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Posts Tagged ‘money’

Some Evidence on Whether Money Buys Political Influence

A new paper by graduate students David Broockman and Josh Kalla tackles an eternal, oft-debated question: does money buy influence? Here’s the abstract:

Concern that lawmakers grant preferential treatment to individuals because they have contributed to political campaigns has long occupied jurists, scholars, and the public. However, the effects of campaign contributions on legislators’ behavior have proven notoriously difficult to assess. We report the first randomized field experiment on the topic. In the experiment, a political organization attempted to schedule meetings between 191 Members of Congress and their constituents who had contributed to political campaigns. However, the organization randomly assigned whether it informed legislators’ offices that individuals who would attend the meetings were contributors. Congressional offices made considerably more senior officials available for meetings when offices were informed the attendees were donors, with senior officials attending such meetings more than three times as often (p < 0.01). Influential policymakers thus appear to make themselves much more accessible to individuals because they have contributed to campaigns, even in the absence of quid pro quo arrangements. These findings have significant implications for ongoing legal and legislative debates. The hypothesis that individuals can command greater attention from influential policymakers by contributing to campaigns has been among the most contested explanations for how financial resources translate into political power. The simple but revealing experiment presented here elevates this hypothesis from extensively contested to scientifically supported.


The Undercover Economist Is Back

Tim Harford, who writes the Financial Times‘s “Undercover Economist” column, has appeared on our blog many times. This guest post is adapted from his new book The Undercover Economist Strikes Back: How to Run or Ruin an Economy. Harford also appeared in our podcast “Hey Baby, Is That a Prius You’re Driving?“

Perhaps the strangest currency in the world can be found on the island of Yap, in Micronesia in the West Pacific. This coin, the rai, is a stone wheel with a hole in the middle. Some rai are fairly portable—a handspan or less across, and the weight of a couple of bags of sugar. But the most valued stones are far bigger—one British sailor wrote in the late nineteenth century of a stone wheel that was four and a half tons in weight and more than nine feet in diameter. In other words, it was almost completely immovable.

Yap’s stone money used to be a serious business. The stones were quarried and carved on the island of Palau, 250 miles away. One Victorian naturalist witnessed four hundred men from Yap, a tenth of the adult male population, at work in the quarries of Palau. Getting the stones from Palau to Yap on a little bamboo boat was a difficult and sometimes lethal affair—some of the stones weighed as much as two cars. (And rai were especially valuable if someone had died on the expedition to fetch them.) The biggest stones might have been used for major transactions such as buying land or wives; more modest-size stones—a couple of feet across—were exchangeable for a pig. Even then, it would have been a lot easier to move the pig than to move the stone.


Charity "Shoppers" vs. Charity Investors

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

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

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

I look at this three ways:

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


What Makes People Do What They Do?

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

Money is important. For a long time, economists thought that it was the only thing that mattered. And, in fact, if you want people to do what you want, money can be incredibly useful. Out to entice the best workers? Pay more. Want to sell a product? Discount it, a lot. Want to discourage a bad behavior? Impose a monetary fine.

It seemed a little silly to us though (as well as to other behavioral economists doing work back in the 1990s) to think that money was the only thing that mattered. So we set out to learn exactly when and how monetary incentives work. Along the way, we discovered some environments where incentives don’t work at all. 


Money Didn’t Buy Happiness in Baseball in 2012

If you wish to win in baseball, your team has to spend money. Just look at the New York Yankees. USA Today reports that in 2012 the Yankees led the American League in spending.  And the Yankees finished with the best record in the American League.

Of course, one data point doesn’t a trend make. What do we see when we look past the Yankees?


Does Money Really Buy Elections? (Ep. 57)

Mitt Romney won big in New Hampshire, but his opponents are vowing to push on in South Carolina. Which means stepping up their pleas for cash. In an e-mail to supporters, Rick Santorum wrote:

We must show real progress tonight and redouble our efforts … That’s why my campaign launched the “Game On” Moneybomb, and why we need your help right now. As you already know, we are facing serious and well-funded opposition for the nomination.

That’s the kind of language that confirms one of the biggest truisms in politics: money buys elections.

But how true is that truism?


FREAK-est Links

This week, does eating fish reduce the risk of Alzheimer’s? How to use Google to pick your baby’s name; the brains of psychopaths are structurally different; impatient people have lower credit scores, and an interactive chart of all the money in the world.


Time Banks: Got Time for Lunch?

Last weekend, I was walking around New York’s Lower East Side when I stumbled upon an interesting restaurant. The counter was serving Thai food, but they didn’t take cash – they only took time.

For a home-cooked lunch (with table service), I was told I’d have to pay with a half-hour of my time. This was an alternative economy staged by artists Julieta Aranda and Anton Vidokle as part of Creative Time’s Living as Form exhibition, part of a larger community movement of time banks going on nationally.

A time bank is not a barter system. Your good (or service) is not directly exchanged for another good or service. There’s a medium of exchange: it’s time, not money.

Some interesting history from their artist statement


Marriage: More Money, More Problems

We included this in last week’s FREAK-est Links, but thought it was worth a full blog post. A recent study of 1,734 married couples in the U.S. finds that money, indeed, can’t buy you love. According to an article about the study, couples who don’t value money very highly score “10 to 15 percent better on marriage stability and other measures of relationship quality than couples where one or both are materialistic.”

“Couples where both spouses are materialistic were worse off on nearly every measure we looked at,” said Jason Carroll, a professor at BYU, and the lead author of the study. “There is a pervasive pattern in the data of eroding communication, poor conflict resolution and low responsiveness to each other.” Interestingly, materialistic couples’ perception of their finances seems to matter more than their actual financial status: “Though these couples were better off financially, money was often a bigger source of conflict for them.”


Follow the Money

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.
Jay K asked:

A friend recently quoted the Washington Post as saying ‘Follow the money’ during the Watergate days. I thought it was just a line from the movie ‘All the President’s Men’. But is the phrase older than that?

This is usually said to have originated in William Goldman‘s screenplay for the 1976 film All the President’s Men, uttered by the source called “Deep Throat.” (It does not appear in the earlier book by Carl Bernstein and Bob Woodward.)


QE3? Not So Fast. Let's Debate the Merits of QE2 First

The Fed’s second round of monetary stimulus, the $600 billion QE2, ended on June 30. Since then, financial markets have rallied on news of another Greek bailout, and then fallen on weakening jobs and economic news from the U.S. The Dow is basically back to where it was when QE2 ended on June 30. So the world hasn’t ended, and yet there are those who think we need a third round. The minutes of the latest meeting of Federal Reserve officials, released Tuesday, show them divided on whether to implement a third round of monetary stimulus. Before we get ahead of ourselves, let’s first assess QE2. For that, we turn to two of our regular contributors, Justin Wolfers, and James Altucher.


Know Your Scarcity

Fred Brooks, the computer scientist who 35 years ago wrote the still-relevant The Mythical-Man Month, has written a new book, The Design of Design, and Kevin Kelly interviews him in Wired.


A New Car or Ten Thousand Lattes?

At Big Think, Dan Ariely discusses ways to think about money so you splurge less — like equating expensive wine with gallons of milk and making paying hurt a little more.


Do We Need a 37-Cent Coin?

A young economist I know, Patrick DeJarnette, believes a much more radical change in currency is warranted. Here is what Patrick writes:
Late one night I was curious how efficient the “penny, nickel, dime, quarter” system was, so I wrote a little script to compare all possible 4-coin systems, with the following stipulations:


Should Antoine Walker Be Arrested for Bouncing Checks? (Should You?)

I’m troubled by news reports that Antoine Walker was arrested for writing $1,000,000 in bad checks. The ex N.B.A. star — Employee Number 8 — was forced to do a perp walk as he apparently was led out of Harrah’s Tahoe in handcuffs. The criminal complaint alleges that from July 27 to January 19, he wrote 10 separate $100,000 checks with insufficient funds to Caesars Palace, Planet Hollywood, and Red Rock Resort.


Advice Worth $1 Billion

Usually, when people talk in terms of billions of dollars, they are referring to macroeconomic questions. Recently, however, three economists (Jeremy Bulow, Jonathan Levin, and Paul Milgrom) were hired as consultants to advise a group that was bidding in a spectrum auction that would allow them to provide wireless service.
By following the advice of the economists, the group was able to purchase wireless coverage for the United States for $2.4 billion, while their major competitors ended up paying $3.5 billion for the same spectrum in the same auction. Thus, their advice was worth more than $1 billion to their clients.


Still No Cash for Clunkers

Last year I blogged about the Cash for Clunkers program in which the government subsidizes consumers who turn in their beat-up old cars to buy new ones. I noted that this program was likely to have a host
of negative unintended consequences that its proponents were ignoring.
The bad news is that the House of Representatives has now passed a Cash for Clunkers bill. The good news is that the version they passed applies to so few vehicles that there is virtually no incentive for anyone to take advantage of the program, so its unintended consequences will be smaller than they otherwise would be.


What Do 3,000 Years Do to Wages?

One of the better-known biblical passages, Leviticus 27:1-7, lists the value of pledges of silver to the temple based on the value of a person: 50 shekels for a man between the ages of 20 and 60, 30 shekels for a woman of the same age, 15 shekels for a man over 60, and 10 shekels for a woman over 60. Once we ignore differences in labor-force participation, the earnings ratios today are not that far from what was expected 3,000 years ago.


Most Expensive Blog Post

In much of America, conspicuous conservation is the new conspicuous consumption. Those of you itching for a fix of boom-time nostalgia can visit the Most Expensive Journal, your guide to the priciest items available. A $50,000 Go-Kart? Sure. A jewel-encrusted, $2.4 million iPhone? Why not? It’s SkyMall for plutocrats. [%comments]


The Cost of Campaigning in Rapid City, S.D.

Levitt and I had the pleasure of visiting Rapid City, S.D., recently to give a lecture. Yes, we had time to visit Mount Rushmore, a good time made all the better by our charismatic tour guide, National Park Service Superintendent Gerard Baker (Yellow Wolf), the very tall gentleman between us here: We also had occasion to meet a phalanx of . . .


Turning Money Into Art

| For those of you who enjoy dollar origami, we bring you a gallery of Mark Wagner‘s intricate and beautiful dollar bill collages. His portrait of Marxism is our favorite. [%comments]


How to Lose Millions in a Day Without Benefit of the Stock Market

Matthew J. Darnell, writing on Yahoo!’s N.F.L. blog, talks about how Andre Smith, an Alabama offensive lineman slotted as a potential overall No. 1 draft pick, has destroyed his own value with a series of bad decisions and, most recently, a really bad workout in front of pro scouts: I can’t recall anyone’s draft stock falling quite like Andre Smith’s. . . .


Some Advice for Gold-Diggers

The Los Angeles Times reports that membership at online dating sites has increased substantially this year; eHarmony, for example, was up 20 percent. In light of the economy, we wonder how many of these online daters joined up to do some gold-digging. They should be careful. As research by Gunter Hitsch, Ali Hortacsu, and Dan Ariely makes clear, income is . . .


Is This Where the $700 Billion Is Going?

There was a lot of noise last week about how the banks who’ve been drawing down the government’s Troubled Asset Relief Program fund can’t account for how the money is being spent. It’s not like $700 billion can just disappear, right? Well, a reader named Gannon Hubbard wrote in with a hunch as to where the money is being spent. . . .


FREAK Shots: When Money Goes Down the Toilet

At around 231 million percent, Zimbabwe’s hyperinflation (which we’ve written about before) is currently the highest in the world. Blog reader Ben Saltsman sent us this photo of a restroom sign in South Africa, which hints at one use for Zimbabwe’s severely devalued currency: Photo: Eugine Baron But is it cost-effective for Zimbabweans to use money instead of T.P.? A . . .


Suze Orman Answers Your Money Questions

Suze Orman Earlier this week, we solicited your questions for Suze Orman. You asked about paying college debt, choosing a good retirement plan, and — especially with a week like this — how safe your money is. In her answers below, Orman also offers a question to ask whenever deciding what to do with your money: Is that normal? And . . .


Money Can’t Buy Time

The average human being will be substantially richer in 50 years, just as the average American today has a real income three times what it was in 1955. But the average human being will not have much more time in 50 years than today; and life expectancy has increased by only 10 percent in the U.S. since 1955, so for . . .


A Criminal History of the U.S. Dollar: A Q&A on A Nation of Counterfeiters

The dollar has taken serious hits recently, not only continuing to fall against the euro but being caught even by the Canadian loonie. From the long view, however, the dollar’s current woes are simply another step in the long and tumultuous history of paper currency in the U.S. Stephen Mihm, a professor of history at the University of Georgia and . . .