Thursday, February 27, 2020

econlife - How Eating Less Popcorn Is Like Smoking Fewer Cigarettes by Elaine Schwartz


Sometimes people want to eat stale popcorn.

During one experiment filmgoers were asked to rate several movie trailers. Instead, researchers were looking at eating habits by giving some participants freshly popped popcorn while others got a week-old stale batch. Yes, everyone consumed the fresh stuff. But some also appeared to be enjoying the stale popcorn.

Where are we going? To how we make and break habits.



Popcorn Habits

It turned out that the stale and fresh eaters had different habits. The people who said the stale popcorn was inedible tended not to down popcorn while at the movies. Those that ate it said they regularly consumed popcorn while watching a film. Researchers hypothesized that the group with the popcorn habit just did what they always do with little thought.

To see how they could break a habit, the next step was to ask people to eat their popcorn with a right hand if they were lefties and a left hand if they were righties. The result then was much less consumption of bad tasting popcorn.

Smoking Habits

The popcorn experiment provides some insight about why fewer adults smoke cigarettes. Since the 1960s, the rate has continued to sink. From 42.4 percent in 1965 and 16.8 percent in 2014, the adult smoking rate went down to 13.7 percent in 2018:




At first health experts and regulators told us that smoking was bad for us. On the package, in the media, word of mouth, all said that you get lung cancer and emphysema from smoking. People knew it.

But they kept smoking.

Then though laws were passed that eliminated cigarettes from vending machines. To buy them you had to request a pack from behind the counter. To smoke, you had to leave the office or the restaurant and sometimes even the bar. That was when smoking rates went down. It wasn’t will power that made people stop. It was about the hassle.

Our Bottom Line: Friction


In physics, friction slows the movement of a sliding object. In economics, it diminishes a person’s willingness and ability to do something.

When a behavior is a habit, we do it automatically, thinking little, acting immediately. However, if it’s not habitual, then just contemplating the action creates some friction. For movie goers, there was little friction for the habitual popcorn eaters until they had to switch hands.

Similarly for smoking.  As a habit, smoking cigarettes used to be frictionless. But then as the friction went up, demand went down.

Whether it’s cigarettes or another undesirable commodity, more friction can decrease demand, But when your goal is the opposite, just do what Netflix does and immediately take us to the next episode. Or use one-click like Amazon. We cannot resist because there is no friction.

My sources and more: Always interesting, NPR’s Hidden Brain focused this week on making and breaking habits. Their Wendy Wood interview took me to her research lab. Then, for my smoking data, The Washington Post had a fascinating summary of who smokes and some history as did the CDC.


Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

Tuesday, February 18, 2020

econlife - The Problem With Finding the Right Size by Elaine Schwartz


Serial returners were in danger of being blacklisted when the online U.K. fashion firm, ASOS,  threatened to close the accounts of the people who return too much.

They did do it gently:




Inconsistent Dress Sizes

The reason you probably returned an online purchase was the fit:





The reason you could not predict the fit?  Because you didn’t know your size.

Assume you wear a size 26. The Wall Street Journal discovered that each of seven retailers would have sent you skinny mid-rise jeans with different measurements:






In addition to the varied meaning of a single size, our shapes are exceedingly diverse. One woman can have a 28 inch waist and 32 inch hips and another, the same waist and  42 inch hips. The pants they order could be made from a stretchy fabric, a heavy linen, a light cotton, each that fit in their own unique way.

What to do?

Standardization

In the past the solution was standardization. After decades of gathering thousands of women’s measurements, an industry group came up with 27 different sizes that were compressed to a size range of 8 to 38. Commercialized by 1958, the results were used by the pattern-making industry and became a standard for modern sizing.

But then we started to get larger while sizes got smaller and less consistent. A size 14 or 16 in 1958 became the equivalent of a size 8 in 2008. Some retailers selected 000 as their smallest size or perhaps an XXXS. At the Gap you can find a range of 00 to 20 but H&M uses 2 to 32.

Now some firms have decided some of us don’t even want to hear a number that designates our size. One is using a color. Others are custom fitting. But most give us free shipping, free returning, and let us order in bulk, and send back a part of it.


Our Bottom Line: Transaction Costs

Economically defined as sacrifice, the cost of what we buy online is more than the money we pay. Called a transaction cost, it includes the try ons, the phone calls, the forms we fill out and all the hassles that relate to a purchase. Size standardization used to diminish those costs because one size had a consistent definition everywhere. Standardization helped when all railroads laid the same size tracks. Similarly, we eventually got one kind of VCR that would play a standardized DVD and of course, our weights and measures are standardized.

You can see where this is going. When something is standardized, there is less hassle, more efficiency, maybe more productivity. And when it’s not, we order multiple dresses, and jeans and shoes that increase the transaction costs of doing business online.

My sources and more: Thanks to the daily WSJ podcast for alerting me to their dress size article. Vogue also looked at the problem as did a previous econlife.

Our featured image is from Pixabay.


Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

Thursday, February 13, 2020

econlife - How Hershey Kisses and COPEC Are Like Oil and OPEC by Elaine Schwartz


Ghana’s vice president called it COPEC. He was referring to a chocolate version of OPEC.

Although both are cartels, they are not quite the same.



Cocoa Bean Prices

Last summer, West Africa’s Ghana and the Ivory Coast said they would elevate cocoa bean prices. But instead of controlling supply like OPEC, they are going to increase the price. For every metric ton, the benchmark futures price will get an extra $400 added to it.

The Ivory Coast and Ghana produce more than 60 percent of the world’s cocoa. Far behind, at #3, is Ecuador:




A Supply Chain

In a typical cocoa supply chain, the beans go from small farmers who earn less than $3 a day to local middlemen who pool the crop. The next step is the government and then the processors that sell it to the chocolate makers we all know. Since the government sets the price paid to the farmers, it will be able to give them more.

Some worry though that the cocoa bean price hike could have unintended consequences. As economists we know that higher prices hike supply and also shrink demand. Combined, more quantity supplied and less demanded mean unsold surpluses. In addition, traders could look for alternate sources, children could be taken out of school to help their families expand production, and forests could be cleared.

Higher cocoa price futures will create new incentives. You can see that they have sunk since their 2015/2016 highs:






Our Bottom Line: Cartels


“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” Adam Smith

A cartel is an association among the providers of a good or service that typically establishes a common price and other forms of cooperation. Contemporary cartels include OPEC’s 14 countries (Organization of Petroleum Exporting Countries) and the Federation of Quebec Maple Syrup Producers. Composed of just two countries, COPEC is a rather tiny cartel.

During the 19th century, rival U.S. railroads with parallel track found that cooperation was the one way to eliminate ruinous competition. We had for example, the Acheson, Topeka and Santa Fe, the Union Pacific, and the Missouri Pacific Railroad all with the same customers. Rather than compete, the better solution (for them) was a cartel that gave them monopoly power.

If the cocoa cartel’s monopoly power works, then we will be paying more for our Hershey Kisses, Mars Snickers Bars, and Mondelez’s Oreos.

My sources and more: In an exceedingly long article, WSJ had the complete story of cocoa beans prices as did Bloomberg and FT. Then, for a slightly different perspective, FT told about typical cocoa farmers. And finally, for some cartel history, you might go to this article from a Stanford historian or this paper.

Most of Our Bottom Line was in a past econlife post.


Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

Friday, February 7, 2020

Put Away the Tech, Part 2 by Scott Harris

Attend a lecture at a local college or even look around at pictures internet, and you’ll see nearly every student behind their (usually Apple) laptop. They are allegedly taking notes, but research suggests otherwise. 

A 2010 study (Journal of Information Systems Education, v21 n2 p241-251 2010  Examining the Affects of Student Multitasking with Laptops during the Lecture.  Kraushaar, James M.; Novak, David C.) found that students spent 40% of their time on things unrelated to coursework. Ninety percent of students were engaged in unrelated activities for at least five minutes, and 60% were distracted for half of the class.

While colleges can block the internet in lecture halls, few do. This begs the question of why any professor or teacher would allow their students to take notes on computers. Some like Dr. Laurie Santos at Yale, have banned laptops. Yet even she got so tired of students asking for exceptions, that she made an exception. However, they have to apply, and she quarantines them in the cheap seats, where they can’t distract anyone else. (See picture below) 


Dr. Santos teaches “Psychology and the Good Life,” the most popular course at Yale. She knows the research is wildly against taking notes with computers. Taking notes by hand has many benefits. Students can type much faster than they can write, which would seem to be an advantage. Yet when an experimental and control group are set up, the students taking notes by hand did better on conceptual understanding, both an hour later and seven days later.


But the typists did better on detail, surely? No. The hand writers did better on that, too. It seems that you can’t keep up writing by hand is the beneficial part. That you have to evaluate, synthesize and condense what is being said is the very thing that forms memory hooks. Typists can essentially record verbatim what is being said; thus, the integration necessary for memory formation is not occurring. 

Then it occurred to researchers to tell the typists to synthesize and not record verbatim. It had no effect. It seems we just can’t help ourselves. If we can keep up, we will. Typing allows to record without really thinking.



Scott K. Harris teaches The Moral Sciences: A.P. Macroeconomics, A.P. Psychology, and Philosophy. He holds a B.A. in History/Psychology and a M.Ed. in Teacher Leadership. He has also taught U.S. History, World History, International Baccalaureate’s Theory of Knowledge, and coached swimming and water polo. He piloted curriculum for Stossel-in-the-Classroom and is an associate producer for izzit.org.  

Tuesday, February 4, 2020

econlife - The Two Best Ways to Keep Your New Year’s Resolutions by Elaine Schwartz


For several years, I’ve listened to “page-turner” best-sellers when I do the dinner dishes. As Tom Hanks read Ann Patchett’s The Dutch House, I actually looked for extra plates to wash. Somewhat similarly, I get myself to lift weights regularly by leaving 6- and 10-pounders on my closet shelf.

The page-turners and the closet shelf are commitment devices. Called temptation bundling and piggybacking by behavioral economists, they can help us keep our New Year’s resolutions.

New Year’s Resolutions

Temptation Bundling

With temptation bundling, we combine our “wants” and “shoulds.” Temptation bundling limits the time used for your indulgent wants while encouraging a distasteful activity that will be good for you. You wind up with less of the “wants” and more of the “shoulds.” Done alone, each activity has less utility. Done together they create a value boost.

The Experiment


To see if temptation bundling had academic resilience, researchers divided 151 people who wanted to exercise into two groups. One group received iPods loaded with tempting page-turner novels that could be accessed only at the gym. The second group didn’t have the book incentive.

The results confirmed most of what we would expect. Group 1’s workouts exceeded the control group by 27%. So yes, temptation bundling did increase the frequency of the undesirable activity—the “should.” However, we should note that it didn’t kickstart a permanent workout regiment. After a temporary Thanksgiving break, neither group displayed “staying power.”

Piggybacking

With piggybacking, we “attach” a new task to one that we habitually do. The result is a cue. After accomplishing what we usually do, we have something that is supposed to come next.

The Experiment


In one study, researchers looked at flossing. Wondering what could get us to floss our teeth regularly, they used when as the key variable. The experiment had two groups of flossers. One was supposed to floss before brushing their teeth and the other, after. The power of the piggyback was confirmed by the experiment. The “after” group not only flossed more during the test period but more of them did it in the 8-month follow-up.

Our Bottom Line: Commitment Devices


Temptation bundling and piggybacking are two of many commitment devices. Defined by behavioral economists, commitment devices are incentives that encourage us to stick with an activity.

Other devises?

The New Yorker called it the Ulysses Strategy. When graduate students opted for a monetary punishment if they did not buy healthy food, the incentive had an impact among those who committed:




In addition, smaller plates at a buffet can make us take smaller portions. Another possibility is placing money into a deposit contract that requires forfeiture if you don’t carry out your end of the bargain. Also, those year-long gym memberships are an example (unless you’re one of those typical individuals who still doesn’t go).

For me, temptation bundling (the dishes) and piggybacking (the weights) so far work. I guess we each can choose the commitment device that perpetuates our New Year’s resolutions.

My sources and more: In The Washington Post, Penn Professor Katherine Milkman takes us to several commitment devices. Much drier, the academic formula for health interventions is described in this paper. Then, for a fast read, here is a brief summary of a flossing study. However, the best sources that combined the academics and some fun were Freakonomics and The New Yorker.

Our featured image is from Gerd Altmann at Pixabay.

This was an updated version from last year. I hope you enjoyed it.


Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.