One of the coolest things about posting at Freakonomics is the chance to be educated by your high-quality comments, which add to our posts and sometimes correct our mistakes.
But to be honest, every once in a while I have been depressed by the harsh general tone of criticism. (For example, the comments here got me down. To be specific, it’s not that commenters sometimes disagree with a post; it’s that they claim that the post is insufficiently related to Freakonomics-type thinking.)
Peter Ubel suggested that some of these comments may be the byproduct of Google Alerts and not come from regular readers of this blog. In an earlier post, I made a mistake in describing how often the open-source statistical software, R, is updated, and dozens of knowledgeable R users appropriately corrected me. I’m betting that most of these comments came from Google Alerts (plus indirect links on message boards). The Google Alerts comments are real comments, and as this example shows, they are often helpful comments. Read more…
Some of them, according to this New Yorker piece by Lizzie Widdicombe, are being sent in by Madoff victims to raise cash:
Back in midtown, business was brisk at the Madison Avenue headquarters of CIRCA, a jewelry-buying firm, where Madoff-related jewels had been incoming all month, like expensive shrapnel. “When Madoff hit, then we started to get the calls,” the firm’s C.E.O., Chris Del Gatto, said the other day in his office, which is decorated with polo paraphernalia. An older woman in Beverly Hills had mailed in a nine-carat diamond to sell, so that she could pay her expenses; the company had sent armored cars to retrieve two batches of family jewels from Chicago and Arizona. “If it’s high enough value, one of the services we provide is we’ll send Brinks,” Del Gatto said.
And some of them, according to this Washington Post report by William Branigin, are being sent out by Madoff himself, which is a no-no:
In a separate development in New York, federal prosecutors today charged that Madoff, who is currently under house arrest in his Manhattan apartment, violated conditions of his bail by mailing about $1 million worth of jewelry and other assets to relatives and friends. The prosecutors asked a judge to revoke Madoff’s $10 million bail and send him to jail. An attorney for Madoff argued that the mailings were done “innocently” and said his client is not a flight risk or a threat to the community. The judge said he would rule later on the matter.
Note to self: apply tomorrow for a job with the U.S.P.S. and keep on the lookout for more Madoff jewels.
As I was getting coffee in the faculty lounge, I started talking to a senior colleague who is nearing retirement. He said that he avoided a lot of the market pain of the last year because he had only about 25 percent of his savings in stock. (Now with the market drop, he has an even smaller percentage!) But his current concern is inflation.
As this killer graph from Paul Krugman shows, Ben Bernanke has been incredibly aggressive in expanding the money supply.
It is quite reasonable to be worried that the Fed will not be nimble enough to suck up this cash as the economy recovers. The banks and others are currently hoarding cash. But when they start to spend or invest it, the Fed will need to remove it by buying back assets (such as Treasury bonds), or we will have substantial inflation.
So here’s a puzzle: What should you do if you are retired or close to retirement and you are scared about the risk of inflation?
Holding stocks is often a way to hedge inflation — because dividends and stock prices rise with inflation. But at this stage in your life, you don’t want the risk of holding stock. Where should you invest at least some of your money to hedge the inflation risk?
This is not a hard puzzler; but if you’re having trouble, here’s a hint: Larry Summers. Read more…
Turkey fryers are fixtures at southern holiday parties. As I watched my friend’s husband gleefully fry his turkey in a big vat of boiling oil this Christmas, I became a bit concerned for his and my safety … and rightly so.
But Environmental Capital also notes that small-town mayors, among others, are increasingly grateful for the surplus of grease the fryers create — a valuable source of biofuels now that a regular grease supplier, school cafeterias, are cutting down on fried foods.
The American Economic Association meetings are taking place. There is a young economist whom I have never met, but who is doing some really interesting research. So I wrote him and asked if he wanted to get together over a beer to talk about his work. The first sentence of his response was:
I would really like to be very interested in meeting with you.
You don’t see that kind of honesty every day! Although the economist in question is not actually interested in meeting with me, he wishes he were.
Actually, he wrote back later saying it was a typo.
I would really like to be very believing that is true.
The C.B.O. has released a new report on effective tax rates (total taxes divided by total income). Compared with previous reports, it includes more information about thin slices at the top of the income distribution.
I typed this from 10,000 feet, while on my way to the annual econ gabfest known as the ASSA meetings. I was lucky enough to score an upgrade to first class, and as I settled into my seat I was informed about the most astonishing cost-cutting measure: U.S. Airways has taken the coat hangers out of its planes.
Arriving uncrumpled used to be one of the few perks for those at the front of the plane, but now the racks behind seat 4B sit unemployed. It can’t be that these hangers had much value on the secondary market, and the number of flight attendants hasn’t changed, so I can only guess that the cost reductions come from the fuel savings that come from carrying a few less ounces. (How big could these be?)
Turning from comic strips to a weightier arena, I would welcome suggestions of notable quotations from United States Supreme Court decisions of recent years. Are there any worthy successors to the eloquent justices of the past, such as Oliver Wendell Holmes Jr. and Robert H. Jackson?
In recent years, the federal government has taken various actions to make it harder to bet on sports over the internet.
That’s lucky for me, because when I used to bet on football, one of the key pieces of information I used was whether or not a team was a home underdog. For whatever reason, bettors don’t like to bet on home underdogs.
Recognizing this, bookies shade the point spreads toward the home underdogs. Because of the bettor bias, the bookies can set spreads so that home underdogs cover the spread more than half the time, but attract less than half the betting dollars. According to my estimates, home underdogs covered the spread almost 54 percent of the time over a 20-year period, but they still only attracted about 40 percent of the betting dollars in those games. As a consequence, these games are extremely profitable for the bookies: most of the money goes on the visiting favorite, who manages to cover the spread only 46 percent of the time. (For more on this, see an academic article I wrote on the subject.)
Even after I published that paper, the home-underdog bias remained alive and well. I nearly won an 800-person handicapping contest doing little more than picking home underdogs. Read more…
In a New York Times Op-Ed on Saturday, Sonja Lyubomirsky wrote that subjective well-being has remained high during the recession. But she’s dead wrong.
Research in psychology and economics suggests that when only your salary is cut, or when only you make a foolish investment, or when only you lose your job, you become considerably less satisfied with your life. But when everyone from autoworkers to Wall Street financiers becomes worse off, your life satisfaction remains pretty much the same …
So in a world in which just about all of us have seen our retirement savings and home values plummet, it’s no wonder that we all feel surprisingly O.K.
Unfortunately the claim she’s making — that we’re all O.K., thank you very much — isn’t one for theory, it is a factual claim. Read more…
Sorry, moms: it turns out that reading in low light won’t make you go blind; going hatless in the winter won’t make you freeze to death; and you could eat poinsettias all day and not be poisoned.
All this holiday medical myth-busting and more is courtesy of our somber friends at the British Medical Journal (part one and part two).
Of course, you probably didn’t need the British Medical Journal to tell you that — a quick Google search would have popped the bubble on each of the three myths we mentioned.
The internet may be good at slaying old myths. But if myths can spread like viruses, do they also respond under the pressures of natural selection by evolving?
It is hard to believe that it was 20 years ago when the Economist magazine first ran a story on the hot young economists to watch. I remember reading and re-reading that article. In particular, I was amazed that a guy I was taking a course from — a young professor named Alberto Alesina — made the list.
His course was one of the best I ever took as an undergraduate, but I had no idea he was a superstar. I was oblivious to those sorts of things and had just chosen the course because it sounded interesting. I suspect some of my peers who signed up for the class were better informed, because out of an enrollment of about 15 students in that class, at least four of us are now tenured economists at top universities.
The last thing in the world I would have predicted at that time (as I headed off to management consulting) was that I would be included as one of the rising stars of the profession in the follow-up article the Economist wrote 10 years later.
Last week I did something that felt very 1990’s: I purchased a compact disc. The CD wasn’t for me; it was a Christmas present.
As I wrapped the CD, I pondered the silliness of the whole enterprise. After all, the recipient — like most of us these days — listens almost exclusively to MP3 files. In fact, I’m not even sure if he has a CD player beyond his laptop, which he will use to convert his disc-shaped gift into a more useful set of MP3 files.
But somehow it felt more “real” to give a physical compact disc, rather than to transfer the property rights to a more ephemeral MP3 file. The same thing can be said for books. I now read mostly on my Kindle. You might think that this would lead my family to give me books in the appropriate electronic format; after all, they are cheaper, easier to travel with, and more useful. Read more…
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.
No, not on commercial loans or mortgage relief or even a new highway fund. Try … a rabbit hutch.
Yes, a third-party seller on Amazon.com was offering a “Marshall Peters Hinged Mat Woven Grass for Rabbits and Small Animal” for the low, low price of $766.5 billion:
