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What Are the Most Notable Quotes From 2009?

Fri, 06 Nov 2009 11:43:18 +0100

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Naked Self-Promotion

Levitt and Dubner travel to London this week, where they'll lecture before sold-out crowds at the London School of Economics (Nov. 9) and the RSA (Nov. 10). Fortunately for those of us who can't attend, the RSA lecture will be webcast live on Tue. Nov. 10, at 1 p.m. GMT (8 a.m. EST). The duo will also make the rounds on British television and radio, including a chat with Undercover Economist Tim Harford on his BBC program More or Less on Nov. 10, 3 p.m. GMT (10 a.m. EST). The book, meanwhile, continues to top best-seller lists across the country. The Times (UK) calls it "a humdinger of a book: page-turning, politically incorrect, and ever-so-slightly intoxicating, like a large swig of tequila." The Associated Press says it's "deft and seamless ... as fun as its predecessor." Click here if you want to catch up on the global-warming controversy that SuperFreakonomics has provoked.

About Freakonomics

Stephen J. Dubner is an author and journalist who lives in New York City.

Bio | Contact | Lectures

Steven D. Levitt is a professor of economics at the University of Chicago.

Bio | Contact | Lectures

Their book Freakonomics has sold 4 million copies worldwide. Their followup, SuperFreakonomics, has recently been released. This blog, begun in 2005, is meant to keep the conversation going. Recurring guest bloggers include Ian Ayres, Robin Goldstein, Daniel Hamermesh, Andrew W. Lo, Eric Morris, Sudhir Venkatesh, and Justin Wolfers.

Annika Mengisen is the site editor.

Comment of the Moment

“ I ended up breaking the law because I perceived that I was being an idiot for following the traffic laws while the speeders were getting to their destinations without being hindered by morality, conscience, rules, safety, or love of mankind. ”

— Nonchalant Savant
Why Does Driving Bring Out the Worst in People?

FREAK Shots:

Nudging the Calorie Counters

Photo: Petes travels

Submit your FREAK-worthy photos.

Stuff We Weren't Paid to Endorse

Shopsin's (120 Essex Street) is a New York institution, a restaurant that began as a grocery store; its owner, Kenny Shopsin, is colorful, irascible, and talented. Shopsin's is famous for breakfast but also for its vast, unusual, common-sense menu. Shopsin has just written a book that is half cookbook and half memoir, entirely fascinating. I had never sat down and read a cookbook from cover to cover but that is what happened with Shopsin's book (co-written with Carolynn Carreno). It is called Eat Me. The introduction is a reprint of a New Yorker article by Calvin (Bud) Trillin, a Shopsin's regular. If you do go to the restaurant, do pay attention to Shopsin's idiosyncrasies, because he allegedly has a Soup-Nazi-like intolerance that may earn you permanent exile from his restaurant. (SJD)

I recently took the kids to see a performance by Jim Dale, the longtime British stage actor (he won a Tony for Barnum) who is best known these days as the wildly entertaining reader of the Harry Potter books on tape. He was reading an adaptation of a Eudora Welty story called “The Shoe Bird,” which he recently recorded with the Seattle Symphony. (It was wonderful, and I encourage you to give it a listen.) Afterward, Dale took questions from the audience -- which, predictably, were about the Harry Potter series. Items of interest that emerged: Dale was given only 100 pages of manuscript at a time to read and then record, so he never knew what was coming; and in order to keep track of the 146 voices he’d created for all the characters, he often pre-recorded a bit of the characters’ voices and then held a tape recorder up to his ear in the studio to remind himself. (SJD)

If you live in or are visiting New York and have children, do everything you can to take in one of the Young People's Concerts at the New York Philharmonic. Even if you don’t love the music on that day’s program -- we recently attended “Ravel’s Paris,” not my favorite by a long shot -- all the extras in the program are terrific: the dancers, composers, instrumentalists, and explainers who are paraded out by conductor Delta David Gier to put the music in context for the kids. (SJD)

From the Opinion Blogs

Room for Debate

Getting a Grip on Drugs and Horses

What should horse racing officials in the U.S. do to prevent doping?

Paul Krugman

Reagan! Reagan! Reagan!

There's no measure I can think of by which the U.S. economy has done better since 1980 than it did over an equivalent time span before 1980.

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A Different Kind of Organ Market?

Fri, 06 Nov 2009 11:00:31 +0100

Who gets bumped to the front of UCLA medical center’s liver-transplant line? The godfather of the Japanese mafia, according to this 60 Minutes video. Called the “John Gotti of Japan” by U.S. law enforcement, he moved to the top of UCLA’s waiting list and got a liver in about six weeks rather than the average three years, reports 60 Minutes’s Lara Logan, by allegedly paying $1 million for the transplant and making a sizable donation to the transplant center. He wouldn’t have been so lucky in the UK.

Charity Won't Contain This Secondary Market

Fri, 06 Nov 2009 09:20:47 +0100

Each year I receive about 10 introductory economics textbooks from publishers. The purpose is to induce me to adopt the book in my 500-student principles class. Many years ago the books I received typical copies, same as the students would buy. Book-buyers came around seeking to buy my unused copies, but I never sold them. Others obviously did, because the publishers started stamping “Complimentary copy” on these freebies. One publisher even has my name printed on the copy I received. The purpose of all this is to prevent an increased supply in the secondary book market from competing with the supply of new books. I received a text today that had stamped, “…please return it to XX and we will donate $1 to [a charity]….”

Heartwarming—but it requires me to spend time addressing an envelope, and spend the University’s money on mailing costs. I DON’T THINK SO, despite the worthiness of the cause and my desire to protect authors’ royalties. Publishers will have to do something better than this to cut supply in the secondary market.

Do Earmarks Matter?

Fri, 06 Nov 2009 08:31:17 +0100

Making fun of earmarked Congressional spending is easy, feel-good entertainment. In this regard Sen. John McCain’s Twitter feed, in which he reels off outrageous examples of pork-barrel spending (we especially liked “$300,000 for Texas A&M for ‘Texas Height Modernization’“) is a laugh factory. But is the war on pork a distraction from a larger problem? In 2008, Congress earmarked $17.2 billion for special projects. That amounts to less than one half of one percent of all Federal spending last year. The figure is less than NASA’s 2008 budget ($17.3 billion) and less than half of the $35 billion the country spent on foreign aid last year (is there a “Finland Height Modernization” program?). A recent paper found almost no correlation between the amount of pork in a given year and the size of that year’s deficit. The authors conclude: “While increasing levels of pork may be symptomatic of a larger government spending problem, they are not the underlying cause.”

SuperFreakonomics Book Club: Emily Oster Answers Your Questions

Fri, 06 Nov 2009 07:33:17 +0100

Earlier this week, we introduced the SuperFreakonomics Virtual Book Club, wherein we’ll regularly invite readers to chat with some of the researchers and other characters we wrote about in SuperFreakonomics.

Our first guest was University of Chicago economist Emily Oster, whose research, co-authored with Robert Jensen, formed the basis of the section where we discuss how the introduction of television turned out to be an unlikely boon for rural Indian women. (I should have also mentioned that we cite Emily’s fascinating research on how women were regularly put to death for centuries on charges of witchcraft.)

Here are Emily’s answers to your fine questions. Thanks to all for participating. Next up, we’ll feature Sudhir Venkatesh, talking about his and Levitt’s research on street prostitution in Chicago.

SuperFreakonomics Book Club
Emily Oster Responses:

Thanks, everyone, for your questions. Rob and I have done our best to answer them below. Interested in more technical details? You can read the paper for yourself on my webpage.

Have you proven there is a causal link between getting TV and lower birthrate, or just a correlation? It could be that social attitudes were undergoing changes at the same time Indian wages were rising and allowing [some people] to afford TV, and in fact it was the rising economic status that caused women’s lot to improve. Do you know if TV was causal? If so, how have you tested for it? – Jon

This is the central issue in the paper, and the central challenge. The simplest version of this concern is that the type of women who have TV’s are different than the type who do not. For example, television ownership rates in Delhi are much higher than in rural Bihar (a poor state), but we would hardly want to attribute differences between those areas to TV.

Our data are well-suited to address this concern, since we estimate effects using changes in television availability. Put simply, we surveyed 2,500 women in 180 villages in 2001. In that year, 64 of the villages had access to cable TV. We returned to talk to the same women in the same villages in 2002. Between the surveys, 11 of the villages had newly received access to cable. When we returned in 2003, another 10 villages had gotten access; 90 of the villages remained without cable during this period.

To estimate the effect of cable we compared changes in the outcomes of interest over time in villages that changed their cable status versus villages that did not change their status. If cable had a causal effect on the variable we are interested in, we expected to see changes in these outcomes in villages that changed cable access and not in villages that did not change access (those that always had cable or never got it). Further, we expected to see changes between 2001 and 2002 for the villages that got cable in 2002 and between 2002 and 2003 for villages that got cable in 2003. This is exactly what we observed. If you look at the paper, you can see this very clearly in the simple graphs.

This deals with the most basic concern. But getting access to cable is not random. You might still be concerned that there are other changes going on in these villages which get access to cable and those other changes (village is getting richer or more “modern”) are driving the changes in women’s access.

We do several things to address this concern.

First, we do observe income and education. We control extensively for changes in income over time, and for education, age, and other demographics. Second, and perhaps more important, we look at whether there are pre-trends in these outcomes. We ask whether it looks like the status of women is changing in areas that get cable before they get cable. We find this is not the case. In fact, getting cable in the future is not at all predictive of changes in the status of women or fertility. We argue that this addresses the concern that our results are driven by attitudes changing for other reasons.

Do you think the content on TV has a particular effect? Were families who watched a certain type of program more apt to exhibit the change in behavior?

If the content did play a role, do you think there are other applications for this effect? For example, could you affect the rate of STD transmission by providing a specific type of content that resonates with the target population? – AJ

In our data, we do not directly observe the programs people are watching. We can make general statements about content. For example, we know that people typically watch Indian-produced television, and the three most popular genres are soap operas, game shows, and sports. Beyond this, however, we cannot be very specific about what type of television content is driving this.

There actually are programs — not as much in India, but more in Africa — that attempt to promote a social message like the one you describe. For example, there are soaps in Africa that promote an anti-HIV message. I don’t know of much work evaluating their impact on behaviors, although it would clearly be interesting.

One very nice example — unfortunately, not by us! — of a paper that is able to look specifically at content is by Eliana La Ferrara and coauthors (the paper can be accessed here). They explore the impact of soap operas in Brazil and find, among other things, evidence that after the introduction of a particular soap opera, people begin to name their children after characters on the show!

What kind of data did you use in this work? Was it a government-sponsored survey? Did you buy it from some private company? – Felipe Araú

Rob collected much of this data himself, as part of a larger survey. The administrative data on schooling that we use at the end of the paper were purchased from the government and supplemented with another survey that we organized and ran.

Do your data reveal any differences based on either the women’s economic status or caste? What about Muslim versus Hindu? – PragmaticC`ynic

We did not have enough religious variation in the data to estimate differences for Muslim versus Hindu women. We did explore differences by socioeconomic status (education, income) and age. Our data suggest slightly larger effects for older women, but limited differences across education or income.

How were the findings received in India? Second, is there a next logical (but possibly counterintuitive) step that would further help women in rural India? Last, were any negatives associated with the expansion of cable? I read the book and thought this was pretty interesting. We like to think about how we have such control over our decisions, but it’s clear that none of us are so independent as we think. This isn’t limited to India. – charles

As far as we know, the reaction in India has been mostly positive. We’ve been in some media outlets there and not gotten much negative feedback. Having said that, I’m not sure how much effect we are having on policy, either!

In terms of negatives, the short answer is that in our data we do not observe any negative effects; that doesn’t mean that there are not some that we cannot observe.

Have you or has anyone else documented a similar relationship in the U.S.? Can this also go too far and give individuals an unrealistic expectation? – Kris

As far as I know there has not been work on this in the U.S., although economists have used the introduction of television in the U.S. to look at other outcomes, like the effects on children’s test scores. [Editor's note: a later section in SuperFreakonomics examines the relationship between crime and the introduction of TV in the U.S.; we'll run a virtual book club on that section when we get to it.] In terms of going too far, I’m not sure. We certainly wouldn’t argue that television is the solution for all the world’s problems with gender inequality, but the effects we find are large enough that they seem worth taking seriously from a policy perspective.

London Calling

Fri, 06 Nov 2009 06:55:25 +0100

Just announced: Levitt and Dubner’s sold-out lecture at London’s Royal Society for the Encouragement of Arts, Manufactures and Commerce (RSA) will be webcast live on Tuesday, November 10, 2009, at 13:00 GMT (that’s 8 a.m. Eastern — or use this handy calculator to find the time where you live). One day earlier, they are also speaking at the London School of Economics; negotiations are still underway to temporarily rename it LSF.

A Great Answer From a Flight Attendant

Thu, 05 Nov 2009 12:43:59 +0100

A while back, I wondered why flight attendants don’t get tipped. Here’s a nice response from a reader named Barb, who retired after 36 years as a flight attendant with US Airways. Her suggestion sounds pretty perfect to me. I particularly liked her “schmuck” observation:

Flight attendants are paid very well and therefore do not need to be tipped. They are also safety professionals. Airlines teach us in training not to accept tips unless from a little old lady so as not to hurt her feelings. I would like to share a few things that happened to me over the years.

I received a Hummel, a check from a famous movie producer (buy yourself a bottle of Champagne), a basket of products from Johnson & Johnson, Richard Simmons diet plan and tapes, etc. from passengers who appreciated that little extra something they thought I provided. The best gifts were food [from] passengers who brought baked goods, candy, food, or bagels for the crew.

I personally never get on a plane without home-baked chocolate-chip cookies for the crew or a box of candy. Just being polite when boarding and saying thank you touches a flight attendant’s heart. And when you receive exceptional service, take the flight attendant’s name and base and write a complimentary letter to the airline. The schmuck sitting across from you just may be writing a nasty letter and yours will cancel it out. Safe flying, and thanks so much for providing insight into the world of airline crews.

Best, Barb

Unfree Enterprise

Thu, 05 Nov 2009 10:06:19 +0100

Lately, the lot of the New York cabbie has improved a bit. But there are still some major systemic obstacles that keep drivers and their passengers from getting the conditions and service they deserve. One crucial issue is that the system for licensing cabs seems less a product of American capitalism and more like something straight out of a Soviet Five Year Plan.

It is probably noncontroversial to assert that New York’s economy and society have developed considerably since the Great Depression. Yet the number of licenses to operate cabs in New York has actually shrunk since 1937. That was the first year a city permit (or “medallion”) was required to provide taxi service (i.e. respond to street hails). Many cities across the U.S., such as Chicago and Boston, have similar systems which cap the number of cabs.

In New York, the ever-spiraling demand for taxi service, coupled with draconian limits on supply, has had predictable results. Corporate medallions, which permit the holder to operate a single cab, were selling for an eye-popping $760,000 in September. USA Today recently noted that medallion prices have risen 126 percent since 2004; Andrew Murstein, president of a firm that invests in medallions, reports that “it’s an industry that has always gone up. It has outperformed every index you can think of — the Dow, Nasdaq, gold, you name it.”

In addition to the appreciation of the medallions themselves, owners realize a handsome income from leasing the permits to the people who actually drive the twelve-hour shifts.

Excluding other services they might perform, like driving or leasing cabs, what do medallion holders actually contribute? Uh, yeah, umm, can I phone a friend?

Primarily, medallion owners extract unearned “rents” from the pockets of drivers and passengers. The limits on medallions also make it hard to find cabs in many places. It is true that the Taxi and Limousine Commission tries to protect passengers by regulating fares and forbidding taxis from refusing undesirable trips. It also tries to protect cabbies by capping the rates they pay to lease medallions from the owners. But the maximum medallion lease fee is currently set at $800 per week, or $40,000 a year, which seems like quite a financial burden for cabbies who often take home considerably less than that.

(Also, the market has a funny way of working around such ham-handed attempts to micromanage it. New York City Council Member David Yassky recently issued a report which demonstrates medallion owners are circumventing the lease price cap through questionable means, like heavily overcharging for the rent on the cabs themselves.)

What to do about this? There is some scholarly debate over whether complete taxi deregulation is a panacea. Proponents, backed by basic microeconomic theory, believe better, cheaper, and higher-quality service would result, with the circumstances of both drivers and passengers considerably improved.

However, some fear that lifting the caps entirely would bring a flood of new entrants into the industry that would drive down fares and/or occupancy rates. This would erode gains to drivers (at least existing drivers), though at the same time it would have benefits for passengers.

But even absent total deregulation, a more incremental step could be taken. Medallion prices are a great guide to the current level of supply and demand, and right now they indicate that many new medallions could be issued without the sky falling in. One option for cabbies if the Manhattan market is truly saturated: expand service in the outer boroughs. Excluding airport trips, only eight percent of cab rides in New York are to outer-borough destinations. As a result, service there has largely been left to quasi-legal “gypsy” cabs.

More medallions on the market would drive down medallion prices and hence leasing rates, helping out most drivers. It would also give them a better chance of someday buying their own medallion. It would put more cabs on the street (better service) and it would also create lots of new jobs.

Another option for reform of the system would be a program to gradually transfer corporate medallion ownership to owner-drivers. This would at least ensure that those doing the work reap the rewards.

In all, it is probably safe to say that a system which caps the supply of a highly in-demand service (creating a thriving black market), and then empowers an unproductive class of investors to squeeze rents from both workers and customers, and then institutes price controls to limit gouging of customers, and then institutes more price controls to try to prevent gouging of employees, is enough to give most economists hives.

At the very least the medallion system deserves some serious scrutiny and some kind of reform.

Unfortunately, given the billions that politically powerful medallion owners have invested in the current system, the chances of this happening are probably about as good as the chance of finding a cab on a rainy night in Staten Island.

Women for Polygamy

Thu, 05 Nov 2009 08:55:16 +0100

What can polygamy on the outskirts of Russia tell us about the effects of the financial crisis in less remote locales? A lot — or so says Cambridge anthropologist Caroline Humphrey: “In the 1990’s, Russia and central Asia experienced huge economic change: what a bank was, how your career was going, what you could expect from life, everything changed overnight. And of course it had a huge impact on people’s lives, from family life to politics, and polygamy is part of that whole scene. So far, we haven’t had such dramatic change in the west, but you never know.” Humphrey, who studies communities on the edges of the former Soviet Union, found that many men and women advocate polygamy for economic reasons. Men are in short supply and life on the rural farms many women live on is difficult. “Women say that the legalization of polygamy would be a godsend: it would give them rights to a man’s financial and physical support, legitimacy for their children, and rights to state benefits,” Humphrey told the Guardian. (HT: Marginal Revolution)

Is Climate-Change Belief a Religion?

Thu, 05 Nov 2009 07:30:48 +0100

Actually, yes, at least if you live in the United Kingdom.

(Hat tip: David Cushman)

Newspapers Not as Dead as You Think

Thu, 05 Nov 2009 06:57:30 +0100

We’ve blogged about proposals to save ailing print newspapers. Despite shrinking circulation and falling ad revenue, Daniel Gross doesn’t think print news is doing so badly. In a Slate column, he points out that “Every month, several million Americans pay to have newspapers and magazines delivered to their homes — a trick most online publications have yet to pull off.” Jason Kottke compares print newspapers’ sales strategy to Apple’s iPhone and Mac sales: “they have less market share but they make more money on each sale than their competitors by offering a premium product.”

Ken Caldeira's Carbon Solution

Wed, 04 Nov 2009 12:33:53 +0100

There’s been a brouhaha over whether we “misrepresented” the research and views of the climate scientist Ken Caldeira, whom we write about in the global-warming chapter of SuperFreakonomics. We’ve been in constant touch with him over the past few weeks, since we wanted to amend future printings of our book if indeed there were misrepresentations. If you want to know the end of this story, just skip ahead to the bottom of this post. Otherwise, here’s the background:

Caldeira is working with Nathan Myhrvold and other scientists at the firm Intellectual Ventures on potential global-warming solutions, which include a variety of geoengineering ideas. We cite a variety of Caldeira’s research, primarily on atmospheric carbon dioxide, including these passages:

Caldeira is thoroughly convinced that human activity is responsible for some global warming and is more pessimistic than Myhrvold about how future climate will affect humankind. He believes “we are being incredibly foolish emitting carbon dioxide” as we currently do.

And:

“Twenty thousand years ago,” Caldeira says, “carbon-dioxide levels were lower, sea level was lower — and trees were in a near state of asphyxiation for lack of carbon dioxide. There’s nothing special about today’s carbon-dioxide level, or today’s sea level, or today’s temperature. What damages us are rapid rates of change. Overall, more carbon dioxide is probably a good thing for the biosphere — it’s just that it’s increasing too fast.”

And:

As much as Caldeira personally lives the green life — his Stanford office is cooled by a misting water chamber rather than air-conditioning — his research has found that planting trees in certain locations actually exacerbates warming because comparatively dark leaves absorb more incoming sunlight than, say, grassy plains, sandy deserts, or snow-covered expanses.

But as you can read here (if you really feel like going down a rabbit hole), it was the first sentence of the following paragraph that incurred the scorn of a climate blogger named Joseph Romm:

Yet his research tells him that carbon dioxide is not the right villain in this fight. For starters, as green house gases go, it’s not particularly efficient. “A doubling of carbon dioxide traps less than 2 percent of the outgoing radiation emitted by the earth,” he says. Furthermore, atmospheric carbon dioxide is governed by the law of diminishing returns: each gigaton added to the air has less radiative impact than the previous one.

A noisy conversation ensued, primarily in the climate blogosphere, and we were charged with gravely misrepresenting Caldeira’s views even though we sent him the manuscript for review before publication, and incorporated many of his additions and changes. (For the latest on this conversation, see here, here, or here.)

So what is Caldeira’s own position?

Here’s a block of text he sent me recently that he has labeled “Text Sent to Inquiring Journalists,” which he sends out when someone asks him about the “villain” issue:

Q: Romm says you objected to the “not the right villain” line but Levitt and Dubner left it in anyway. Is that accurate?

A: Reality is just slightly more complex.

I did receive a version in MSWord. I did not read it all but just searched for my name. (I feel no need to fact check things that come in over the transom.)

I highlit the offending sentence and wrote the following comment:

And yet his research tells him that carbon dioxide is not the right villain in this fight.[KC1]

[KC1]My views differ significantly from Lowell’s and Nathan’s. I do think we are being incredibly foolish emitting CO2 and that avoiding all of this environmental risk is a good way to invest a few percent of our GDP. My pessimism stems from the apparent difficulties of solving the “prisoner’s dilemma”- and “tragedy of the commons”-type aspects of this problem.

I expected, based on this comment, that the highlit sentence would be removed but did not explicitly request them to remove it. Instead, Levitt and Dubner added a line about “foolish” preceding the line that I was concerned about. So now the text reads:

He believes “we are being incredibly foolish emitting carbon dioxide” as we currently do. Yet his research tells him that carbon dioxide is not the right villain in this fight.

Did I object to the line? Arguably, yes. Was I clear and explicit about not wanting the line in there? No. Was there room for people acting in good faith to differ regarding what my highlighting meant? Yes.

All of the other statements attributed to me are based on fact, although there are differences in detail, nuance, etc.

As I have tried to say several times now: my views, beliefs, policy prescriptions, etc., differ from those of Myhrvold, Wood, Levitt, Dubner, etc., however, I do not question their good intentions.

I can and do frame my own beliefs differently and set them in a different context.

So, given all this drama, and how extensively Caldeira’s views and research figured in our global-warming chapter, we wrote to him and offered to change anything in the chapter in future printings if indeed we failed to portray his research and views accurately.

Here’s the only change he requested:

You could just change it to “However, carbon dioxide may not be the right villain in this fight” or something like that and not attribute it to me.

Sounds like a good solution. So that’s how future editions of SuperFreakonomics will read. Some critics may of course charge us with making this change only in order to make the first printing of the book more valuable and therefore drive sales. If only we’d been so clever on purpose …

The Winner of the SuperFreakonomics Counting Contest

Wed, 04 Nov 2009 11:35:51 +0100

A few months ago, we asked blog readers to predict how many results a Google search for “SuperFreakonomics” would yield on the morning of Tuesday, November 3, two weeks after the book was published. At the time, the tally stood at 11,000.

On Tuesday morning, the Google tally stood at 668,000.

The closest guess to be submitted before the deadline was from Dave Benner, commenter No. 93, who guessed 666,666. Apparently the devil really is in the details. Congratulations to Dave; he’s got some schwag coming his way.

Guess What the Initials NADA Stand For

Wed, 04 Nov 2009 10:15:49 +0100

I blogged a few days ago about the Edmunds.com analysis of the Cash for Clunkers program, which concluded that the program was an expensive bust, costing the government roughly $24,000 for each extra car sold.

Now a group called NADA is weighing in on the subject. In a press release issued by NADA, they quote their chief economist Paul Taylor as saying the following:

It’s really not that hard to determine a credible cost estimate for the Clunkers program. You subtract projected sales from actual sales for July and August when the Clunkers program was operating, and divide the program’s $3 billion by that number.

When you do that calculation, you come up with a cost to the government per extra car sold of $4,587.

If you are in the mood for a little test of your economic acumen, re-read that quote above and see if you can figure out why it is completely and utterly wrong.

That quote makes no sense economically, of course, because people have control over the timing of when they make their purchases. If you tell people the price of anything is going to go way up in the future (because the Clunkers program is ending), they will make their purchase earlier. This is especially true with automobiles, which are durable goods. It would be less true, of course, with something perishable like a meal at a fast-food restaurant.

With or without a Ph.D. in economics, it should be obvious that the wrong way to judge the success of the Clunkers program is without factoring in shifting of the timing of purchases.

When I see a mistake as egregious as this, I usually suspect it is more likely the result of someone trying to intentionally deceive the public rather than an error of logic. So the first thing I do is try to figure out the incentives of the group that is making the statement.

In this case, I was not surprised to find out that the initials NADA stand for National Automobile Dealers Association. One of their main purposes: to represent auto dealers on Capitol Hill. Their incentive: to say Cash for Clunkers worked so that the program is renewed and more government funds are funneled to auto dealers.

I know it is Paul Taylor’s job to figure out ways to make it seem like Cash for Clunkers was a success, but it is bad for the field of economics when people calling themselves economists make ridiculous, erroneous statements like this one.

If nothing else, getting an economics Ph.D. should teach someone how to complicate and obfuscate the issue so that it isn’t so obvious to outsiders that the argument makes no sense.

(Hat tip: David Cushman)

Do You - Achoo - Support Health Care Reform?

Wed, 04 Nov 2009 08:33:22 +0100

People who see someone sneeze are more likely to tell a survey-taker that they disapprove of the current health care system. Researchers sent a survey-taker into a downtown mall, where she coughed and sneezed before handing her survey to several passers-by. She was careful not to sneeze when administering the same survey to a second group. The sneeze witnesses were more likely to disapprove of American health care. They were also more likely to say they were at risk of having a fatal heart attack or accident or succumbing to a murderer. We know polling results are sensitive to the wording of questions. The delivery of those questions could be a factor, too. We’ll know for sure when we see the first health care push-poll featuring sniffling, sneezing pollsters.

Freakonomics

What Are the Most Notable Quotes From 2009?

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Naked Self-Promotion

About Freakonomics

Comment of the Moment

FREAK Shots:

Nudging the Calorie Counters

Stuff We Weren't Paid to Endorse

Archive

Recent Posts

What Are the Most Notable Quotes From 2009?

A Different Kind of Organ Market?

Charity Won’t Contain This Secondary Market

Do Earmarks Matter?

SuperFreakonomics Book Club: Emily Oster Answers Your Questions

From the Opinion Blogs

Room for Debate

Getting a Grip on Drugs and Horses

Paul Krugman

Reagan! Reagan! Reagan!

Feeds

A Different Kind of Organ Market?

Charity Won't Contain This Secondary Market

Do Earmarks Matter?

SuperFreakonomics Book Club: Emily Oster Answers Your Questions

London Calling

A Great Answer From a Flight Attendant

Unfree Enterprise

Women for Polygamy

Is Climate-Change Belief a Religion?

Newspapers Not as Dead as You Think

Ken Caldeira's Carbon Solution

The Winner of the SuperFreakonomics Counting Contest

Guess What the Initials NADA Stand For

Do You - Achoo - Support Health Care Reform?

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Guess What the Initials NADA Stand For

Do You - *Achoo* - Support Health Care Reform?

Do You - Achoo - Support Health Care Reform?