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Photo: Reuters
Photo: Reuters

Who says economists can’t have fun?

The dismal science has its fair share of fun-loving practitioners

What do economists do when they want to have fun? They write research papers, funny ones.

Those papers do not fetch their authors the Nobel Prize, but some do fetch their authors the Ig Nobel Prize, a parody of the Nobel Prize, which honours research that makes people laugh, and then think.

This year, Gennaro Bernile of the Singapore Management University, Vineet Bhagwat of the University of Oregon and P. Raghavendra Rau won the Ig Nobel Prize in management for their research showing that chief executive officers (CEOs) who experience fatal disasters early in life without suffering much for it lead firms that behave much more aggressively compared with peers.

Their research paper uses a unique database of county-level exposure to natural disasters in the US to figure out which CEOs had exposure to fatal disasters in their formative years (ages 5 to 15).

Firms whose CEOs experienced a moderate level of fatalities from disasters have a 3.4% higher leverage ratio than firms whose CEOs experienced no fatal disasters, while firms whose CEOs experienced extreme levels of fatalities from disasters have a 3.7% lower leverage ratio than firms whose CEOs have no fatal disaster experience, the authors found.

“These results are due to active financing choices made by the CEOs," the authors wrote. “Specifically, CEOs with moderate levels of fatal disaster experience are significantly more likely to fill their net financing deficit with debt rather than equity, pay higher interest expenses and loan spreads on their debt, and their debt is likely to be rated lower than CEOs with no fatal disaster experience. Their firms are also significantly more likely to go through bankruptcy. In contrast, CEOs with extreme levels of fatal disaster experience display diametrically opposite patterns."

They conclude that experiencing fatal disasters without extremely negative consequences desensitizes CEOs to the negative consequences of risk: “What doesn’t kill you makes you risk-loving."

The Ig Nobel Prize in economics has gone to even funnier research in the past. In 2008, Geoffrey Miller, Joshua Tybur and Brent Jordan of the University of New Mexico, US, received the Ig Nobel Prize in economics for their research showing that professional lap dancers earn higher tips when they are ovulating.

“Normally cycling participants earned about $335 per 5-hour shift during estrus, $260 per shift during the luteal phase, and $185 per shift during menstruation," the authors wrote. “By contrast, participants using contraceptive pills showed no estrous earnings peak. These results constitute the first direct economic evidence for the existence and importance of estrus (a period of sexual receptivity and fertility in many female mammals) in contemporary human females, in a real-world work setting."

Economists have also researched how relative physical attractiveness of spouses determine which spouse works more, and how love can raise the probability of faking ecstasy.

A 2011 working paper by economists Sonia Oreffice and Climent Quintana-Domeque showed that “husbands who are heavier relative to their wives work more hours, while wives who are thinner relative to their husbands work fewer hours".

A 2010 research paper by Hugo M. Mialon of Emory University, Atlanta, used data from an orgasm survey to show that lovers do not risk faking ecstasy while making love if they believe their partners are able to tell (since that signifies higher cost of faking), and that “love, formally defined as a mixture of altruism and demand for togetherness, increases the likelihood of faking".

His tongue-in-cheek conclusion was that “the rational model performs quite well—even in the bedroom. In future work, it would be interesting to test the predictions of the model experimentally!"

You may be wondering why economists spend time writing these papers which probably won’t be highlighted in their résumés. Some may just be driven by curiosity. Others may be just too bored with their regular work.

In 1978, one such bored young assistant professor at Yale University decided to take a break from the academic rat race and ended up writing an unpublished paper on the theory of interstellar trade. That gentleman was Paul Krugman. Thirty years later, when that young professor had turned into a feted Nobel-winning economist, he dug out a typewritten version of the paper which he shared on his blog.

Krugman, who has often expressed admiration for the science fiction books of Isaac Asimov, attempted to extend trade theory to an interstellar setting. He noted that the calculation of interest charges on goods in transit posed a problem since the time taken in transit will appear less to an observer travelling with the goods than to a stationary observer.

Like a good economist, he assumes away part of the problem through an assumption that the two planets between which trade occurs are in the same inertial frame. And then he proceeded to come up with two fundamental theorems of interstellar trade.

The first fundamental theorem states that interest costs on goods in transit between two planets in the same inertial frame should be calculated using time measured by clocks in the common frame, and not by clocks in the frames of trading spacecraft. The second theorem postulates that if sentient beings hold assets in the two planets in the same inertial frame, then competition will equalize the interest rates on the two planets.

After proving what he called two useless but true theorems, Krugman concluded by pointing out that further research is needed to flesh out the “fascinating possibilities of interstellar finance, where spot and forward markets will have to be supplemented by conditional present markets".

Another Nobel laureate, Paul Samuelson, wrote an entire paper published in the Journal of Banking and Finance in prose of but one syllable.

The Journal of the Political Economy published several humorous pieces in its miscellany section when Nobel-winning economist George Stigler was the editor. Stigler himself wrote a biting commentary on how a research paper presented at a conference is typically received by conference participants.

While many of these papers are written and accepted in good humour, there are occasions when economists write papers in all seriousness that readers then deem to be funny.

This happened in the case of the former chief macroeconomist of the International Monetary Fund, Olivier Blanchard, when he proclaimed in a National Bureau of Economic Research paper that “the state of macroeconomics is good" just when global financial markets were crashing in 2008.

Economics Express runs weekly, and features interesting reads from the world of economics and finance.

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