Read Online When to Rob a Bank: ...And 131 More Warped Suggestions and Well-Intended Rants by Steven D. Levitt, Stephen J. Dubner - Free Book Online
Authors: Steven D. Levitt, Stephen J. Dubner
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only what his ranking was on the Forbes list of richest people.) Third, you can’t really blame yourself for house prices falling, but you could second-guess your decision to carry around $18,000 in cash. Fourth, the fact that a thief has your money might make it worse than the money just evaporating into space, like it does when house prices fall. There are probably other reasons as well.
More generally, the economist Richard Thaler coined the phrase mental accounts to describe the way in which people seem to treat different assets as non-fungible, even though in principle it seems like they should be. Although my economist friends make fun of me for it, I definitely use mental accounts myself. For me, a dollar made playing poker means much more than a dollar earned from the stock market going up. (And a dollar lost playing poker is likewise far more painful.)
Even people who deny that they are affected by mentalaccounts often fall prey to them. I’ve got a buddy in that category who won a big bet on NFL football (big relative to his usual football bet, but very, very small relative to his overall wealth) and the next day he spent the proceeds on a fancy new driver.
What does this all mean for housing prices? Well, if prices start going back up, it would be a lot more fun if the price increases came in the form of little packets of cash dropped outside your front door with the morning newspaper, rather than via house appreciation. I suppose all those people who took out home-equity loans figured this out a long time ago.
How Is a Canadian Art-Pop Singer Like a Bagel Salesman?
(SJD)
Much like Paul Feldman, the economist-turned-bagel salesman we wrote about in Freakonomics, the singer-songwriter Jane Siberry has decided to offer her wares to the public via an honor-system payment scheme. She gives her fans four choices:
1 . free (gift from Jane)
2 . self-determined (pay now)
3 . self-determined (pay later so you are truly educated in your decision)
4 . standard (today’s going rate is about .99)
Then, cleverly, she posts statistics on payment rates to date:
% Accepting gift from Jane: 17%
% Paid by determining price: 37%
% Paying Later: 46%
Avg. price per track: $1.14
% paid below suggested: 8%
% paid at suggested: 79%
% paid above suggested: 14%
Even more cleverly, Siberry posts the average payment rate for each song as you pull your payment option from the drop-down menu—another reminder that, hey, you’re more than welcome to steal this music but here’s how other people have acted in the recent past.
It seems that Ms. Siberry grasps the power of incentives quite well. This allows for at least a couple of interesting things to happen: people can decide what to pay after they hear the music, and see how much it’s worth to them (it looks like people generally pay the most per song under this option); and it takes the variable-pricing scheme that economists love and puts it in the hands of the consumer, not the seller.
I think record companies will need a lot more convincing before they’re willing to try this model on a large scale. Presumably, Jane Siberry fans who go to her website to get her music are a deeply self-selecting lot, far more devotedthan the average downloader. But as desperate as the record companies are, I wouldn’t be surprised to see more of this in the future.
TWO DAYS LATER . . .
Jane Siberry Snaps
(SJD)
Apparently, Jane Siberry doesn’t appreciate people calling attention to her website, which allows people to pay as they wish to download Siberry’s music. I liked the idea, and blogged about it. But here’s what Siberry wrote on her MySpace journal today:
The “self-determined pricing” policy of the store is in the spotlight again, freakonomics has an online article; abc news emailed. I don’t want the attention. I think I’ll change the pricing to “you can pay me all you want but i’m
More generally, the economist Richard Thaler coined the phrase mental accounts to describe the way in which people seem to treat different assets as non-fungible, even though in principle it seems like they should be. Although my economist friends make fun of me for it, I definitely use mental accounts myself. For me, a dollar made playing poker means much more than a dollar earned from the stock market going up. (And a dollar lost playing poker is likewise far more painful.)
Even people who deny that they are affected by mentalaccounts often fall prey to them. I’ve got a buddy in that category who won a big bet on NFL football (big relative to his usual football bet, but very, very small relative to his overall wealth) and the next day he spent the proceeds on a fancy new driver.
What does this all mean for housing prices? Well, if prices start going back up, it would be a lot more fun if the price increases came in the form of little packets of cash dropped outside your front door with the morning newspaper, rather than via house appreciation. I suppose all those people who took out home-equity loans figured this out a long time ago.
How Is a Canadian Art-Pop Singer Like a Bagel Salesman?
(SJD)
Much like Paul Feldman, the economist-turned-bagel salesman we wrote about in Freakonomics, the singer-songwriter Jane Siberry has decided to offer her wares to the public via an honor-system payment scheme. She gives her fans four choices:
1 . free (gift from Jane)
2 . self-determined (pay now)
3 . self-determined (pay later so you are truly educated in your decision)
4 . standard (today’s going rate is about .99)
Then, cleverly, she posts statistics on payment rates to date:
% Accepting gift from Jane: 17%
% Paid by determining price: 37%
% Paying Later: 46%
Avg. price per track: $1.14
% paid below suggested: 8%
% paid at suggested: 79%
% paid above suggested: 14%
Even more cleverly, Siberry posts the average payment rate for each song as you pull your payment option from the drop-down menu—another reminder that, hey, you’re more than welcome to steal this music but here’s how other people have acted in the recent past.
It seems that Ms. Siberry grasps the power of incentives quite well. This allows for at least a couple of interesting things to happen: people can decide what to pay after they hear the music, and see how much it’s worth to them (it looks like people generally pay the most per song under this option); and it takes the variable-pricing scheme that economists love and puts it in the hands of the consumer, not the seller.
I think record companies will need a lot more convincing before they’re willing to try this model on a large scale. Presumably, Jane Siberry fans who go to her website to get her music are a deeply self-selecting lot, far more devotedthan the average downloader. But as desperate as the record companies are, I wouldn’t be surprised to see more of this in the future.
TWO DAYS LATER . . .
Jane Siberry Snaps
(SJD)
Apparently, Jane Siberry doesn’t appreciate people calling attention to her website, which allows people to pay as they wish to download Siberry’s music. I liked the idea, and blogged about it. But here’s what Siberry wrote on her MySpace journal today:
The “self-determined pricing” policy of the store is in the spotlight again, freakonomics has an online article; abc news emailed. I don’t want the attention. I think I’ll change the pricing to “you can pay me all you want but i’m
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