August 21, 2007, 11:44 am
The issue they tackled is detection of illegal arms trades that defy United Nations embargoes. Their idea was to use the information embedded in stock markets to tease out indirect evidence of the illegal deals. Legitimate weapons dealers that obey the embargoes are hurt by them, while illicit dealers benefit. So DellaVigna and La Ferrara examined how the stock prices of weapons dealers in different countries are affected by events that raised and lowered the likelihood that the embargo will be rescinded. They found that the stock prices of arms sellers in countries more likely to house illicit dealers (e.g. countries with more corruption and less rule of law) rise when events prolong embargoes, whereas stocks of arms dealers in countries like the U.S. fall in response to the same news.
While this is not the sort of evidence you could use to convict somebody, it is an excellent example of what some are calling the “forensic economics” movement. In a column in last week’s Philadelphia Inquirer, the conservative talk-radio host Michael Smerconish called for forensic economists (myself in particular) to apply our tools to terrorism. More to come, perhaps.
August 21, 2007, 9:04 am
I am delighted to report that the economics paper on AC/DC I blogged about yesterday was meant as a joke. It takes a lot of work
to run an experiment on real people, just for a gag paper. It turns out they meant to play the same AC/DC song in both treatments, but made a mistake and accidentally played two different songs. Thus the genesis of the joke paper.
I still think this leaves Professor Oxoby with a bit of explaining to do as to why they were playing AC/DC as part of an experiment in the first place, however.
August 21 is the 21st anniversary of the Hubbard Glacier’s sudden and rapid shift, threatening the Alaskan town of Yakutat with an eco-disaster. Two decades later, the story would have been just one in the slew of climate change headlines.
A while ago, we wrote a New York Times Magazine column about talent — what it is, how it’s acquired, etc. The gist of the column was that “raw talent,” as it’s often called, is vastly overrated, and that people who become very good at something, whether it’s sports, music, or medicine, generally do so through a great deal of “deliberate practice,” a phrase used by the Florida State psychologist Anders Ericsson and his merry band of fellow scholars who study expert performers in many fields.
As we wrote, there are at least three key elements to deliberate practice: Read more …
They grow up to write economics papers like this one, which looks at whether participants in lab experiments get closer to efficient outcomes when exposed to one lead singer of the rock band AC/DC versus another.
I hope for this guy’s sake he has tenure.
(Hat tip to Joshua Gans.)
Bruce Wydick, a professor of economics at the University of San Francisco, has written an interesting OpEd in USA Today about sunk costs and the Iraq war. Here is his lead:
Our inability to think clearly about sunk costs is impeding our ability to make clear decisions about our involvement in Iraq. Failing to correctly identify sunk costs (those that are irretrievable), and deal with them properly, biases our decision-making in favor of prolonging the war.
This is not the first time that someone has publicly connected war policy with the cognitive misstep that behavioral economists have made widely known as the sunk-cost fallacy. As noted earlier here, Read more …
Back in the day, when people noted that Diet Coke was 99% water, it was an insult. The point was that water was free, and Diet Coke was just free water plus a little bit of artificial this and that — so you would have to be a fool to pay so much for it.
Of course, times have changed. Bottled water now generates an estimated $50 billion in sales each year, with that number growing rapidly. According to this CBS News report, which puts soda revenues at $68 billion a year and stagnant, bottled water is now as big a business as soda.
All of which explains the new print ad I saw for Diet Coke, Read more …
August 20 is the day in 1938 when Lou Gehrig hit his record 23rd career grand slam. At least that is one home run record that seems well out of reach of Barry Bonds (though hardly so for Manny Ramirez).
Freakonomics and High School Musical have a lot in common. Both were surprise hits that had no reason to be commercial successes, but managed to do well by not taking themselves too seriously.
My kids and my wife love the original High School Musical. I kind of like it myself. It is played an average of three times a day in my house. So we have been eagerly awaiting the sequel, High School Musical 2, which premiered on Friday. The verdict: my six- and seven-year-olds liked it okay, but I could not believe how bad it was. It was shockingly awful.
I’ve been trying to figure out what made the movie so incredibly terrible. I think the only possible answer is that they started taking themselves seriously. Do others who saw it agree?
Anyway, to answer the question posed in the title of this blog post … Let’s hope the answer is “nothing.”
It has recently come to our attention that roughly 90% of the people who read this blog via RSS feed had their subscriptions interrupted when we moved our blog to NYTimes.com about 10 days ago. (If you don’t read this blog via feed, you probably have no idea what I am talking about, and nothing in this post will matter to you.) There are four things to say about this:
1. The problem is now fixed.
3. Welcome back.
4. The feed currently being sent out by the Times is not the full feed; instead you will be receiving an excerpt of each post, requiring you to click through to the Times site to read the whole blog.
There are a few more things to say about No. 4: Read more …
In the video player over in the right-hand column of our home page, you’ll find a new short video that’s a brain tease about your brain. Go give it a click, and then leave your answer in the comments section of this post.
A one-time religion student at Columbia University, Chris Napolitano took a job at Playboy in 1988 as an editorial assistant in the fiction department. He went on to become features editor, executive editor, and in 2004 reached the top job, editorial director. (The editor-in-chief title remains reserved for founder Hugh Hefner.) In the spirit of Jim Cramer, Mark Cuban, and Sudhir Venkatesh, Napolitano has offered to answer questions from Freakonomics.com readers.
A few things to consider:
Napolitano’s job hasn’t been easy lately, with Playboy hustling to stay relevant in the modern world. Circulation has fallen from about 6 million in the early 1970s to about 3 million (a figure that the magazine struggled to hit in the first half of this year). Playboy is fighting back by offering a tiered online subscription service, digitally archiving its past issues, creating a presence in Second Life (the sexual proclivities of which we’ve touched on before), and offering content for iPhones. Read more …
One of my favorite people from graduate school (a writing program at Columbia) was Peter Temes. He worked incredibly hard, writing and teaching and raising a family all at once, which meant that he kept his head way out of the clouds, which couldn’t be said of all of our peers. He has gone on to write some books (including The Just War and The Power of Purpose), teach at some universities, and is now the president of the ILO Institute, a consortium of 60+ global companies and NGOs focused on innovation in large organizations. For three years, he was also president of the Antioch New England Graduate School in Keene, N.H.
We were talking recently about the closing of Antioch College, and what it says about the state of higher education. Peter had some interesting thoughts on the subject, so I asked him to write up the following guest blog post. I hope you find it as interesting as I did.
When a College Dies
by Peter Temes Read more …
For reasons that may not make sense to anyone else, I recently performed a Google search for “They Might Be Giants” and “Belly Button.” This was the second hit: a paper by a Stanford linguist named David Beaver (that’s not an aptonym, is it?) called “Have You Noticed That Your Belly Button Lint Colour Is Related to the Colour of Your Clothing?” Here is the abstract: Read more …
Last week, we solicited your questions for Mad Money host and man-about-Wall Street Jim Cramer. Here are his responses:
Q: Do you feel Ben Bernanke listened to some of the points you made in your CNBC rant last Friday?
A: I’d say that just the opposite is true, based on the FOMC statement from the August 7 meeting.
Q: What is your view on the moral hazard issues that could accompany the fed bailout you’ve requested?
A: In my opinion, it’s potentially a far larger moral hazard for millions of individuals to soon become so far underwater on their investments Read more …
On Monday, Dubner argued that the President of the United States matters far less than people think.
As it turns out, there is some economic research to back him up, at least when it comes to influencing economic growth. Ben Olken (one of my favorite young economists) at the Harvard Society of Fellows and Ben Jones from Northwestern (not the same Ben Jones of Dukes of Hazzard) have two recent papers on the subject.
A couple weeks ago, Levitt wondered about the crowds that buy the slew of anti-religion and anti-God books that are so popular these days. His argument included an analogy — which many commenters found lacking, I should say — about bird-watching books: even if you hate bird-watching, you’re not prone to buy a book that bashes it.
By strange coincidence, I had just started reading a book that’s about God and bird-watching. It’s an advance copy of The Life of the Skies, by my friend Jonathan Rosen. It includes an interesting chapter about the famous search for the ivory-bill woodpecker, long thought to be extinct. (Rosen had written earlier on the subject, in both the New Yorker and a Times OpEd in 2005, after the apparent rediscovery of the “Lord God bird,” so named because it’s allegedly so beautiful to behold that you can’t think of anything to say except “Lord God!”) Read more …
Following last week’s quorum about street charity, we’ve now brought in a half-dozen bright people to address a very different issue:
Is it finally time to believe in the housing bubble? And how much should the average American care?
While the topic of real estate has hardly been neglected on this blog, the housing bubble is another story. Here to tell the story are:
Robert Shiller, the Yale economist and Irrational Exuberance author, who has indexed U.S. home prices back to 1890; Lawrence Yun, chief economist of the National Association of Realtors; David Lereah, the N.A.R.’s former chief economist, who is now executive vice president of Move, Inc.; Barbara Corcoran, the real estate maven and author; Aviv Nevo, a professor of economics at Northwestern and a co-author of a study about FSBO (for sale by owner) sales versus sales via a realtor; and Amir Korangy, founding editor of the very good New York City real estate publication The Real Deal. Here are their replies: Read more …
One final thought (for now) on terrorism:
The people who should most despise my blog posts on terrorist attacks (found here and here) are the government officials charged with fighting terrorism. Why? Imagine that one of the scenarios mentioned in the posts or the accompanying comments ever did come to pass. No doubt someone would write a headline saying something like, “Did the Freakonomics Blog Give Ideas to Terrorists?” But I suspect there would be far more headlines like this: “Government Officials Failed to Prepare Against Terror Attack Predicted Years Ago by Freakonomics Blog.”
Running the Department of Homeland Security is about the toughest job around. Those folks have my sympathy. The number of ways we can be attacked is virtually infinite. If anything bad happens, security officials are squarely to blame. If nothing happens, hardly anyone even knows that these people are the ones in charge. I would bet fewer than 20% of Americans could name the current Secretary of the Department of Homeland Security. (If you need some help, the answer is here.)