Results for “prizes” 226 found
Yes, there is a great Singaporean novel
Or is it a novella? The Widower, by Mohamed Latiff Mohamed, was not recommended to me by anyone, but I found it during my recent browse in Singapore Kinokuniya. It starts with the meditations of a man whose wife has passed away and who then delves into his obsessions.
Although the book was published in the 1990s, it was translated into English only this year; I hope Michael Orthofer at Literary Saloon is paying attention. But alas it is not for sale on U.S. Amazon.
Here is a recent article about the hand-wringing of Singaporeans over their failure to win major literary prizes. Not long ago, Mohamed moved to Australia, proclaiming “Singapore is still my home.”
Here is my earlier post on what are the Singaporean literary classics, there were a few good answers in the comments.
John Nash, RIP
John Nash and his wife died yesterday in a car accident.
CNN: Nash, who won the Nobel Prize for Economics in 1994, was known for his work in game theory, and his personal struggle with paranoid schizophrenia. His life story inspired the 2001 Oscar-winning film “A Beautiful Mind” starring Russell Crowe and Jennifer Connelly as the Nashes.
Nash’s 27 page dissertation would eventually win him a Nobel prize in economics. Nash’s dissertation extended von Neumann and Morgenstern’s theory of games from cooperative, bargaining-type solutions to non-cooperative solutions in which each player is assumed to act in their self-interest and in so doing made the theory tremendously more relevant to economics, business, political science, and even theories of animal behavior and evolution.
Here is further background on Nash’s work in game theory. Here is the PBS documentary A Beautiful Madness with lots of links to interviews and further explanations of his work and influence.
The False Prophets of Efficiency Wages
One of the least-convincing tropes of financial journalism is the article explaining how business firms can increase profits and at the same time engage in some conventional, culturally-approved, do-good activity such as improving the environment, saving energy, or helping the poor. The latest version is how to increase profits by increasing wages.
Here is James Surowiecki writing in the New Yorker:
A substantial body of research suggests that it can make sense to pay above-market wages—economists call them “efficiency wages.” If you pay people better, they are more likely to stay, which saves money; job turnover was costing Aetna a hundred and twenty million dollars a year. Better-paid employees tend to work harder, too. The most famous example in business history is Henry Ford’s decision, in 1914, to start paying his workers the then handsome sum of five dollars a day. Working on the Model T assembly line was an unpleasant job. Workers had been quitting in huge numbers or simply not showing up for work. Once Ford started paying better, job turnover and absenteeism plummeted, and productivity and profits rose.
Walter Frick writing in the Harvard Business Review agrees:
The theory of efficiency wages…suggests that firms sometimes have an incentive to pay workers more than the going rate because doing so attracts better candidates, motivates them to work harder, and encourages them to stay at the company longer.
(Similar kinds of stories are offered by Justin Wolfers and Jan Zilinksy and also Paul Krugman).
There are two problems with this story, one obvious and one not-so obvious. The not so-obvious problem is that the economists who developed the theory of efficiency wages (including Shapiro and Stiglitz, Akerlof and Yellen and Yellen) had no illusions that they were helping business firms to discover a new way to increase profits. The economists who developed efficiency wage theory were trying to explain persistent unemployment. Hence the title of Janet Yellen’s famous survey, Efficiency Wage Models of Unemployment.
The question that motivated efficiency wage theory was not why firms should raise wages but why firms don’t cut wages when they should. The answer they gave was that firms don’t cut wages despite unemployment because they fear that workers will respond to lower wages with reduced productivity. Thus, here is Akerlof and Yellen explaining that when workers demand “fair” wages they create unemployment.
…according to the fair wage-effort hypothesis, workers proportionately withdraw effort as their actual wage falls short of their fair wage. Such behavior causes unemployment…
In the original efficiency wage literature there is no wishful thinking–no idea that we can have more of everything that we want without tradeoffs. Instead of being desirable, the efficiency wage is a problem because lower wages would reduce unemployment and be better for the economy as a whole.
Instead of letting us bask in wishful thinking the real efficiency wage theory suggests unpleasant tradeoffs. Yellen, for example, suggests that if it were cheap, greater monitoring of workers would lower unemployment as would allowing workers to take low-pay or no-pay internships for trial periods. In our paper on asymmetric information, Tyler and I make such unpleasant tradeoffs clear:
When employers do not easily observe workers, for example, employers may pay workers unusually high wages, generating a rent. Workers will then work at high levels despite infrequent employer observation, to maintain their future rents (Shapiro and Stiglitz 1984). But those higher wages involved a cost, namely that fewer workers were hired, and the hires that were made often were directed to people who were already known to the firm. Better monitoring of workers will mean that employers will hire more people and furthermore they may be more willing to take chances on risky outsiders, rather than those applicants who come with impeccable pedigree. If the outsider does not work out and produce at an acceptable level, it is easy enough to figure this out and fire them later on.
Notice that the efficiency wage theorists took it for granted that to the extent that firms can increase profits by raising wages they have already done so (hence the persistent unemployment). Firms don’t typically leave $100 bills lying on the ground so the Stiglitz, Akerlof, Yellen assumption makes perfect sense. Thus the more obvious problem with the journalistic account of efficiency wages is that it makes it sound as if the idea that productivity might increase with wages is a revelation that firms have never considered. (See Frick for some implausible stories of why firms might not raise wages even when it is profitable to do so.) In fact, firms routinely track turnover and productivity and they are well aware that higher wages are a possible means to reduce turnover and increase productivity although, as it turns out, not necessarily the most effective means. Indeed, the whole field of workforce science deals with retention, turnover and job satisfaction and the relationship of these to productivity and it does so with more nuance than do most economists. Thus, it’s simply not plausible that large numbers of firms on the existing margin can increase wages, profits and productivity. TANSTAAFL.
In summary, the real theory of efficiency wages is an important and useful theory of persistent unemployment–one that helped earn Stiglitz and Aklerof Nobel prizes and Yellen a plum government job–but the journalistic proponents of “efficiency wages” are false prophets peddling false profits.
Derek Lowe on CRISPR, from the comments
Derek writes:
As a scientist in the biopharma world, I can tell you this this does indeed seem very close to being done in humans, and that there is a very high (but still not perfect) chance of success. CRISPR/Cas9 is the real deal, and there are others competing for its spot as well (such as zinc-finger TALEN technology, whose discoverers have just called for a similar moratorium on human germ-line work). There’s no need to whisper about possible Nobel Prizes in this area – the only difficulty for the Nobel committees will be figuring out how to divide the credit and who exactly to recognize.
The first human applications would surely be the obvious single-mutation genetic diseases. In most cases, this would be done best as germ-line work, followed by in vitro fertilization. The children born after such a process would, of course, pass their altered/repaired DNA to their own offspring, and it’s this possibility that has people worried, in case we get it wrong, or in case we start messing around for more arguable traits. (Fixing these problems after you’ve become a fully sized human is harder, because you have to find a way to treat enough cells in the body to make a lasting difference).
Many of the possibilities that people are most worried about are harder to pin down, though. There’s no single gene for height, for example, or intelligence (or Alzheimer’s or diabetes, for that matter, to stick with the fixing-what’s-broken part of the landscape). Many of the really sticky issues are still a bit downstream, awaiting a better understanding of the human genome, but the big fundamental one is indeed here now: the first deliberate editing of the human genetic inheritance. Tyler’s absolutely right about that one – it could be done right now by anyone with the nerve to do it.
Here is Derek’s website.
The economics of antibiotics
Ezekiel J. Emanuel writes:
The big problem is profitability. Unlike drugs for cholesterol or high blood pressure, or insulin for diabetes, which are taken every day for life, antibiotics tend to be given for a short time, a week or at most a few months. So profits have to be made on brief usage. Furthermore, any new antibiotics that might be developed to fight these drug-resistant bacteria are likely to be used very sparingly under highly controlled circumstances, to slow the development of resistant bacteria and extend their usefulness. This also limits the amount that can be sold.
Assorted links
1. Modeling economic civil war and protection in Somalia, and why Islam has an advantage.
2. Witches of Chiloé. And the price of condoms in Venezuela. Real world development indicators.
3. Greek debt/eurozone rap video, best is Merkel.
4. Why it is better to read on paper. And there is no great beehive stagnation.
Valentine’s Day Nobel Puzzle
Here is a Valentine’s Day puzzle: there have been five husband and wives awarded Nobel Prizes. Name them.
I will give you one hint. Four of the couples won for joint work. Only one of the couples each won a Nobel and that couple included a Nobel prize winner in economics.
Jean Tirole and Industrial Organizaton
Graduate students in economics will instantly know Jean Tirole from his textbook, The Theory of Industrial Organization. In this textbook, Tirole brought game theory to the study of industrial organization–the study of firm behavior in different market structures (competition, duopoly, oligopoly, monopoly). First published in 1988 this textbook has been the dominant one in the field since that time. (Tirole has also written excellent advanced textbooks in game theory and finance which together have made him one of the most influential teachers of graduate students everywhere). The new game theory provided new answers and new questions. We can see in this prize the continued working out of the game theory revolution in different areas in economics. First the prizes went to the founders (Nash, Selten, Aumann, Schelling) and then to applications of the new theory in different areas (Hurwicz, Maskin and Myerson for mechanism design, Vickrey for auctions). This is probably the last one in this line as behavioral approaches take over and game theory runs out of steam.
The 2014 Nobel Laureate in economics is Jean Tirole
A theory prize! A rigor prize! I would say it is about principal-agent theory and the increasing mathematization of formal propositions as a way of understanding economics. He has been a leading figure in formalizing propositions in many distinct areas of microeconomics, most of all industrial organization but also finance and financial regulation and behavioral economics and even some public choice too. He is a broader economist than many of his fans realize.
Tirole is a Frenchman, he teaches at Toulouse, and his key papers start in the 1980s. In industrial organization, you can think of him as extending the earlier work of Ronald Coase and Oliver Williamson with regard to opportunism and recontracting, but applying more sophisticated and more mathematical forms of game theory. Tirole also has been a central figure in procurement theory and optimal contracts when there is asymmetric information about costs. The idea of mechanism design runs throughout his papers in many different guises. Many of his papers show “it’s complicated,” rather than presenting easily summarizable, intuitive solutions which make for good blog posts. That is one reason why his ideas do not show up so often in blogs and the popular press, but they nonetheless have been extremely influential in the economics profession. He has shown a remarkable breadth and depth over the course of the last thirty or so years.
His possible pick had been heralded for some numbers of years now, this award should not be considered a surprise at all. You will note that the Swedes mention Jean-Jacques Laffont, who died a decade ago, and who co-authored many of the key papers in this area with Tirole. Such a mention is considered a nod in the direction of implying that Laffont, had he lived, would have shared in the prize.
Here is Tirole’s home page. Here is Tirole on Wikipedia. Here is a short biography. Here is Tirole on scholar.google.com. Here is the press release. Here is background from the Swedes. Here is the 54-page document on why he won, one of the best places to start. Here is the Twitter commentary.
One idea of Tirole’s I use frequently has to do with renegotiability. Let’s say a regulator and a monopolist agree to a scheme of regulation and provision, creating some surplus for both parties. As time passes, will each side of that bargain stick with the original agreement? A simple example here is the defense contractor. After a procurement contract is written, sometimes the supplier has the incentive to conduct a hold-up, to report that costs are higher than expected, and to ask for more money in return for timely fulfillment of the contract. Of course this is a contract breach, but if no other supplier can step in and do the job, it may be optimal for the government to give in to these demands to some degree. The question then is: how should the contract best be designed in advance, so as to prevent this problem from popping up later on? Or should the renegotiation simply be allowed? Anyone wishing to tackle these questions likely would start with the papers of Tirole on this topic. For one thing, these papers help explain why a second-best optimal contract may offer some rents to agents and appear to give the agent “too good a deal.”
Some of his key papers focus on asymmetric information about costs. Say a firm knows its costs and the regulator can only guess. Ideally the regulator would likely to make the firm price at marginal cost, but the firm will pretend marginal cost is higher than it really is. The regulator and the firm thus play a game. Tirole figured out with rigor which principles govern how this game works and what a second-best regulatory solution might look like. With Laffont, here is his key paper in that area. David Baron made contributions to this area as well. Again, there is a potential argument for an “agent rent,” to limit the incentive of the agent to lie too much about costs, for fear of losing that rent if the cooperative relationship breaks down.
Tirole, writing sometimes with Rey, wrote some important papers on vertical agreements and how they can be used to extend market power, for instance when can buying up parts of a supply chain help extend monopoly power? His paper with Oliver Hart figures out some of the conditions under which vertical acquisitions can help foreclose a market. With Rey, Tirole surveys the literature on vertical relations and foreclosure.
This early 1984 paper, with Drew Fudenberg, laid out the conditions when firms should overinvest in capacity to deter competitive entry, or when firms should instead look “lean and mean” for entry deterrence. The underlying analysis has shaped many a business school discussion.
I am a fan of this 1996 paper on how we can think of firms as credible ways of carrying reputations in a collective sense. For instance the existence of a firm called “Google” transmits real information about the qualities of the people you deal with when you are transacting with members of the Google firm. This was an important addition to the usual Coasean vision of thinking of a firm in terms of economizing transaction costs.
He has written some key papers on financial intermediation, collateral, and the agency problems associated with lending, here is one well-cited paper by him and Holmstrom. Here is a non-gated version (pdf). A key argument is that a decline in the value of the collateral in a lending relationship can lower efficiency and also output, and this can help explain some features of business cycles. This 1997 paper was well ahead of its time and it remains one of Tirole’s most widely cited works. Arguably it is relevant for recent financial crises.
He has a 1994 book with Mathias Dewatripont on the prudential regulation of banks and how to apply the proper incentives to make sure banks do not take too much risk at public expense. Obviously this also has since become a much more important topic. How many of you know his 1996 paper with Rochet on “Interbank Lending and Systemic Risk“? They show the contradictions which can plague a “too big to fail” policy and the attempts of central banks to maintain a “creative ambiguity” about what kinds of bailouts will occur, using rigorous game theory of course.
With Rochet, he has a well-known paper on platform competition, laying out the basics of how these “two-sided” markets work. Think of internet or payment portals which must get both sides of the market on board. What are the efficiency properties of such markets and what are the game-theoretic issues? In this setting, how do for-profits compare to non-profits? Competition to monopoly? Rochet and Tirole laid out some of the basics here, here is their survey piece on the field as a whole. Alex’s post above has much more on these points, and Joshua Gans covers this area too, here is Vox.
In public choice economics, he and Laffont have an important paper on when regulatory capture is actually likely to occur. I have yet to see the insights of this paper incorporated into the rest of the literature adequately. His paper on the internal organization of government considers the relative appropriateness of high- vs. low-powered incentives as applied to government employees, among other matters. His 1999 paper with Mathias Dewatripont, “Advocates,” shows in game-theoretic terms why something like the Anglo-American system of competing lawyers might make sense as the best way of discovering information and adjudicating the truth. This paper shows how career concerns affect bureaucratic incentives and what is the optimal degree of specialization within a government bureaucracy.
He has thought very deeply about the nature of liquidity and what is the optimal degree of liquidity in a securities market. There can be some side benefits to illiquidity, namely that it forces parties to stay committed to an economic relationship. This must be weighed against the more obvious benefits of liquidity, which include having better benchmarks for measuring managerial performance, namely stock price (see this paper with Holmstrom). This kind of analysis can be applied to the question of whether the shares of a firm should stay privately traded or be put on a public exchange. This 1998 paper, with Holmstrom, is a key forerunner of the current view that the global economy does not have enough in the way of safe assets.
Here is his paper on vertical structure and collusion in bureaucracies (pdf). Here is his very useful survey article, with Holmstrom, on the theory of the firm.
His textbook on Industrial Organization is a model of clarity and remains a landmark in the field, even though it came out almost thirty years ago.
He has written a book on telecommunications regulation (with Laffont) although I have never read that material.
In finance he wrote this key 1985 paper, deriving the conditions under which you can have an asset bubble in a market with rational expectations. The problem of course is that the price of the asset tends to keep rising, relative to the size of the economy as a whole, and eventually it becomes impossible to keep on buying the asset. This has to mean an eventual crash, unless the growth rate of the economy exceeds the general rate of return on assets. This paper helped us think through some issues which recently have resurfaced with the work of Thomas Piketty. His earlier 1982 paper on speculation is also relevant to this topic. Most economists think of Tirole as game theory, finance, and industrial organization, but his contributions to finance are significant as well.
Just to show his breadth, here is his paper with Roland Benabou on incentives and when they undermine the intrinsic desire to do a good job. For instance if you pay kids to get good grades, will that backfire and kill off their own reasons for wanting to do well? Alex covers that paper in more detail. This other paper with Benabou, “Self-Confidence and Personal Motivation,” is a great deal of fun. It analyzes the benefits of overconfidence, namely greater motivation, and shows how to weigh those benefits against the possible costs, namely making more mistakes. It shows Tirole dipping a foot into the waters of behavioral economics and again reflects his versatility in terms of fields. I like this sentence from the abstract: “On the supply side, we develop a model of self-deception through endogenous memory that reconciles the motivated and rational features of human cognition.” Again with Benabou, here is his paper on willpower and personal rules, very much in the vein of Thomas Schelling.
Here is Tirole on intellectual property and health in developing countries, with plenty on policy.
It’s an excellent and well-deserved pick. One point is that some other economists, such as Oliver Hart and Bengt Holmstrom, may be disappointed they were not joint picks, this would have been the time to give them the prize too, so it seems their chances have gone down.
Overall I think of Tirole as in the tradition of French theorists starting with Cournot in 1838 (!) and Jules Dupuit in the 1840s, economics coming from a perspective with lots of math and maybe even some engineering. I don’t know anything specific about his politics, but to my eye he reads very much like a French technocrat in terms of approach and orientation.
Jean Tirole is renowned as an excellent teacher and a very nice person.
The Nobel Prize in Chemistry
Eric Betzig, one of today’s winners of the Nobel Prize in Chemistry is a team leader at Janelia Farms the stunning Howard Hughes Medical Institute campus located nearby in Ashburn, VA. I’ve been out to the labs at Janelia a number of times for public talks and seen how Betzig’s work creating much higher resolution microscopes has impacted research in chemistry, biology and brain science. The new microscopes can be used to look at the dynamic operation of live cells. Check out some of the “movies” produced by these techniques. Be sure to scroll down and click right to see the movie of chromosome separation (no it’s not an animiation!).
Betzig has had a very unusual career. After working at Bell Labs for six years he quit science to work in manufacturing, optimizing machines in his father’s factory. After 10 years of that he wanted to get back into science but he hadn’t had any publications for a decade so he knew that he couldn’t just ask for job. Instead, he spent long hours at his cottage thinking of the ideas that would bring him job offers and eventually the Nobel.
Hat tip: Monique van Hoek.
Addendum: Here is Derek Lowe with more on the techniques.
Crafty Nudges and Prize Linked Savings Accounts
Thirteen percent of US citizens play the lottery every week. The average household spends around $540 annually on lotteries and poor households spend considerably more than the average. The high demand for lotteries, especially among the poor, has led many to suggest that we use them to promote some other good. Los Angeles, for example, has recently discussed giving voters lottery tickets–a great idea if we want to encourage more voting by uninformed people with a penchant for get-rich-quick schemes. What could go wrong?
A somewhat better idea is to use lotteries to promote saving. Prize linked savings (PLS) accounts offer savers pro-rata lottery tickets based on how much they save. The average return on a PLS account can be the same as on regular account but the interest rate is lowered to make up for the small probability of a big gain. It’s illegal for banks in the United States to offer lotteries but a few credit unions have experimented with PLS accounts and they are used in some 20 other countries around the world.
Does the option of saving in a PLS account increase total savings or does it merely reallocate savings? In a new paper, Atalay, Bakhtiar, Cheung and Slomin run an experiment in which participants allocate a budget to consumption, saving, lottery tickets, and a PLS account. They conclude:
…the introduction of a PLS account indeed increases total savings quite dramatically (on average by 12 percentage points), and that the demand for the PLS account comes from reductions in lottery expenditures and current consumption. We further show that these results are stronger among study participants with the lowest reported savings on the survey.
Thus, PLS accounts appear to be a kind of crafty nudge, a way to trick the get-rich-quick brain module to save more.
If we allow PLS accounts, the poor may save more and in a competitive bank market the return on PLS accounts will trump the lousy returns offered by state lotteries. Win, win. If we deregulate all kinds of lotteries, however, I have little doubt that entrepreneurs will come up with schemes that will easily trump PLS accounts–but without the social benefit of encouraging saving among the poor. As a libertarian, I can live with that but as a political economist I wonder how well we can draw the line between banning gambling and allowing gambling so long as it’s tied to a nice nudge.
How to boost voting turnout and improve the quality of local government
I did not know this idea was under consideration:
Los Angeles city leaders are considering a lottery system to reward citizens for casting a ballot in local elections, in a measure to combat low voter turnout that officials and outside observers say could be a first for any U.S. municipality.
The Los Angeles Ethics Commission voted 3-0 on Thursday to recommend that members of the City Council move forward with the lottery idea, either by putting it before voters as a local initiative or by adopting it on their own, said commission president Nathan Hochman.
The commission discussed a number of possible ways for the lottery to work, including the use of $100,000 to be split into four prizes of $25,000, or 100 pots of $1,000 for lucky voters who win the drawing, Hochman said.
The story is here, hat tip goes to long-time MR correspondent Daniel Lippman, who now is working for Politico.
File under The Polity that is California.
Do the advantages of undergraduate prestige persist?
Joni Hersch of Vanderbilt has a new paper on this topic. Given the multiple dimensions of unobserved quality, I wonder if there is any method which can convince me on such questions. Still, I am glad to see someone putting the effort in. Here is what the author came up with:
Income disparities arise not only from differences in the level of education but also from differences in status associated with an individual’s degree-granting college or university. While higher ability among those who graduate from elite undergraduate institutions may account for much of the earnings premium associated with elite education, ability should be largely equalized among those who graduate from similarly selective graduate programs. Few graduates of nonselective institutions earn post-baccalaureate degrees from elite institutions, and even when they do, undergraduate institutional prestige continues to influence earnings overall and among those with law, medical, graduate business and doctoral degrees.
For the pointer I thank the excellent Kevin Lewis. Kevin also refers us to this unorthodox paper on the Finns, namely why are they so smart yet win so few Nobel Prizes.
Ebola and the FDA
The Telegraph reports:
The two American doctors who have caught Ebola have been treated with a new “secret serum” which could potentially save their lives.
…A source close to the Atlanta hospital, where Dr Brantly is being treated, told CNN: “Within an hour of receiving the medication, Brantly’s condition was nearly reversed. His breathing improved; the rash over his trunk faded away.”
One of his doctors reportedly described the events as “miraculous.”
…Dr Writebol was also administrated with the drug, which was transported to Liberia in a special sub-zero container. She showed a less remarkable recovery, but is hoped to travel to the US on Tuesday to continue her treatment.
According to CNN, the drug was developed by the biotech firm Mapp Biopharmaceutical, based in California. The patients were told that this treatment had never been tried before in a human being but had shown promise in small experiments with monkeys.
…health workers said drugs that could fight Ebola are not particularly complicated but pharmaceutical firms see no economic reason to invest in making them because the virus’ few victims are poor Africans.
Of course, pharmaceutical firms are not going to invest millions in getting a drug through FDA trials for a disease that has only killed a few thousand people since being discovered in 1976. Nevertheless, some people find this simple logic difficult to accept.
Prof John Ashton, Britain’s leading public health doctor, termed the “moral bankruptcy” of profit-driven drugs developers.
The logic of profit-driven drug developers is no different than the logic of profit driving automobile manufactures. It isn’t profitable to make cars for people who can’t afford them but the auto firms are rarely called morally bankrupt for not giving cars away to the poor. Moreover, it’s not at all obvious why the burden of producing unprofitable drugs should fall on the drug manufacturers. To the extent that there is an ethical case for developing drugs for the poor it’s a burden that falls on all of us.
As Eric Crampton notes there are at least two possible solutions. Either ensure at taxpayer expense a return on investment by subsidizing, offering prizes (as I suggested in Launching) or publicly investing in orphan drugs or
…ease up the FDA trials for drugs in this kind of category. Does it really make sense to mandate placebo trials for drugs hitting diseases with 60% fatality rates? We are condemning people to a very high risk of death for the sake of ensuring that there aren’t drug side effects and that the drugs are more effective than placebos (pretty easy to tell quickly where the fatality rate is otherwise 60%!).
Insurance markets in everything
But there is one type of insurance that people buy to protect them from the consequences of unusually good luck: In Japan, the U.K., and, to a lesser extent, around the world, golfers buy insurance to protect themselves from the potentially bankrupting consequences of sinking a hole in one.
The concept of hole in one insurance may baffle the uninitiated, but to many it is a wise precaution as golf tradition holds that anyone who scores a hole in one should buy drinks back at the clubhouse for his playing group — if not everyone present. In Japan, many give extravagant gifts to friends and family after scoring a lucky ace.
And indeed there is such an institution:
A number of firms offer hole in one insurance, frequently bundled with other services that golfers commonly buy like insurance for golfing equipment or personal liability. (Apparently yelling “Fore!” can’t ward off lawsuits if you hit a ball right at someone.) Golfplan, a U.K. insurer, covers $340 to $510 worth of drinks for hole in one celebrations. (Clubs’ set of rules for validating a hole in one makes it easier to process claims.) When it is sold unbundled, hole in one insurance can be cheap; Tokio Marine & Nichido Fire Insurance Co. Ltd offers Japanese golfers hole in one insurance for as little as a $3 premium. Outside of individual policies, golf tournaments also get hole in one insurance so that they can offer huge cash prizes for a hole in one as a marketing promotion — it’s the same type of “prize indemnity” insurance that covers teams when a fan sinks a half court shot or makes a field goal.
In the United States, where the custom is less firmly established, golf forums are filled with debate about what tradition demands. Some clubs have written the tradition into their rules. The New York Times notes that the membership dues at one San Francisco club include covering $250 worth of drinks to celebrate any hole in one, while a similar system at a club in Bremerton, Washington, gives pro shop and food and beverage credit to the lucky golfer — it’s up to him or her to share.
The full story is here, hat tip goes to Michael Rosenwald. I wonder how many people buy this insurance simply to convince themselves (falsely) that they have some chance of making a hole in one.