I work with an international bank, but have recently been laid off. Fortunately, I have managed to land myself another job in this very tough job market (yes, in India too!).

The catch is that my current employer is offering me a severance package of around 20 months pay – but only if I stick around for six more weeks, while the other company wants me to join as soon as possible.

One option gives me a pile of hard cash, but uncertainty and the stigma of unemployment. The other option is a secure and cushy job. And, another thing: India does not have any unemployment benefits.

P.M., India

Dear P.M.,

I’m not surprised you’re tempted by the severance package, especially with two companies fighting over who employs you for the next six weeks – a great boost to your ego.

Still, I’d urge you not to get too confident. An economics PhD student at MIT, Johannes Spinnewijn, recently published a research paper showing that most unemployed people are too cocky about their prospects of finding a new job. On average, they expect seven weeks of unemployment, but eventually endure 23 weeks. And this is using data from the mid-1990s, not recession years. Be warned, then: don’t let overconfidence lure you into undervaluing the guarantee of a good job.

A better approach would be to negotiate a compromise. Surely there is a way to secure the new job without losing all the severance pay – perhaps involving part-time work for both companies for the next two months.

If you do decide to turn down the new job and look again with severance pay in hand, look very hard indeed. Spinnewijn’s research shows that job-seekers tend to harbour another misperception: that an energetic job search does not pay dividends. They are wrong.

Questions to economist@ft.com

This morning, I had a remarkable experience: I strolled into a delicatessen and bought some delicious Stilton. What made the shopping trip unusual was that I was wearing a brain scanner while I did it.

My costume consisted of an electroencephalograph (EEG) cap, which looks like a polka-dot shower cap with wires plugged into it; a pair of wrap-around glasses with a tiny video camera attached; a clothes peg on one finger to measure my heart rate; two other finger monitors that functioned like a lie-detector; a thermometer patch on a fourth finger; and a satchel to hold a computer gathering the data.

Most of these devices, or their equivalent, can be hidden under clothes or baseball caps so that the wearer looks as if they are sporting only shades and an iPod, but in my case the boffins hadn’t bothered, and so I entered the deli looking like an extra from a 1970s episode of Doctor Who.

The remainder of this article can be read here. Please post comments below.

The Nobel memorial prize in economics has been awarded to Paul Krugman, a professor at Princeton University and a prominent columnist for the New York Times. Mr Krugman is one of the great popularisers of economic ideas and a trenchant critic of the Bush administration, but his prize was awarded for work done almost three decades ago in developing what is known as “new trade theory” and “new economic geography”.
Earlier trade theories suggested that a country would trade with trading partners that were very different – rich would trade with poor, and capital-intensive would trade with labour-intensive. In practice, rich countries tend to trade with other rich countries. Mr Krugman’s analysis showed why this was to be expected: many products were most efficiently produced by very large companies, but consumers wanted variety and would thus buy products from foreign giants as well as the dominant domestic corporations. Mr Krugman’s ideas on the importance of economies of scale could be traced all the way back to Adam Smith, but the new ingredient was a usable mathematical description of what was going on.
Economic geography uses much the same mathematics to explain the location of jobs and businesses. Mr Krugman showed that the forces of globalisation, far from creating a “flat world”, could enhance the power of global cities such as New York and London, because those cities could increasingly do business with a global market.
Mr Krugman has long been seen as a future Nobel laureate. He won the John Bates Clark medal for young economists in 1991, an award which is often a precursor to a Nobel. Yet if the choice is not surprising, the timing – just before the US Presidential election – might be. Mr Krugman is an influential and partisan political commentator. His columns, first in Slate and then the New York Times, were at first clever refutations of popular misconceptions about trade protection or the “new economy”, but they have become far more notable for their stinging attacks on the Bush administration. He has recently criticised Hank Paulson, the US treasury secretary, for mishandling the credit crisis, while praising the British government for being “willing to think clearly about the financial crisis, and act quickly on its conclusions.” He also warned of the US housing bubble in the summer of 2005.
This is, however, not the first time that the Nobel prize committee has recognised an economist with a public profile and an appetite for political debate. Joseph Stiglitz shared the prize in 2001, after a combative stint as chief economist of the World Bank; Milton Friedman was an early laureate in 1976.
Among professional economists, Mr Krugman is admired for his work on currency crises as well as the work on trade that won the prize. A Princeton colleague, Avinash Dixit, once described Krugman’s methods: “He spots an important economic issues coming down the pike months or years before anyone else. Then he constructs a little model of it, which offers some new and unexpected insight. Soon the issue reaches general attention, and Krugman’s model is waiting for other economists to catch up.”
Mr Krugman’s trade model showed that there were circumstances in which trade protection could be in a nation’s economic interest. This idea was joyfully embraced by protectionists, and Mr Krugman spent much of the 1990s vigorously defending free trade and arguing that trade protection in practice was almost always harmful. The experience may have fuelled his enthusiasm for economic popularisation, although even his early writing betrayed a wit and clarity not common amongst economists: he wrote, in 1978, “A theory of interstellar trade”, commenting that it was “a serious analysis of a ridiculous subject, which is of course the opposite of what is usual in economics.”
The economics prize was not one of the original Nobel prizes. It was established in 1968 by the Swedish central bank and is officially called the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. The prize money is 10 million Swedish Kronor (£810,000; $1.4m; euro1m).

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Marginal Revolution will also have much more. Here is Krugman’s blog. Congratulations to Paul!

So says this NBER paper:

During the contest for Kansas attorney general in 2006, an organization sent out 6 pieces of mail criticizing the incumbent’s conduct in office. We exploit a discontinuity in the rule used to select which households received the mailings to identify the causal effect of mail on vote choice and voter turnout. We find these mailings had both a statistically and politically significant effect on the challenger’s vote share. Our estimates suggest that a ten percentage point increase in the amount of mail sent to a precinct increased the challenger’s vote share by approximately three percentage points. Furthermore, our results suggest that the mechanism for this increase was persuasion rather than mobilization.

The authors are  Alan Gerber, Daniel Kessler, and Marc Meredith.

My attention is drawn to this paper, on the asking price (not sale price, not) for used cars that have been driven by smokers or non-smokers. The difference is about 10 per cent - $700 - for a typical car:

For this car to loose $700 in KBB value, the car would have to miss all of the following standard features: air conditioning, power steering, power windows, power door locks, cruise control, and the dual front airbags.

The authors emphasise the dangers of second-hand smoke but of course there are other explanations. (If safety concerns are the main motivation for the lower selling price for smoky cars, my guess is that they are overblown.) I wonder if this result tells us more about smokers than their cars - smokers are the ones offering cheaper deals, after all.

Possibly, suggests this new IZA research paper from Guido Schwerdt, Andrea Ichino, Oliver Ruf, Rudolf Winter-Ebmer, and Josef Zweimüller:

Does the Color of the Collar Matter?… In the short run earnings and employment losses are substantial for both groups but stronger for white collar workers. In the long run, there are only weak effects for blue collar workers but strong and persistent effects for white collars.

No further comment; I’m on holiday, remember?

Where have all the heroes gone? For gone they have, if we believe congressional medal of honour awards are a good proxy for heroism - such awards are scarcer in absolute terms, let alone proportional to the US population. Brock Blomberg, Gregory Hess, and Yaron Raviv think it’s all perfectly rational. (HT: Zubin Jelveh)
For an alternative perspective, check out Philip Zimbardo’s view on “the banality of heroism”. Zimbardo - yes, he of the Stanford Prison Experiment - argues:

It is vital for every society to have its institutions teach heroism, building into such teachings the importance of mentally rehearsing taking heroic action—thus to be ready to act when called to service for a moral cause or just to help a victim in distress.

There is a little bit more here; frustratingly little. Zimbardo argues that people act heroically when unexpectedly called to do so - “I only did what anyone would have done in the situation” - if they have mentally rehearsed acts of heroism. Not everyone does this, and not everyone does “what anyone would have done”.

Apparently. Here’s the press release about this new Economic Journal paper:

The prevalence of the sexually transmitted infection syphilis has fallen by nearly a half in parts of continental Europe as a result of recently introduced national laws that allow for the legal recognition of same-sex partnerships. That is the central finding of new research by Professor Thomas Dee.

How might these laws have influenced the prevalence of sexually transmitted diseases such as syphilis? Professor Dee conjectures that the legal recognition of same-sex partnerships may reduce the levels of sexual promiscuity among homosexuals by creating legal and financial incentives as well as social norms similar to those associated with heterosexual relationships.

What’s more, by reducing the social stigma of homosexuality, these laws could limit the transmission of sexually transmitted infections by discouraging furtive, high-risk sexual activity and the ‘closeting’ of sexually active homosexuals in heterosexual relationships.

The study uses World Health Organization (WHO) data on European countries from 1980 to 2003. During this period, nine European nations – Denmark, Norway, Sweden, Iceland, Netherlands, France, Germany, Finland, and Belgium – introduced new laws that allowed same-sex couples to form legally recognised partnerships and, in some countries, marriages.

So that’s interesting. Here’s the author’s home page; here’s an NBER version of the research. The direction of the effect sounds right to me but the size seems implausibly large. Still, I have not read the paper. (I’m on holiday, remember?)