Lotteries, Pot, and Happiness: More Reporting from CELS

terminator.jpegSome more notes from the wonderfully exciting CELS III, or, as I’ve decided to name it, CELS: The Rise of the Quants. There were tons of good panels, so here are just a few idiosyncratic highlights.

1. Paige Marta Skiba presented The Ticket to Easy Street? The Financial Consequences of Winning the Lottery, co-authored with Mark L. Hoekstra and Scott Hankins. Interesting paper, with an odd methodological problem. The concept was to measure the bankruptcy filing rates of winners of the Florida lottery, dividing individuals into big- and small- ticket wins. The dataset of lottery winnings appeared complete, and the the authors had a great idea: test the intuition that sometimes winning a big pot of money results in bad financial decision making – acquiring expensive new habits, houses, and family members – and thus an increased risk of bankruptcy. As Bob Frank said in his comments on the paper, it is the kind of project that would have scoffed at only a decade or two ago at Chicago. (And maybe today, over at ToTM.) The authors presented a confirming result: an increase in filings in the high-lottery-win group, and a steady-rate in the low-win group. Cool!

But there was a weird problem with the data. Even before the lottery happened, the groups weren’t identical – individuals who would later win big had lower bankruptcy rates than the penny-ante folks. How is this possible? Is there cheating in the Florida lottery system? Are high-winners somehow smarter players, i.e., do they play random numbers instead of common, “lucky”, digits? Or, more likely, is there something wrong with the filing data?

2. Robert MacCoun presented Do Citizens Know Whether Their State Has Decriminalized Marijuana? A Test of the Perceptual Assumption in Deterrence Theory, co-authored with Rosalie Liccardo Pacula, Jamie F. Chriqui, Katherine M. Harris, and Peter H. Reuter. Using a huge dataset based on a national survey, MacCoun found that citizens in states that have legalized marijuana largely are unaware of that fact (when compared to citizens in non-legalized states). The exception seems to be that frequent users of the drug are slightly more likely to know the (non)consequences of their behavior. As one commentator said, this kind of data doesn’t make clear if de-criminalization doesn’t matter, or if it has been implemented badly. Sort of like the death penalty debate. Except much calmer

3. Betsey Stevenson presented the already famous paper that she co-authored with Justin Wolfers, Economic Growth and Subjective Well-Being: Reassessing the Easterlin Paradox . What struck me about the presentation was how Betsey presented an incredibly rich, complex, set of statistical findings clearly, with easy-to-read charts and intuitive graphic displays. Tufte would (does?) approve. Bob Frank again offered comments, in which he argued that individuals are likely to trade off status for cash, thus making data correlating happiness with wealth more noisy than we’d otherwise predict.

I was the moderator on the panel, and had been given strict instructions to make sure that no one ran over some tight time limits. Bob Frank properly ignored my increasingly frantic time signals, pointing out both the importance of the topic and the centrality of status even in moderator-discussant relationships. After the talk, I went up to Bob, introduced myself, and mentioned that he had been the topic of conversation on the blog, perhaps once or twice. I even said that I was pretty sure that if he googled himself, some of Frank’s posts would likely be high on the list. Turns out, I was completely wrong. Which leads me to wonder: Frank, does google hate us now, or are you just not posting about Bob Frank enough?

Anyway, it was a fun conference. And the incidental benefit is that it helped me satisfy my Solove-imposed blogging quota for the week! Thank god. I thought I might have to say something interesting about Sarah Palin, which would be hard, because Orin has already written the definitive, must-read, reason-to-visit-the-VC-again-despite-your-vows-to-the-contrary, blog post on that topic.

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5 Responses

  1. Josh says:

    Dave: I’m not sure why you or Bob Frank would say that folks at the University of Chicago 20 years ago, or at TOTM today (speaking as one of the resident economists at that blog), would “scoff” at a serious empirical project evaluating how a shock like this would impact behavior. Maybe you were being funny? Or maybe Bob was taking a cheap shot at the Chicago School? Fair enough. But there are some pretty serious applied microeconomists, IO and Labor econ folks in that Chicago crowd if I remember correctly. Anyway, as for the actual study and results, it certainly sounds interesting to me (and I’ll look forward to reading it in detail when it becomes publicly available).

    More generally, I appreciate your posts on the CELS panels. I had to miss the conference this year and it is nice to get some sense of what is going on!

  2. dave hoffman says:

    I’m not going to speak for Bob Frank, but here’s what I had mind. My perception of first-generation L&E work (i.e., last generation in Chicago) is that they would have expected that individuals who received a large lump sum payment would, all things equal, be better off than those who received a small lump sum payment. Thus, they wouldn’t have scoffed at the empirical project, but rather its motivating hypothesis, which, as I understood it, was that large winners will be irrational discounters, estimators, and spenders, and therefore will be worse off over all. (It may be this is isn’t the paper’s complete thesis – I, like Josh, really look forward to the authors posting a draft up on the ‘net.)

    The swipe at ToTM was 95% a joke, but mostly a nod to what I see as the blog’s position as a leading place on the web where you can see what modern neoclassical L&E thinking on legal problems looks like – – not really a proxy for the chicago school, but better in that ill-fitting role than the chicago faculty blog!

    Thanks for the kind words about the blogging. Wish I’d been to more panels. If anyone else has reports from the field, please post them in the comments. In particular, the family law & bankruptcy panels looked useful.

  3. Josh says:

    Dave: Fair enough. I’m not going to say anything about the motivational basis or methodological design of a paper I haven’t read. But if one took a thorough look at the contributions of Chicago economists to fields like applied micro, IO and Labor, I don’t think the “scoffing” point holds up. For just one example, Chicago School antitrust economists who believed that anticompetitive conduct was highly improbable to persist in the marketplace were among the only ones to find empirical examples of monopolization.

    The “scoff” comment reads to me like it is intended to paint those particular economists as dismissive about competing economic views of the world or ideologically driven to the point that they did not engage in serious discourse (in favor of “scoffing”). Caricatures of the Chicago School are not too uncommon these days. I object only to the extent that any such characterization was intended. And I will reduce any offense taken to the TOTM reference by 95% …

  4. A.J. Sutter says:

    Regarding the Stevenson & Wolfe paper: were the intutitive graphic displays that they presented different from the graphics in their paper? The latter do not seeem to be models of Tuftean clarity.

  5. A.J. Sutter says:

    One more brief comment about the Stevenson-Wolfer paper: it’s interesting that although the authors note, “In contrast, Japan stands out as a remarkable success story, recording rising happiness during its period of rapid economic growth,” they don’t mention anything about the context in which this occurred: viz., following a couple of decades of a police state, plus a devastating war, nuclear attack and a humiliating defeat and occupation. Indeed, there are many countries in which growth occurred in relatively pacific times following a harrowing wartime experience. Was this mentioned at the conference?