Wednesday, October 28

Scented nonsense?

You may have read this one in your local paper: lemon scents make people more trustworthy, charitable and generous. The study by Katie Liljenquist (Brigham Young), Chen-Bo Zhong (University of Toronto) and Adam Galinsky (Northwestern) has apparently been accepted for publication in Psychological Sciences.

Basically, the researchers got subjects to play a trust game where subjects could pass money between each other or keep it. Money that was passed got multiplied, but there was a chance the other player could screw you by not passing much money back. Subjects were either in a room which was sprayed with lemon-scented Windex, or a room that wasn't. The subjects who were in the Windexed room passed more money back and forth.

The researchers did another experiment where people filled out a questionnaire about their wilingness to volunteer and donate to Habitat for Humanity. People in the Windexed room claimed to be more charitable and more willing to volunteer than people in the normal room.

Tuesday, October 27

A review of Superfreakonomics

It's not every week a high-profile economics book hits the market, so I decided to forgo some studying over the weekend to read Superfreakonomics, by Steven Levitt and Stephen Dubner. It's the sequel to Freakonomics, probably the most well-known economics book designed for mass consumption.

This is the Seinfeld of economics books: it truly is a book about nothing. Sure, there are chapters which seem to have a unifying theme. But the book itself does not have a concept behind it.

Monday, October 26

Journalists don't do game theory

Does game theory work in the news media business?

According to Saturday's Toronto Star, the Obama administration recently offered an interview with a senior official to all major national news outlets (CNN, ABC, NBC and CBS) except Fox News. Fox News has a reputation for having a strong-right wing bent, favouring Republicans over Obama's Democrats.

Game theory would tell us that (assuming the interview was worthwhile to do) the other networks should have done the interview. But the networks banded together and stood up for Fox by declining interviews.

Sunday, October 18

The debate continues

Knowing and Making, a behavioural economics blog in the UK, has taken up the swine flu vaccine allocation debate (originally blogged about here and here). They argue against my lottery idea and instead make the case for a government-held auction of vaccines.

Saturday, October 17

Monkey-see, monkey-do

I think humans tend to follow the monkey-see monkey-do practice more than we think.

I went for a $17 haircut yesterday and was planning on tipping to $20 (it seemed like a nice round number) until I noticed that the customer before me didn't tip at all, even though he remarked on how pleased he was with his cut. I changed my mind and decided tipping to $19 would be more appropriate.

Likewise, I frequently visit one of the Tim Horton's on campus for their Iced Cappucinnos. They require a straw, which at Tim's is always wrapped in paper. So it's not uncommon to see a bunch of crumpled-up straw coverings on their counter (and sometimes an assortment of other garbage -- I saw a Kit Kat wrapper there the other day). When there are straw wrappers already on the counter, I usually leave mine behind as well. But when the counter is clean, I usually feel guilty about being the first to litter and tuck the wrapper in my pocket to dispose of later.

Thursday, October 15

More swine flu economics

A few weeks ago, I blogged about the Hamilton health authority's proposal of how to figure out who gets scare flu vaccines in the event of a pandemic. Now, the Canadian Olympic Committee's chief medical officer is suggesting that Olympic athletes get first dibs on flu vaccines in the event of a pandemic (hat tip to ECalgary). He notes athletes are a high-risk group and that Canadians would be sad if their Olympic hockey team caught swine flu.

Personally, I'm not convinced his argument that the positive externalities for Olympians getting vaccinated is that strong. I tend to agree with the Hamilton health authority that emergency workers should get dibs over athletes. But I'm not convinced the health authority's solution is the right one.

Why not hold a lottery for flu vaccines, and then allow people to trade or sell their vaccines as they wish? It ensures the rules are equal for everyone, and trading will allow for people who don't put a high value on the vaccine to transfer it to someone who does.

Monday, October 12

Brunches for risk lovers

I visited Floyd's Diner in Victoria for brunch with some friends yesterday. They have an interesting menu item: The Mahoney. Essentially, the cook makes whatever he wants, and you can either pay face value, or flip a coin and get it free if you win but pay double if you lose. I think it's supposed to be a reference to Dan Mahowney (yes, Floyd's made a spelling mistake), a gambling addict.

It's a novel concept. Economists usually assume most people are risk averse, and consequently there are lots of insurance-type products and money-back guarantees in the market to cater to these people. But rarely do businesses (other than casinos and lotteries) cater to the risk lovers among us. Offering people a chance to flip for a free breakfast or paying double seems smart -- it increases the expected value of the meal for risk lovers, and while the restaurant will lose money on the meals it gives out for free, over the long run its revenues should be no different than if it simply charges face value (assuming, of course, the coin toss results in a 50-50 outcome).

For the record, I was feeling risk averse and opted for the Cajun Club with fries. It was delicious.

Friday, October 9

Unintended consequences of Breathalyzers in high schools

Schools in Foxborough (near Boston) will be using Breathalyzer tests on students suspected of being drunk at school or school functions.

When I saw this on Fox News last night, it struck me as a horrible idea because of unintended consequences. Sure, Breathalyzer tests will increase the chances that a student who is drunk gets caught. Sure, it may reduce underage drinking a little bit. But it also means drunk students will be less likely to show up at school functions. While this is a good thing for the school, it's probably bad for the drunk students.

Sunday, October 4

Economics at Dundurn Castle

I visited Dundurn Castle on Friday with my parents, who were visiting from Vancouver. The castle, built in 1835, is a National Historic Site in Hamilton that was a former home of Sir Allan MacNab. He was a prime minister of Canada, before Confederation in 1867.

On our hour-long guided tour, I was surprised at the economic references that crept into our tour. Our guide tried to justify the MacNab family's use of child labour. She mentioned that the servant who did the dishwashing for the MacNab family was likely eight or ten years old and worked ten-hour days. But she qualified this by mentioning that her working conditions were far better than many other jobs at the time, given that it she had a brick floor, a window and running water to work with.

Our guide also gave a neat example of an unintended consequence of tax policy. In those days, taxes were assessed based on how many rooms a person had in their house, with a room being defined as having a door. Therefore, closets were considered rooms. So the house had no closets, instead making liberal use of dressers, until the law was changed so that closets were no longer considered rooms.

It's a reminder that people respond to incentives, even in the 19th century.