
Some of the most popular blogs are tech blogs (Gizmodo, Engadget, TechCrunch) or blogs that place a tech perspective on social commentary (e.g., BoingBoing). And, as we know, economics blogs also tend to be popular. What was missing though was a blog devoted to the economics and competitive issues that arise in the digital age. What’s more, thanks to the NBER’s new Program on the Economics of Digitization (funded by the Sloan Foundation), there is a wealth of new research in this area. That’s how we came to setup a blog devoted to digital issues from an economics perspective.
In conjunction with our latest Freakonomics Radio podcast, “The Folly of Prediction,” I decided to reach out to a former professor of mine, Raymond Horton, whose modern political economy class is a student favorite at Columbia Business School. I wanted to know what Horton thought the worst prediction ever was, particularly regarding the intersection of politics and economics. He immediately pointed to a Foreign Affairsessay written by Mortimer Zuckerman in 1998, in which Zuckerman boldly lays out the case that, like the 20th century, the 21st will also be marked by American dominance.
We’re barely a decade into the new century, so you may think it’s too early to pass judgment on Zuckerman’s prediction. But given the way things have played out over the last several years, it does look to be on shaky ground. At least that’s the opinion of Ray Horton.
Once you’ve finished reading Horton’s essay, we’d love to hear what you think count as some of the worst predictions ever.
A weird week in New York City is only getting weirder. On Tuesday, for the first time since 1884, earthquake tremors were felt in the Big Apple; which, not surprisingly, came with no warning from earthquake prognosticators. Now, NYC is bracing for its first hurricane since 1985. (Any readers game for trying to calculate the odds of NYC getting hit by an earthquake and a hurricane in the same week, I’d love to see your estimates.) As I write, I’m watching out my window as people in the building across the street tape their windows. Which reminds me, I need duct tape!
Now that the MTA has announced that all NYC public transportation will be shut down beginning on noon Saturday, people are out in force doing some last minute hurricane shopping. So we decided to venture out and do a little reporting on what’s left, and what’s not.
Last week, the World Bank blog Development Impact wrote about the influence of economics blogs on downloads of research papers. It included Freakonomics.com, as well as 5 other blogs — Aid Watch, Chris Blattman, NYT’s Economix, Marginal Revolution, and Paul Krugman. Using stats from Research Papers in Economics, it found spikes after blogs cover a paper. For us, it found a 450-470 increase in abstract views and downloads. Check out their cool graph:
A report by New York City’s Metropolitan Transportation Authority seems to prove that hopping a subway turnstile is worth the risk of getting caught and fined. The MTA estimates that riders entered the subway without paying 18.5 million times in 2009 (an average of 50,684 a day) while the police issued just 120,000 summonses, or 1 for every 154 jumps.
The report figures that a regular turnstile jumper has a chance of getting caught only once every 6 to 13 weeks. At $100 per fine, this works out to be cheaper than a $27 weekly unlimited Metrocard that would cost $162 over six weeks. So the fare-skipper who gets nabbed only once in that period still comes out ahead by $62. And that was in 2009. While the price for a weekly pass has since increased to $29, the cost of the fine has not, so in 2011 it pays even more to hop the turnstile.
From the Daily News:
“This basic street economics might explain observed evasion behaviors,” the authors of the report wrote, arguing stiffer penalties might cut down on scofflaws. “Higher fines or arrests may have better deterrent effects.”
This bleg comes from reader Wayne Smith, who asks for suggestions on which economic concepts are the most important for kids to learn:
What topics do the Freakonomics readers feel are most important to teach kids 8-13 years old? Aside, of course, from the fact that the man keeps you down.
I was listening to The History of Sesame Street audio book the other day and thought that it would be nice to come up with a YouTube show with decent production value that outlines basic economic concepts in an entertaining way. Concepts like capital, value, supply/demand, trade, time value of money, interest, saving and borrowing, opportunity cost, taxation,and so on. This would be more narrative than something like Khan Academy. Naturally each concept can have an episode devoted to it and each concept can be addressed in different ways in different episodes, but in scenarios geared toward kids. What do the readers think about this as a concept?