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Fun speculation that the purpose of Google’s big stock sale is to grease the skids for their entrance into the S&P 500. Lots of new people buy the stock of a company just added to the index and the stock sale would make that inventory available. (Or do they need money to buy Skype? Or are Google execs getting jittery about being in a bubble and want to cash in?)
A table of gas prices from around the world. A gallon of gas in Amsterdam is $6.48 while it’s only $0.12 in Venezuela. It’s always so weird to see these types of lists where the US has more in common with Third World and non-democratic countries than with Europe, Japan, etc. (via rw)
Grant McCracken offers an alternate theory for why crime fell in the 90s: rap music replaced violence among urban youths as a way to gain esteem. Compare with Levitt and Gladwell.
Freakonomists Levitt and Dubner: where did all the crack cocaine go? Well, it didn’t. Go. But the crime did.
Tom Standage says bottled water is “bad to the last drop”. It’s more expensive than gasoline, doesn’t taste any better, and isn’t any safer.
How the DVD is changing Hollywood and the movie business. “Most important, the new DVD audience is so diverse that companies can target niche markets and still sell millions of disks. Because specialized markets are more predictable, the risk of failure is much lower, and so small-to-mid-budget movies can be very profitable indeed.”
In the past 5 years, I’ve probably been to a theater an average of once every two weeks to see a movie. Even though it costs a small fortune, I almost always get a soda and popcorn (topped with “butter”[1]) to go with the show. Many of the larger chains offer a deal if you purchase a large popcorn and a large drink together. This “Super Combo” costs a lot less than ordering a L popcorn and a L soda separately from the menu but often it will actually cost you less than a L popcorn/M soda, M popcorn/L soda, or even a M popcorn/M soda (?!??). Why such a steep discount when the theaters make so much of their money on concessions? I’ve developed a few theories over the years but would like to hear your thoughts before sharing them.
[1] The proper way to butter movie popcorn is to fill the bag half full, apply butter, fill the rest of the bag and apply more butter. This results in fairly even application of butter to kernel throughout the bag. Due to a lack of focus on service and an increasing number of theaters moving to DIY butter application, it’s getting more and more difficult to buy a good bag of buttered popcorn at the movies.
Racial disparities in tipping taxi drivers. African-American drivers were tipped 1/3 less than white drivers and African-American passengers tipped 50% less than white passengers.
Pokernomics: Steven Levitt is researching the economics of poker. If you send him statistics from your online games, he’ll share the results with you.
Here’s a list of reasons that Hollywood is in trouble, with nary a mention of the piracy bogeyman. “These trends do not appear reversible in the short run. It is not just that this year’s movies mostly stink.”
“Ireland today is the richest country in the European Union after Luxembourg”. Ireland “today has a per capita G.D.P. higher than that of Germany, France and Britain”.
With higher rents (and other factors), good cheap food is getting hard to find in Manhattan.
Finding a rough model for how films fare at the box office. “They assume that revenue relies on three major factors: the size of the possible audience, the initial desire of audience members to see the film (which is often dictated by the amount spent on marketing and publicity), and audience response to the film.”
PBS to air three part series on Jared Diamond’s Guns, Germs, and Steel.
Keith Chen is doing economic research with monkeys; teaching them how money works. “When taught to use money, a group of capuchin monkeys responded quite rationally to simple incentives; responded irrationally to risky gambles; failed to save; stole when they could; used money for food and, on occasion, sex.”
The public choice economics of Star Wars: A Straussian reading. “The core point is that the Jedi are not to be trusted”.
The Neiman Marcus Paradox: How dumb rich people end up in debt. “14 percent of people with more than $5 million in assets have credit-card balances [which is] mystifying since credit-card cash is perhaps the most expensive form of money legally available.”
There are some signs that Americans are actually paying off their credit card debt.
Maybe the high price of oil isn’t such a bad thing. “When you look closely, it is hard to know what effect, exactly, oil prices have on the economy.”
Two years ago, Stephen Dubner wrote an article for the NY Times Magazine on Steven Levitt, an economist with a knack for tackling odd sorts of problems. Last year, Dubner and Levitt collaborated on an article called What the Bagel Man Saw about the economic lessons gleaned from a man who’s been successfully selling bagels on the honor system in offices for more than 20 years. Now Levitt and Dubner are out with a new book called Freakonomics: A Rogue Economist Explores the Hidden Side of Nearly Everything, an overview of Levitt’s work and collaborations with other economists.
Dr. Levitt was kind enough to answer a few questions I had about the book:
jkottke: In Freakonomics, you state that you’re interested in applying economic tools to “more interesting” subjects than what one may have learned about in my high school economics class. What’s your definition of economics? Is it a tool set or a science or what?
Steven Levitt: I think of economics as a worldview, not a set of topics. This worldview has a few different pieces. First, incentives are paramount. If you understand someone’s incentives, you can do a pretty good job of predicting their behavior. Second, the appropriate data, analyzed the right way are key to understanding a problem. Finally, political correctness is irrelevant. Whatever the answer happens to be, whether you think it will be popular or not, that is the answer you put forth.
jkottke: Your talent for ignoring seemingly applicable but ultimately irrelevant information (not that different from a professional-grade batter taking cues from certain aspects of a pitcher’s mechanics and ignoring the extraneous ones in order to hit well), where does that come from? Good genes or was it all the books in your childhood home?
Levitt: If nothing else, I had an unusual home environment. My father is a medical researcher whose claim to fame is that he is the world’s expert on intestinal gas (he’s known as the King of Farts). My mother is a psychic who channels books. From an early age, my life was different from that of other kids. For instance, when I was in junior high, my father would wake me up at night to drill me with questions in hopes that I would be the star of the local high school quiz show.
jkottke: In looking at the world through data, you’ve investigated cheating schoolteachers, falling crime rates due to abortion, and the parallels between McDonald’s corporate structure and the inner workings of a crack-dealing gang. What’s the oddest or most surprising thing you’ve uncovered with this approach? Maybe something you still can’t quite believe or explain?
Levitt: It’s not the oddest result I’ve ever come up with, but there is one finding I have always puzzled over: when cities hire lots of Black cops, the arrest rates of Whites go up, but no more Blacks get arrested. When cities hire White cops, the opposite happens (more Black arrests, no more White arrests). It was an amazingly stark result, but I’m not quite sure what the right story is.
jkottke: In the chapter on the effect of abortion on crime rates, you and Stephen take care emphasizing what the data says and the strong views that people in the US hold on the issue of abortion. Still, if someone wants to twist your observations into something like “abortion is good because it lowers crime”, it’s not that difficult. Have your observations in this area caused any problems for you? Any extreme reactions?
Levitt: I have gotten a whole lot of hate mail on the abortion issue (as much from the left as from the right, amazingly). What I try to tell anyone who will listen — few people will listen when the subject is abortion — is that our findings on abortion and crime have almost nothing to say about public policy on abortion. If abortion is murder as pro-life advocates say, then a few thousand less homicides is nothing compared to abortion itself. If a woman’s right to choose is sacrosanct, then utilitarian arguments are inconsequential. Mainly, I think the results on abortion imply that we should do the best we can to try to make sure kids who are born are wanted and loved. And it turns out that is something just about everyone can agree on.
jkottke: In the book, you say “a slight tweak [in incentives] can produce drastic and unforseen results”. If you were the omnipotent leader of the US for a short time, what little tweak might you make to our political, cultural, or economic frameworks to make America better (if you can forgive the subjectivity of that word)?
Levitt: I would start by increasing the IRS budget ten-fold and doing a lot more tax audits. If everyone paid their taxes, tax rates could be much lower and otherwise honest people wouldn’t be tempted to cheat. For some reason, everyone hates the idea. But we can’t all be cheating more than average on our taxes. I think it would be for the better. And after I got done with that, I’d legalize sports betting, and I would also do away with most of the nonsense and hassle that currently goes into airport security.
jkottke: In the war between the film and music industries and their customers, there’s an argument over how much the explosive increase in Internet piracy affects sales of CDs, movie tickets, and DVDs. Using the same data, the music/movie industry argues that sales are down because of piracy (or at least diminished from what they “should” be in a piracy-free marketplace) while the other side argues that sales are up and that piracy may actually have a beneficial effect. The question of “how does piracy affect record/movie sales?” seems well suited to your particular application of economic tools. Have you looked at this question? And if not, do you have sense of which special view of the data might reveal an answer?
Levitt: I have not myself studied the issue. I have a former student who has studied this issue. Alejandro Zentner. He argues that music sales are way down as a consequence of downloading. He uses the availability/price of high-speed internet across areas and relates that to patterns of self-reported music buying.
But on the other hand, I have a good friend Koleman Strumpf who has also written on this and comes to the opposite conclusion using a whole bunch of clever arguments.
This is a great issue - an important one and a tough one. Having studied both of these papers, I don’t know which one to believe.
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Thanks, Steven. For more information on Freakonomics, check out the book’s web site — which includes a weblog written, in part, by the authors — or buy the book on Amazon. Check out also this email conversation between Levitt and Steve Sailer on the connection between legalized abortion and reduced crime in the 1990s, a short profile in Wired, and this profile in Esquire (free subscription required).
Update: Here’s a Freakonomics excerpt from Slate on how distinctively black or white names affect a child’s course in life.
Study: tall, slender, beautiful people get paid more. “They showed that women who were obese…earned 17 percent lower wages on average than women [of recommended weight]”. 17%! That’s quite a disparity.
The main thesis of Nonzero is that social complexity of human culture has been increasing since the dawn of man and will continue to do so until forever. Wright argues that non-zero sum games are the culprit: societies get more complex (moving from tribes of hunter gatherers to mutli-trillion dollar global economy) because in order to play ever more lucrative non-zero sum games with an increasing number of people, that’s the way it has to be. It makes a lot of sense.
Michael Lewis is one of my favorite authors. He’s not the smartest or the most clever writer but he weaves deceptively simple stories into larger statements on society and humanity with a skill possessed by very few people doing creative work in any field. I haven’t gotten around to reading Moneyball yet, but Liar’s Poker is probably his strongest work. It’s as hard to put down as any fiction. Great book.
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