Economics of Giving out Candy

As I go to the store to buy candy to hand out to children trick or treating this evening, I got to thinking what are the economic motivations for handing out candy and what factors influence the likelihood a house will give out candy?

Since I'm spending money on the candy, basic economic theory would suggest I get some utility (happiness) out of giving candy to children. My wife and I do enjoy seeing kids in their costumes. We also like to feel like we are part of the neighborhood. Of course we will take our own child to a few houses of friends and hope friends will come to our house.

With that in mind. A simple theory of what induces people to hand out candy. First, it is what some economists would call an institution or social norm (or we do it because everyone else is doing it). Just like we are expected to do many things even without an obvious benefit, because they are part of the culture. Social norms tend to be stronger in more integrated communities. So I would guess there is a correlation between how often neighbors socialize and if they hand out candy. Furthermore, I would guess that neighborhood with households of similar backgrounds in terms of culture, race, and income level would be more likely to hand out candy. Related there is a reciprocity aspect too, if you have kids who go trick or treating you probably feel worse if you don't hand out candy than someone who doesn't have kids.

What about income and trick or treat candy? My guess is that as incomes go up people generally are more likely to hand out candy. This may not be true on the highest end as high incomes may mean more isolated houses or people with higher opportunity costs. Neighborhood walk ability also has something to do with trick or treating.

So far I'm treating this as a supply side issue. Of course there are the trick or treaters who demand candy. One could also worry of the threat of egging if no candy is handed out (although that seems doubtful). Related when we lived in an apartment there was no demand for candy, so we were left with a large surplus (we quickly changed from suppliers to consumers of candy solving the issue).

Finally, looking back 4 years ago I made a Halloween post. Since then the trick (stock market down) and the treat ($2 gas) have reversed with the market and gas prices up substantially

Of course what Halloween post would be complete with a scary costume....

Atoning For Blogging

When you read this post it will be Yom Kippur. On this day Jews ask for forgiveness for their sins. So I will ask you to forgive me for being flippant, writing things too fast, pretending to know more than I do, and if I spread misinformation.

To my fellow Jewish bloggers may you have an easy fast and may you be linked to by the book of life blog.

The Invisible Beard on Talk Like a Pirate Day

In honor of today's holiday I thought I would recognize one of my favorite economists who doesn't really get the recognition he deserves. Bart [pronounced BARRRT] "The Invisible Beard Smith" grew up on a MARRxist commune in the Caribbean. He soon rejected communist ideas and discovered a love of economics after finding a way to ARRRbitrage bottles of rum between his and the neighboring commune. He left the Caribbean to attend Beloit College in Wisconsin, which was a surprise to many given that it is landlocked and full of landlubbers. After founding the Beloit Students Against Scurvy organization he wrote his senior thesis on optimal currency unions in Latin America "ARRgentina, Brazil, and Chile and the pieces of eight currency union." After Beloit he was accepted to HARRvard's Ph.D program working under MARRtin Feldstein as an R!.A. at the NBERR! His work with Feldstein on social security reform proposed seniors take private accounts or walk the plank! His Job Market paper used "Autoregressive (AR!) estimations of shipping tonnage as a predictor of recession" made him a staRR on the market. His job market experience is quite the tale though. Smith visited both fresh and salt water institutions, his success led him to plunder all of the booty from one Big Ten institution, although he lost an eye after a duel with Tom SARRgent following his NYU seminar. Instead of accepting any offers he has for the last ten years commanded a vessel of economists sailing the seven seas and writing articles. He did return to Washington briefly to work with Glen HubbARRd on TARRP. He was the first economist to publish in all 5 AER journals, which they have titled in his honor an AERRRRR! He is currently a  co-editor of the Review of Economics and Statistics (R!-estat). Keep an eye out for him, I'm sure you'll see his work featured in MARRginal revolution or a write up by Megan McARRdle soon.

How Academic Publishing is like a Football Drive

Touchdown! May be the most exciting words in football, but my favorite word to hear in economics is Accepted! On Sunday I got the e-mail with those words so my paper (co-authored with Towson colleague Tom Rhoads) Stadium Construction and Minor League Baseball Attendance is now forthcoming in Contemporary Economic Policy. The paper shows that building new stadiums for minor league baseball teams increases their attendance, but that increase likely does not create revenue increases sufficient to pay for new stadiums. This is consistent with a lot of the other literature on what is called the honeymoon effect that shows building new stadiums increases attendance for most major league sports.

So how is publishing like a football drive, well by being accepted you know we scored a touchdown. But not all touchdowns are equally exciting. A 95 yard pass with 5 broken tackles is more exciting then a punch into the end zone on 1st in goal. So I would compare the acceptance to scoring at 2nd and goal from the 8 yard line, there was still some doubt, but I was pretty hopeful we would score. Let's review the drive.

If you click on the paper you notice that the working paper version is from 2010. I know we presented the paper in July of 2010 at the Western Economics meetings and did most of the work in the spring of that year, so the paper took roughly 2.5-3 years from idea to acceptance, which isn't out of the norm for me or economics. Before Contemporary Economic Policy (CEP) we submit to two other journals, both of which rejected are paper, but gave some useful comments so I think the version CEP saw was much better than the 2010 paper. So in short we had two stalled drives.

So the CEP drive. I believe we submitted to CEP about a year ago. I would start by saying CEP did a great job getting us back reviews and the process could have been quicker only if we did our revisions faster. We then waited a few months for reviews to be returned (this is standard) and CEP got us 3 sets of reviews, which is not atypical although the other journals we submitted to only gave us one reviewer's comments. We got a first down and continued the drive around midfield as the reviewers generally liked the paper, but had lots of suggestions on how to improve it. We spent some time rewriting the paper and doing additional analysis and sent the paper back a few months later. The reviewers noted we had made some progress but weren't quite ready for acceptance yet, putting us in the red zone. The last set of reviews suggested we were pretty close, but we had to close the deal. I spent a month or two on one final issue thinking about it carefully and I think I had a pretty good explanation and I made small changes to the paper but wrote up about 5 pages of why we think what we were doing was accurate based on consistency checks. After a month the reviewers and editor put up their hands and signaled accepted.

Normally I don't tweet or blog as soon as a paper is accepted. I was a big fan of Barry Sanders (a running back for the Lions) growing up and when he scored he would just handed the ball to referee and went back to the bench. I think a football coach once said "act like you have been in the end zone before" My Towson colleagues and I do enjoy celebratory lattes when one of us has an article accepted, but hopefully I'll find the end zone again soon (even if I'm no Barry Sander).

A post script that amused me. A few hours after accepting the paper the journal's editor sent me a request to become  a reviewer for a different paper. We later exchanged e-mails and he was right there was basically 100% chance I would say yes to reviewing (actually I always say yes to reviewing papers unless they are completely out of my expertise zone).

The Opportunity Cost of 600 Posts

This will be my blog's 600th post! I started in back in 2006 at the time I was a visiting professor at Beloit College. Like a good economist the first thing that comes to mind is opportunity cost that is what did I give up by writing 600 posts. My guess is I spend about 15 minutes to a half hour on the average posts. So we are looking at maybe 200-300 hours worth of work spread over 6 years. In short about a weeks worth of work over each year. So what could I have done over that year. Perhaps I have could gotten more consulting gigs and earned thousands of dollars, but having tried to get consulting gigs from time to time that is harder than it sounds. I could have spent more time preparing my classes, but in some sense this blog does prepare me for class I look up lots of examples and think about ways to present info to non-economists (and sure enough all of my students are not PhD economists). I also could have written another paper or two, but one thing I like about being at a teaching focused school is that I don't have to get to the diminishing returns part of my research agenda, so my guess is the paper(s) would not have been my best. Of course there is always leisure too!

I think my enjoyment of the posts shows the benefits outweigh the costs.

Looking back here are some my favorite posts
$240 worth of pudding , Evaluating Bar Rescue, Hanukka PPF

Kaushik Basu new World Bank Chief Economist

Kaushik Basu today was named the next Chief Economist at the World Bank. His work on child labor has been extremely influential to me and I thought I would take the opportunity to discuss it. I remember in undergrad debating with students who were part of an organization called students against sweat shops that banning sweat shops might not be the best idea and that the relationship between trade and child labor is extremely complex. Basu's models of child labor really cut through that complexity. His 1998 paper in the American Economic Review with Van presents a model that was understandable and extremely policy relevant to me as a first year grad student (although the math might not be approachable to the layman). It shows under what conditions a ban on child labor for exports can help or hurt the poorest in a developing county. As Basu's work shows in many cases the answer isn't clear. Related I like this work with Zarghamee from the Journal of Development Economics  that shows under what conditions boycott products that use child labor may hurt or help.

I also always think of Basu when waiting for people who arrive late to a meeting. Writing with Weibull this essay discussed the culture of lateness that seems to persist in many poor countries (summarized here in the New Yorker).  In short in a country where people are normally late it is best to be late yourself creating a culture of chronic lateness.

I look forward to seeing how Dr. Basu uses his position at the World Bank.

Buckle up your children? Endogeneity and car seats

I was in an online discussion about car seats yesterday and recalled a paper by Freakeconomist, Steve Levitt, that for 2-6 year olds car seats are as effective at preventing deaths as seat belts.  As Levitt points out you can't just look at car seat use since people who tend to use them are wealthy and people who take less risks (likely to have better safety features on their car and get in fewer serious accidents).  In other words the choice to use a car seat is endogenous to other factors that also influence the likely hood of crash. A more recent follow up paper by Doyle and Levitt show with a different data set  a similar result in terms of serious injury 9no difference between safety seat and belt), but they also show car seats for 2-6 year olds reduce less serious injuries.

Classical economics suggests that you shouldn't tell people what to do, since you might not know their preferences. Assuming Levitt's results are correct what is the trade off between a reduction in less serious injury versus the expense and hassle of a car seat. Most economists would point out we all take risks, not driving is likely less risky than driving.

But the law and social norms say I should put my 2 year old daughter in a car seat, and I haven't really researched it so as a risk averse dad, I'm going to stick with the car seat.