How Much Do Mood Swings Drive Business Cycles?
Every month, the Conference Board releases its consumer confidence index. Last month, confidence was up. The index is supposed to be a reading of how we feel about the current economic climate, a measurement of what Keynes referred to as our animal spirits. But while these surveys indicate how we’re reacting to the economy, they also influence it, creating a sort of self-reinforcing feedback loop. So, is the economy dictating our mood? Or is our mood dictating the economy?
A new working paper (pdf here) by Paul Beaudry, Deokwoo Nam, and Jian Wang attempts to untangle the two by asking whether (and if so how much?) mood swings drive business cycles: Read More »
The Economics of Chicken Feet… and Other Parts
Our latest podcast, “Weird Recycling,” featured Carlos Ayala, the Vice President of International at Perdue Farms. Stephen Dubner‘s interview with him centered on chicken feet — or chicken paws, as they’re called in the industry. Until about 20 years ago, paws were close to value-less for a U.S. chicken company. But thanks to huge demand in China, paws have become big profit centers. The U.S. now exports about 300,000 metric tons of chicken paws every year. Perdue alone produces more than a billion chicken feet a year, which according to Ayala brings in more than $40 million of revenue. In fact, Ayala says that without the paw, chicken companies would be hard-pressed to stay in business: Read More »
What Makes a Rogue Trader Tick? A Q&A with FT Columnist John Gapper
The rogue trader is a recurring character in the story of finance over the last 20 years. This is the guy who makes secret, unauthorized bets with his bank’s money, driven by some seeming combination of inadequacy and a huge appetite for risk, and abetted at times by an amazing lack of internal controls.
The deeper he goes, the harder he has to work to conceal his deception until one day, it inevitably comes crashing down. The bank loses billions, the trader (sometimes) goes to jail. The story is repeated every several years. The latest version broke in September when UBS announced it had lost more than $2 billion as a result of rogue trader Kweku Adoboli.
In his new e-book, How to Be a Rogue Trader, Financial Times columnist John Gapper explains why this story has become so familiar over the years. As he puts it, the rogue trader is a species of sorts within the world of finance, a special breed with certain behaviors and characteristics that are consistent through time. Gapper delves into evolutionary biology and the research of Daniel Kahneman to better understand the nature of men like Nick Leeson, Joe Jett, and Jerome Kerviel. Read More »
What Happens When You Ice Your Own Kicker?
In our Freakonomics Football episode “Why Even Ice a Kicker?”, Stephen Dubner explores the NFL fad of calling a timeout just before the opposing team’s kicker attempts a crucial field goal. The idea is to get into the kicker’s head, and make him think about all that pressure he’s under to make a big kick. The practice has become all but routine in the NFL, even though, according to the data, it doesn’t work, and in some cases even backfires.
But what about when a coach ices his own kicker?
That’s essentially what Dallas Cowboys head coach Jason Garrett did on Sunday during a game against the Arizona Cardinals. With the score tied at 13, and just seven seconds left in regulation, Dallas rookie kicker Dan Bailey lined up for a potential game-winning 49-yard field goal. Right before the snap, Garrett called timeout. Bailey kicked it anyway, and nailed it. His second attempt? Not so good— he shanked it, wide left. The game went into overtime, and Dallas ended up losing 19-13 to the Arizona Cardinals. Read More »
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