Pleasant Surprises

October 18, 2010
Posted by Jay Livingston

Technology gives us greater control over our lives. You can decide who you want to be with, ignoring the people in the same room with you and instead texting or IMing your friends. You can get the movies, shows, or music you want, untethered from the arbitrary schedules and playlists of media outlets. In Tyler Cowen’s title phrase, you can Create Your Own Economy.

The price we pay for control is surprise. You can’t tickle yourself. You can’t surprise yourself.*

Last Saturday in Central Park, I was watching the singer who sets up with his guitar at the western edge of the boating pond. His name is Dave Ippolito, and his repertoire is what you’d expect from a guy with only an acoustic guitar – James Taylor-Dylan-Elton Johnish stuff, plus his own songs – and people sit on the bench and the grassy slope to listen.

Nearby, on a spit of land that juts out into the pond, there’s a open area with a gazebo, and in the warm weather, wedding couples often take photos there. If the wedding party is small enough, they can have the ceremony there.

Last Saturday, a couple had just done their wedding at the gazebo, and to leave the park they came walking up the paved path, crossing in front of Dave. He stopped singing. “Wait a minute,” he said, “did you guys just get married?” They nodded. “Here. I’m going to play something just for you, and you can have your first dance right here. OK?” They looked at each other, then at the wedding party trailing behind them on the path, and they agreed. He segued into “Can’t Help Falling in Love With You,” and the couple danced.


Then Dave invited the others in the wedding party to dance, and soon the path on that side was filled with well-dressed couples.


At the end of the song, Dave said, “C’mon, anyone who wants to, you guys on the grass, everyone dance. He started another tune. And there we were, the wedding guests in their nice clothes, the rest of us in our jeans and sneakers.

Weddings are usually carefully planned – the guest list, the clothes, the flowers, the music, the food – and scheduled fairly tightly so that everything goes well. But I wonder what that couple and their guests will remember about their wedding day. Will it be all those elements they planned? Or will it be the ten minutes of surprise, when, on their way out of the park, they were dancing to music they’d never expected and with other couples they’d never met?**


*You can’t give yourself a surprise party. Usually, when people say that they surprised themselves, it means they tried something new and unpredictable – that is, they gave up control and predictability. And giving up that control allowed them to discover something new and positive about themselves.

** I also wonder whether this is an “only in New York” kind of surprise. Is there something about the city, where diverse sets of people intermingle in the same space, that makes for more of these spontaneous moments?

Blockheads

October 12, 2010
Posted by Jay Livingston

“No man but a blogger ever wrote, except for money.”

What Dr. Johnson actually said was “blockhead,” but what’s the difference?

Is money the only motivation to produce? Greg Mankiw seems to think so. Mankiw was a top economics adviser in the Cheney-Bush administration. He probably thought that tax cuts for the rich were a good idea ten years ago, and he still thinks they’re a good idea

In a column in the Business section of last Sunday’s New York Times, Mankiw uses himself as an example to illustrate the disastrous effects of allowing the Bush tax cuts on the wealthy to expire, raising that rate the three points from 36% to 39%, and resurrecting the tax on large sums of inherited money.

Suppose that some editor offered me $1,000 to write an article.

Then Mankiw does a little magic – like the magician who starts holding one ball in his fingers out soon winds up with many.

30 years from now, when I pass on, my children would inherit about $10,000.

But then come the taxes.

Without any taxes, accepting that editor’s assignment would have yielded my children an extra $10,000. With [the proposed Obama] taxes, it yields only $1,000

But ah, if we keep the Bush tax cuts for the rich . . .

Taking that writing assignment would yield my kids about $2,000. I would have twice the incentive to keep working.

Other bloggers (Brad DeLong and Kevin Drum, for example) have criticized Mankiw’s math and economics. What I’m curious about is the assumption that rich people do what they do only or mainly because of the money.

Maybe you are looking forward to a particular actor’s next movie or a particular novelist’s next book. Perhaps you wish that your favorite singer would have a concert near where you live. Or, someday, you may need treatment from a highly trained surgeon, or your child may need braces from the local orthodontist. Like me, these individuals respond to incentives. (Indeed, some studies report that high-income taxpayers are particularly responsive to taxes.) As they face higher tax rates, their services will be in shorter supply.

Should Mankiw really be using himself as an example? If Mankiw’s work output is merely or mostly a response to economic incentives, why is he writing this column at all? The Times paid him considerably less than $1000. I would guess about a third less, but whatever it was, it’s pocket change compared to what he makes from his books, and it’s probably much less than he could have made had he spent the same amount of time consulting.

Yet he still wrote the article. And I bet he would have written it even if the Times hadn’t paid him a cent. I base my bet on past performances: on his blog, Mankiw averages about five posts per week, all of them unpaid. In the 1990s, the top tax rate was 40%, and in early 1980s 50%. Did Mankiw work less hard back then?  When the Bush tax cuts kicked in, did he rush to pick up more consulting gigs?

Is money the reason that rich people – movie stars, rock stars, fancy surgeons, rich economists – continue to work? And will that 3% increase in their marginal tax rates make them slack off? If the tax cuts expire, will the hedge fund guys leave the office at 4:30 in the afternoon because it’s just not worth it to trade a few more swaps and derivatives? They already have more money than they know what to do with, yet they work long hours to make more.

Last night, Brett Favre, age 41, threw the 500th touchdown pass of his career. If the Bush tax cuts on the rich had expired a year ago, would Favre have retired (I mean really retired) and not played this season?

Exchange Rates

October 10, 2010
Posted by Jay Livingston

Viviana Zelizer has a new book coming out in a week: Economic Lives: How Culture Shapes the Economy (or what’s left of the economy). I got an e-mail about it from Amazon. They’ve got me pegged.

Will I spend $23.62 for the book? If I thought rationally about money, I would consider what else that $23.62 could buy. But nobody thinks about money with perfect rationality. Dollars are fungible, but not completely so. They have a different value in different sectors of life and do not always flow easily from one sector to another. Exchange rates between sectors are idiosyncratic and rarely specified.

I was reminded of this yet again by Jacob Avery’s recent paper on poker players. Is it rational to bet an amount greater than your weekly paycheck on the turn of a card or the outcome of a baseball game? It’s irrational only if money is perfectly fungible from the world of gambling to the world of everyday living. But it isn’t.

The gamblers I knew would frequently say that “gambling money” was “sacred.” In other words, there was such a thing as gambling money, and it was different from other moneys. It fell under a different set of rules and valuations.

Here’s a slightly different example though also from the world gambling. It’s from a “This American Life” show originally broadcast in November, 2003.* The reporter is Mary Beth Kirchner.

This 2:20 excerpt is from a story about a limo driver in Las Vegas. He is a good blackjack player. Yet he will leave the table, where he’s making a bundle, so as not to miss the peak hours for catching fares, even though these will net him less money than blackjack:



Here’s a transcript from the last part of the clip:

JOE: I was playing about like $2000 a hand. And I told the doorman, “If you get a good ride, like to the golf course, come and get me,” y’know, like $75. Anyway, he came up to the table and told me, “Hey, I got a ride” Seventy-five dollars. The people in the pit, they all think I’m nuts, y’know. I just stopped.. I left, I took my money, and I ran down to take the guy for $75, and there I am playing two grand a hand.

I try to separate the two. One has nothing to do with the other.

MARY BETH: I don’t understand that.

JOE: I know. Nobody does.

 MAURY BETH: Do you understand it?

JOE: I don’t. I just. . . .Gambling to me is gambling, work is work.

Nobody understands it? Viviana Zelizer does. So do most people, at some level. They know that their treatment of dollars is not universalistic They just don’t write books about it.


*This is my first try at embedding an audio clip. If it doesn’t work, you can go to the full This American Life podcast (here): The story begins at about the 23 minute mark. The part I excerpted here begins at about 33:20.

Size Matters

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