My four-year-old son has a July birthday, which would make him one of the youngest in his class at school. I am thinking of keeping him back a year so that when he does start school, he’ll be bigger and more confident. Is this a good idea?
Sarah Goldberg, by e-mail

Dear Sarah

Other parents think it is. The economists David Deming and Susan Dynarski have found that the percentage of six-year-olds not yet registered at school has quadrupled in the US over the past 40 years, largely because parents are holding back their children.

Being older seems to convey lasting benefits in sports: an unusual number of international footballers are old for their year, for instance. That is surely because the older children are more likely to be selected for the most competitive games with the best coaches. Academic streaming may create a similar effect. An influential piece of research, from Kelly Bedard and Elizabeth Dhuey (also economists), found that the oldest in the class tended to do better not just when five or six but even as college students.

Not every study agrees, and Deming and Dynarski also point out that starting school late has its costs. Still, one thing is certain: since your boy has a mother who is fussing about this sort of stuff, he’s going to do fine no matter what.

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Maybe consumers are stupid and think 99p is a lot less than £1. That’s possible, especially if they’re French:

…according to a French study the phenomenon still swings a considerable number of shoppers. Researchers found that lowering the price of a pizza from 8.00 euros to 7.99 euros boosted sales by 15%.

An explanation more consistent with the assumption of hyper-rational consumers is that it’s an technique to deter theft by employees:

…cashiers had to open the till for change, reducing the chances of them pocketing the bill.

But perhaps not, according to Robert Schindler,  a marketing professor:

 ”I studied adverts in the New York Times from 1850 - where there were no 99 endings - to the 1870s and 1880s where they started to appear. Although department stores were doing it - which would fit with the cash register hypothesis - they were advertising discounts. But for the regular price they would use a round number,” he says.

The source is here.

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”.

For many business owners, getting the most out of staff is a perennial problem. In the case of fruit farmers, perhaps perennial is the wrong word: workers show up only for the summer harvest. In a couple of weeks they will be heading home, usually to a university course somewhere in eastern Europe.

Tough work for the fruit pickers, the business is also a headache for the owner, who must offer a pay scheme that both satisfies minimum wage laws and motivates workers in an industry in which slacking is an understandable temptation.

The owner of a large fruit farm business, “Farmer Smith”, was pondering the problem one Christmas, when he discovered that the connection between pay and performance was also an area where economists were scratching around for solid evidence.

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

As a wine evangelist, I always bring a bottle of something really decent whenever I visit friends. The trouble is, their thanks rarely reflect my expenditure. Should I make more of a fuss about the cost of fine wine, or just bring plonk?
Gabriel Elliott, London

Dear Gabriel,

Either plan would work just fine. Several pieces of research by wine critics and “neuro-economists” have found that most wine drinkers pay more attention to price than they do to taste.

Research published by the Journal of Wine Economics shows that inexpert wine drinkers actually prefer cheap wine in a blind tasting. More skilled oenophiles do prefer pricier booze, but only a little. That suggests you should buy plonk with a nice label and a clear conscience.

The alternative is to point out the expense of the wine. This is crass, but should encourage people to rate it more highly.

Or you could bring plonk but claim it is expensive wine. The “neuro-economist” Antonio Rangel has found people enjoy wine more if they are told (truthfully or otherwise) it is expensive. Not only do they rate the wine more highly, but their brains seem to process the experience differently.

Your friends probably can’t tell the difference between expensive and cheap wine. Exploit that information as you wish.

Questions to economist@ft.com

Over at Freakonomics, Sudhir Venkatesh introduces Michael (multimillionaire trying to learn how to be a philanthropist) to Curtis (Chicago squatter):

Curtis showed Michael a rag and cleaning brush. “See this, Michael? Keep this around, and you’ll always have a meal or a place to sleep — or both.” Michael looked confused. Curtis explained further. “People who got places to sleep will let you stay a night. But you have to pay $10. And I don’t have money, so I clean up, fix things. That woman you saw — she probably will clean for a good night’s sleep. Maybe a store needs mopping, maybe your uncle needs his garage cleaned.”

“Why not stay at a shelter?” Michael asked.

“Not enough of them around,” Curtis replied. “And you have to be out by 6 a.m. If you got kids, you can’t take them out in the cold. So you stay in a store, or you stay in a vacant building. And no more food kitchens since the projects went down. Not a lot for poor people.”

Curtis then took out a cigarette. “See this? Always have a loose cigarette. You can always use a bathroom in somebody’s house — maybe even get a shower — for one. Maybe your kid took a dump in his pants. Maybe you need some toilet tissue. Always keep a cigarette for emergencies.”

After reading that, the rest of the post surely recommends itself.

Clive Crook has an excellent post on Adam Smith’s legacy. He concludes, however:

As a general matter, it would be true to the spirit of Moral Sentiments to say that owners of businesses should attune their conduct to the good opinion of mankind. But note that I say “owners”, not managers. Who knows what Smith would have thought of 21st century corporate governance? The modern corporation is a form he could barely have envisaged.

An alternative view:

Adam Smith would not have been surprised by Enron, Parmalat and the rest. The father of economics famously believed that joint-stock companies could never prosper because managers had no incentive to take care of the interests of widely dispersed shareholders. “Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company,” he wrote in The Wealth of Nations.

But Clive is perhaps right not to draw too many conclusions from an 18th century view of 21st century corporations.

When people discover that I am an economist, they rarely ask me for my views on subjects that economists know a bit about – such as how to respond to climate change or pay less at a supermarket. Instead they ask me what will happen to the economy.

Why is it that people won’t take “I don’t really know” for an answer? People often chuckle about the forecasting skills of economists, but after the sniggers die down, they keep demanding more forecasts. Is there any reason to believe that economists can deliver?

One answer can be gleaned from previous forecasts. Back in 1995, the economist and FT columnist John Kay examined the record of 34 British forecasters from 1987 to 1994, and he concluded that they were birds of a feather. They tended to make similar forecasts, and then the economy disobligingly did something else, with economic growth usually falling outside the range of all 34 forecasters.

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

While at a recent Elton John concert, I observed a heated altercation between two ladies. The younger lady wanted to stand up, dance and sing along with Elton. The older lady, seated directly behind her, wanted to stay seated, watch the band and enjoy the music. The older lady asked the younger to sit down, but was told that she should also stand up and dance. An argument quickly broke out. Any thoughts on how they might have resolved the conflict without swinging handbags? 
David Walker

Dear David,

I blame Elton John himself, since he apparently did not clearly define property rights, contrary to the recommendations of the great economist Ronald Coase.

Should a concert seat come bundled with the right to get up and dance, the older woman could have offered to pay her tormentor to sit down. Conversely, should a seat come bundled with the right to an unobstructed view, it would have been the younger woman offering the bribe. Either way, the dance would have continued only if the dancer’s enjoyment outweighed its victim’s frustration. Perhaps the bargaining might also have involved swapping seats?

Sadly, with no clear property rights, there was no basis for a deal. No wonder the night turned out to be all right for fighting.

Questions to economist@ft.com

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?)