Interesting Questions.

Below are some interesting questions culled from The Economist that might cause a general debate.

Question: Dear Economist: Is the lottery the best bet for my pay-off?

Thanks to the recession kindly engineered by financial whiz-kids, I find myself jobless with large debts and a house that is worth less than the mortgage. I have some redundancy money. What am I supposed to do with it? It’s not enough to pay off my debts. Financial disaster seems very likely, so why shouldn’t I just spend the windfall on lottery tickets?
J.P., via e-mail

Answer: Dear J.P.,
I’m not going to argue with you about the expected returns on lottery tickets; you’ll know that your chances of winning anything worthwhile are near zero. Let me make a more striking claim: even if you won, it would be unlikely to save you from financial trouble.

The economists Scott Hankins, Mark Hoekstra and Paige Marta Skiba are in the process of investigating that claim, looking at 35,000 winners of the Florida lottery, almost 2,000 of whom later filed for bankruptcy. The researchers find that lottery winners are more likely to go bankrupt than others – which is not surprising, since many of them don’t win much, and lottery enthusiasts tend to be poor.

More surprising is the discovery that those who won between $50,000 and $150,000 were as likely to have gone bankrupt five years later as those who won less than $10,000. Since the size of a win is random, there should have been no difference between big winners and small winners at the time they bought their ticket. It is remarkable that the additional money was not used to pay off debts.

Admittedly, winning $100,000 did seem to postpone bankruptcy by a year or two, so presumably these winners had a nice time on their way to ruin. Yet this is not an approach I feel able to recommend. Finding a job would go a long way to solving your problems. I won’t pretend that will be easy, but the odds are better than those of winning the lottery.


Question: Dear Economist: Should I stand by my chauvinistic man

I am an economist, as is my boyfriend. We started dating as students, but after four years we broke up for a couple of months because of differences in our ways of thinking. We always supported each other professionally, but things changed. I got a job in a multinational organisation, but he didn’t like me travelling, going out for business dinners, or even spending time at the office.

His father was head of the family, while his mother stayed at home; both my parents worked. (We live in Paraguay, which is quite chauvinistic.) Probably, he thinks women have to stay at home, yet he fell in love with me because of my aspirations. I’ve said that maybe he needs to marry a woman who wants to be a housewife. I gave him another chance, as I love him. Should I be patient?
L.E.

Answer: Dear L.E.,

The economist Betsey Stevenson has discovered that in US states that liberalised divorce laws, couples became less willing to support each other through expensive courses. That makes sense: easy divorce raised the spectre of being dumped once hubby had spent your money and acquired his law degree.

Your own situation is the reverse. Your boyfriend supported you while you built up your human capital, but now spurns the payoff. You are right to be suspicious, I think. Your boyfriend wrongly thought that you would change; you face a similar disappointment.

There is another, more calculating, explanation. Roland Fryer, an economist fascinated by the causes of African-American under-achievement, theorises that some people find professional qualifications disturbing because they allow a credible exit from any relationship. You’ve given yourself that option; your boyfriend has given you reason to use it.


Question: Dear Economist: Has my neighbour confused me with God?

When my neighbour was desperately searching for staff to run her guesthouse, I, after due deliberation about whether to get involved and much trouble, eventually found her a married couple who complied with all her demands. She now thanks God for bringing them to her.
Do you think she’s confusing me with God? If so, should I gently remind her that I’m a simple earthly being and such high praise is making me feel a little uncomfortable? I would prefer you not to use my real name; I don’t want any more people contacting me in search of miracles. In any case, my husband thinks this business has gone to my head.
Mrs S., South Africa

Answer:
Dear Mrs S.

I would say that a more likely explanation of your neighbour’s actions is that she is trying to ingratiate herself with God, not you. I can imagine how aggravating this is for you, given the trouble you’ve gone to, but this attitude makes sense if God is subject to flattery. God is, after all, omnipotent, so it must be better to have God on your side than plain Mrs S.

The question is, does God pay attention to supplicants? No less an authority than Nobel laureate James Heckman has investigated the answer using highly fashionable statistical techniques. (Some claim that Heckman’s paper is a parody of sloppy statistical practice. I couldn’t possibly comment.)

Heckman observes that “the empirical conclusion from this analysis is important. A little prayer does no good and may make things worse. Much prayer helps a lot.” This is fascinating, suggesting that sit-on-the-fence agnostics are choosing a very foolish approach. Your neighbour has taken this lesson to heart: given the importance of extremely fervent prayer, small wonder that she is giving God all the credit for your hard work.