Great Performance !

Despite all the attention paid to rogue companies like Enron, academics know very little about the practicalities of white-collar crime. The reason? There are no good data. A key fact of white-collar crime is that we hear about only the very slim fraction of people who are caught cheating. Most embezzlers lead quiet and theoretically happy lives; employees who steal company property are rarely detected.

With street crime, meanwhile, that is not the case. A mugging or a burglary or a murder is usually tallied whether or not the criminal is caught. A street crime has a victim, who typically reports the crime to the police, who generate data, which in turn generate thousands of academic papers by criminologists, sociologists, and economists. But white-collar crime presents no obvious victim. From whom, exactly, did the masters of Enron steal? And how can you measure something if you don’t know to whom it happened, or with what frequency, or in what magnitude?

Paul Feldman’s bagel business was different. It did present a victim. The victim was Paul Feldman.

When he started his business, he expected a 95 percent payment rate, based on the experience at his own office. But just as crime tends to be low on a street where a police car is parked, the 95 percent rate was artificially high: Feldman’s presence had deterred theft. Not only that, but those bagel eaters knew the provider and had feelings (presumably good ones) about him. A broad swath of psychological and economic research has shown that people will pay different amounts for the same item depending on who is providing it. The economist Richard Thaler, in his 1985 “Beer on the Beach” study, showed that a thirsty sunbather would pay $2.65 for a beer delivered from a resort hotel but only $1.50 for the same beer if it came from a shabby grocery store.

Taken From : FREAKONOMICS - A Rogue Economist Explores the Hidden Side of Everything