The Curse of Cash: An interview with Kenneth Rogoff


What if cash is making us poor?

Called a “fascinating and important book” by Ben Bernanke, The Curse of Cash by leading economist Kenneth Rogoff argues that cash is making us poorer while fueling a corrupt underground economy on a global scale. Even as advanced economies are using less paper money, the amount of cash in circulation is on the rise, a reality Rogoff says feeds terrorism, tax evasion, and human trafficking, among other nefarious activities. Rogoff’s case for eliminating most paper currency is sure to stir serious debate. Recently we asked him to comment on his book and the reasons for his position.

Why do you think paper currency can be a “curse?”

KR: The big problem with paper currency is that a large part of it is used to facilitate tax evasion and a huge spectrum of criminal activities, including drugs, corruption, human trafficking, etc. Most people don’t realize the sheer scale of currency outstanding, over $4200 for every man, woman and child in the United States, with 80% in 100 dollar bills. The vast bulk is unaccounted for; it is not in cash registers or bank vaults. The phenomenon is the same across virtually all advanced economies. The dollar is not special in this regard.

Won’t the government be losing out on huge profits from printing currency?

KR: Yes, governments delight in being able to pay for things by printing money, and the United States government earns tens of billions of dollars each year by doing so. But tax evasion, which is widely facilitated by the use of cash to hide transactions from authorities, costs government far more, in the hundreds of billions for the United States alone, and far more for Europe. If phasing out most paper currency reduces tax evasion and crime by say, 10%, the government should at least break even, and the overall gains to society will be far larger. This is not a quixotic attempt to end all crime and tax evasion, but simply the observation that earning profits by printing large denomination notes is penny wise and pound foolish, a point I first made in an academic paper almost two decades ago.

Are you arguing for phasing out all paper currency?

KR: No, for the foreseeable future, I am proposing a “less-cash” society, not a cashless society. My plan would leave smaller notes, say $10 and below, for an indefinite period. This will help mitigate concerns about privacy, power outages, and the continuing convenience of cash in some small scale transactions. Over the very long run (perhaps several decades), moderately heavy coins would be substituted for small bills to make it even more difficult to transport and conceal large quantities. This last piece is inspired by the experience of ancient China, where paper currency was introduced in part because lower-grade metals were used in coinage, and it proved burdensome to carry large amounts over long distances.

Are you advocating digital currencies such as Bitcoin instead of cash?

KR: Private digital currencies are, in fact, a complete non sequitur, though of course they need to be regulated. Drastically scaling back currency was already a good idea two decades ago when I first wrote on the topic. Credit cards, debit cards, checks and electronic transfers have long been far more important than cash in the legal economy for larger transactions. Today, the role of cash is dwindling even for smaller transactions.

If we get rid of most paper currency, won’t criminals and tax evaders find other ways around the system?

KR: Of course, but there are good reasons why cash is king in the global underground economy. There are other ways to launder money and hide income, but they do not offer the same safety or universal acceptance as cash.

Aren’t most dollars held abroad anyway?

KR: Overwhelmingly, the evidence is no, at least half of all dollars are held inside the United States, still more than $8000 per four-person family.

Do other countries have the same issue with huge amounts of currency outstanding or is the dollar unique?

KR: The US is no way unique, virtually every advanced country has a massive currency supply, some even larger than the United States. And in virtually all cases, the vast bulk is in very large denomination notes. Japan, for example, has issued over 50% more cash per capita than the US, with over 90% of it in 10,000 yen notes (roughly equivalent to the US $100 bill). T

What will happen to the poor in your “less-cash” society?

KR: The poor are not the ones accounting all the 100 dollar bills, but they are the ones suffering the most from crime and who stand to benefit the most if the government were more effective at collecting tax revenues. To facilitate financial inclusion, my plan calls for providing free basic debit card accounts; several other countries have already done this.

What about privacy from the government?

The continuing circulation of small bills will ameliorate privacy concerns to some extent.  The basically philosophy of this approach is that it should remain convenient for individuals to keep modest-size transactions completely private from the government, but for large transaction, the government’s right to tax, regulate and enforce laws trumps individual privacy considerations. I am making this argument on pragmatic, not moralistic grounds.  The current system just makes it too easy to do repeated large-scale illicit trades in cash with big bills.  Even after big bills are gone, there will still be many ways for ordinary citizens to conduct one-off high-value transactions with a significant degree of privacy.  These alternatives, however, are typically inferior to cash for repeated large-scale transactions, as risk of detection rises proportionately.

What about power outages, hurricanes, etc.?

KR: Again, the continuing circulation of small bills mitigates the issue. Other payment mechanisms, including via cell phones, are rapidly becoming more important in the aftermath of storms anyway, and there are a variety of backup technologies such as checks. In a sufficient profound power outage, ATM machines and cash registers will not work either, and the government will have to airlift cash and script regardless.

How will reducing the role of cash help deal with illegal immigration?

KR: Without paper currency, it would be vastly more difficult for employers to pay workers off the books, and sub-market wages. It would be more difficult for employers to avoid making social security tax contributions and to skirt labor laws. Phasing out paper currency is a far more humane way of channeling immigration through legal channels that some of the draconian methods being proposed, such as building giant walls and barbed wire fences. Remarkably, no one in the heated political debate on immigration seems to have quite realized this. Of course, any substantial phase-out of paper currency would take place of a very long period, perhaps 10-15 years, giving a long runway for policy to help existing immigrants.

If the US gets rid of large denomination, won’t other countries just fill in the void and supply their large notes to the world underground economy?

KR: The gains from reducing domestic tax evasion and crime still should make it a big win, even though the US would forgo profits earned from supply the global underground economy, including for example, Colombian rebels, Russian oligarchs and Mexican drug lords. Europe might profit if the euro becomes more popular, but frankly Eurozone countries have much larger underground economies than the United States, and thus even more incentive to phase out paper currency. By the way, foreign notes will hardly fill the void in the United States underground economy. There are already strict reporting requirements on banks and financial firms, and there already exits limits on taking cash in and out of the country. Any alternative currency that cannot easily be spent and recycled in the legal economy will be costly to use and sell at steep discount.

Is it realistic to think cash will ever get phased out?

KR: In fact, the Scandinavian countries are already far along the path, and have successfully negotiated many of the practical concerns that have been raised, for example now to give money to indigent individuals on the street. Sweden is particularly far along. Several countries, including Canada, Sweden, the European Central Bank and Singapore have already taken action to phase out their largest denomination notes, very much in response to concerns about their role in tax evasion and crime.

Part 2 of this interview with Kenneth Rogoff will appear tomorrow.

Kenneth S. Rogoff is the Thomas D. Cabot Professor of Public Policy at Harvard University and former chief economist of the International Monetary Fund. He is the coauthor of the New York Times bestseller This Time Is Different: Eight Centuries of Financial Folly (Princeton).  He appears frequently in the national media and writes a monthly newspaper column that is syndicated in more than fifty countries. Rogoff resides in Cambridge, Massachusetts.

New Economics & Finance Catalog

Our Economics & Finance 2016 catalog is now available.


AkerlofShiller In Phishing for Phools, Nobel Prize-winning authors George A. Akerlof and Robert J. Shiller reveal the dark side of the free market, including the role that manipulation and deception play in it.
Gordon Robert J. Gordon explores the period of economic boom following the Civil War and the impact it had on society in The Rise and Fall of American Growth. Then, he argues that this era has now come to a close, analyzing the causes and effects of economic stagnation.
Sandbu Check out Europe’s Orphan by Martin Sandbu, a defense of the beleaguered euro and an analysis of what must be done to achieve prosperity in Europe.
Deaton Nobel prize-winning author Angus Deaton analyzes the remarkable progress that some nations have made over the course of the past 250 years and addresses what steps ought to be taken to aid those nations that have had less success in The Great Escape, now available in paperback.

If you would like updates of new titles, subscribe to our newsletter.

Finally, if you’re in San Francisco for the Allied Social Science Associations Meeting, visit PUP at booth #205.

What do these Nobel prize winning economists have in common?

Princeton Makes. Stockholm Takes.

Princeton University Press is proud to be the publisher of these Nobel Prize-winning economists

Angus DeatonThe Great Escape jacket

The Great Escape: Health, Wealth, and the Origins of Inequality

Demonstrating how changes in health and living standards have transformed our lives, The Great Escape is a powerful guide to addressing the well-being of all nations.


The Theory of Corporate Finance jacket2014 Jean Tirole

The Theory of Corporate Finance

Tirole conveys the organizing principles that structure the analysis of today’s key management and public policy issues, such as the reform of corporate governance and auditing; the role of private equity, financial markets, and takeovers; the efficient determination of leverage, dividends, liquidity, and risk management; and the design of managerial incentive packages.

2013 Lars Peter HansenRobustness jacket


What should a decision maker do if the model cannot be trusted? This book adapts robust control techniques and applies them to economics. By using this theory to let decision makers acknowledge misspecification in economic modeling, the authors develop applications to a variety of problems in dynamic macroeconomics.

Irrational Exuberance jacket2013 Robert J. Shiller

Irrational Exuberance

In addition to diagnosing the causes of asset bubbles, Irrational Exuberance recommends urgent policy changes to lessen their likelihood and severity—and suggests ways that individuals can decrease their risk before the next bubble bursts. No one whose future depends on a retirement account, a house, or other investments can afford not to read it.

Handbook of Experimental Economics jacket2012 Alvin E. Roth

The Handbook of Experimental Economics (Edited with John H. Kagel)

This book presents a comprehensive critical survey of the results and methods of laboratory experiments in economics:public goods, coordination problems, bargaining, industrial organization, asset markets, auctions, and individual decision making.

2012 Lloyd S. Shapley

Advances in Game Theory (AM-52) (Edited with Melvin Dresher & Albert William Tucker)

Shapley considers Cooperative Game Theory when discerning various match methods that result in stable matches. In this book, Shapley defines stable matches as no two entities that would prefer one another over their counterparts and recognizes processes to achieve these matches.

2011 Thomas J. SargentConquest of American Inflation jacket

The Conquest of American Inflation

Sargent examines two broad explanations for the behavior of inflation and unemployment in this period: the natural-rate hypothesis joined to the Lucas critique and a more traditional econometric policy evaluation modified to include adaptive expectations and learning. His purpose is not only to determine which is the better account, but also to codify for the benefit of the next generation the economic forces that cause inflation.

2010 Peter DiamondBehavioral Economics and Its Applications

Behavioral Economics and Its Applications (Edited with Hannu Vartiainen)

In this volume, some of the world’s leading thinkers in behavioral economics and general economic theory make the case for a much greater use of behavioral ideas in six fields where these ideas have already proved useful but have not yet been fully incorporated–public economics, development, law and economics, health, wage determination, and organizational economics. The result is an attempt to set the agenda of an important development in economics.

Understanding Institutional Diversity jacket

2009 Elinor Ostrom

Understanding Institutional Diversity

Concentrating primarily on the rules aspect of the IAD framework, this book provides empirical evidence about the diversity of rules, the calculation process used by participants in changing rules, and the design principles that characterize robust, self-organized resource governance institutions.

Mass Flourishing jacket2006 Edmund S. Phelps

Mass Flourishing

Phelps argues that the modern values underlying the modern economy are under threat by a resurgence of traditional, corporatist values that put the community and state over the individual. The ultimate fate of modern values is now the most pressing question for the West: will Western nations recommit themselves to modernity, grassroots dynamism, indigenous innovation, and widespread personal fulfillment, or will we go on with a narrowed innovation that limits flourishing to a few?

2005 Robert J. Aumann

Values of Non-Atomic Games

This book extends the value concept to certain classes of non-atomic games, which are infinite-person games in which no individual player has significance. It is primarily a book of mathematics—a study of non-additive set functions and associated linear operators.

Anticipating Correlations jacket2003 Robert F. Engle III

Anticipating Correlations:A New Paradigm for Risk Management

Engle demonstrates the role of correlations in financial decision making, and addresses the economic underpinnings and theoretical properties of correlations and their relation to other measures of dependence.

Clive W.J. Granger

Spectral Analysis of Economic Time Series (PSME-1) (with Michio Hatanaka)

Spectral Analysis of Economic Time Series expands and implements on innovative statistical methods based on Granger’s differentiating process, “cointegration”. Granger analyzes and compares short-term alterations with long-term patterns.

Identity Economics jacket2001 George A. Akerlof

Identity Economics: How Our Identities Shape Our Work, Wages, and Well-Being (with Rachel E. Kranton)

Identity Economics provides an important and compelling new way to understand human behavior, revealing how our identities–and not just economic incentives–influence our decisions.The authors explain how our conception of who we are and who we want to be may shape our economic lives more than any other factor, affecting how hard we work, and how we learn, spend, and save.

Lectures on Public Economics jacket2001 Joseph Stiglit

Lectures on Public Economics (with Anthony B. Atkinson)

The lectures presented here examine the behavioral responses of households and firms to tax changes. The book then delves into normative questions such as the design of tax systems, optimal taxation, public sector pricing, and public goods, including local public goods.

Anat Admati on the stark reality of post-2008 banking

Admati-BankersNewClothes_pbkThere are a few lessons still unlearned from the 2008 financial recession, according to Anat Admati, co-author of The Banker’s New Clothes: What’s Wrong with Banking and What to Do about it. “After such a major trauma, we want to believe all is well again,” Admati wrote in her Bloomberg piece on Monday. “But the reality in banking is different and stark.”

Admati turns her attention to former chair of the Federal Reserve, Ben Bernanke’s new book, The Courage to Act. While she applauds Bernanke for appreciating the significance of “equity capital in protecting the economy from financial shocks”, she is skeptical of the supposed progress resulting from regulations implemented by the Federal Reserve post-2008. Admati writes in Bloomberg:

A clear lesson is that banks need much more capital, specifically in the form of equity. In this area, the reforms engendered by the crisis have fallen far short. Regulators focus on “risk-weighted” and accounting-based capital ratios that, among their many flaws, rely on banks to assess the riskiness of their assets. Using off-balance-sheet accounting, derivatives and other tools, banks have become adept at manipulating these ratios. Annual stress tests aren’t much better: They employ the same flawed measures and cannot reliably predict how an actual crisis, which may come from an unexpected direction, would play out in an opaque and interconnected financial system.

Admati argues that a larger amount of equity given to banks would offer substantial benefits to society with minimal costs, halting the precarious practice of creditors allowing the largest banks in the world to borrow money under the assumption of government intervention in dire situations.

Read the rest of Admati’s analysis here .

Anat Admati is the George G. C. Parker Professor of Finance and Economics at Stanford’s Graduate School of Business.

Introducing the new video trailer for PHISHING FOR PHOOLS by Robert Shiller & George Akerlof

Phishing for Phools jacketDo you have a weakness? Of course you do. Which means, according to Nobel Prize-winning economists George Akerlof and Robert Shiller, you have probably been “phished” for a “phool.”

We tend to think of phishing as the invisible malevolence that led our grandparents to wire money to Nigeria, or inspired us to click on a Valentine’s day link that promised, “someone loves you,” and then promptly crashed our hard drive. But more generally understood, “phishing” is inseparable from the market economy of everyday life. As long as there is profit to be made, psychological weaknesses will be exploited. For example, overly optimistic information results in false conclusions and untenable purchases in houses and cars. Health clubs offer overpriced contracts to well-intentioned, but not terribly athletic athletes. Credit cards feed dramatic levels of debt. And phishing occurs in financial markets as well: Think of the legacy of mischief at work in the financial crises from accounting fraud through junk bonds and the marketing of derivatives.

Ever since Adam Smith, the central teaching of economics has been that the invisible hand of free markets provides us with material well-being. In Phishing for Phools, Akerlof and Shiller challenge this insight, arguing that markets are far from being essentially benign and don’t always create the greater good. In fact, markets are inherently filled with tricks and traps.

We are thrilled to introduce this new video trailer in which Robert Shiller talks about his new book with George Akerlof, Phishing for Phools:


Book Fact Friday – GDP

From chapter 5 of The Little Big Number:

Economic policy was not always so heavily influenced by the concept of Gross Domestic Product. Policymaking at the federal level began to be premised on the concept of GDP in earnest following the Great Depression—Franklin Delano Roosevelt exerted his influence to propel these policies forward.

The Little Big Number: How GDP Came to Rule the World and What to Do about It
Dirk Philipsen









In one lifetime, GDP, or Gross Domestic Product, has ballooned from a narrow economic tool into a global article of faith. It is our universal yardstick of progress. As The Little Big Number demonstrates, this spells trouble. While economies and cultures measure their performance by it, GDP ignores central facts such as quality, costs, or purpose. It only measures output: more cars, more accidents; more lawyers, more trials; more extraction, more pollution—all count as success. Sustainability and quality of life are overlooked. Losses don’t count. GDP promotes a form of stupid growth and ignores real development.

How and why did we get to this point? Dirk Philipsen uncovers a submerged history dating back to the 1600s, climaxing with the Great Depression and World War II, when the first version of GDP arrived at the forefront of politics. Transcending ideologies and national differences, GDP was subsequently transformed from a narrow metric to the purpose of economic activity. Today, increasing GDP is the highest goal of politics. In accessible and compelling prose, Philipsen shows how it affects all of us.

But the world can no longer afford GDP rule. A finite planet cannot sustain blind and indefinite expansion. If we consider future generations equal to our own, replacing the GDP regime is the ethical imperative of our times. More is not better. As Philipsen demonstrates, the history of GDP reveals unique opportunities to fashion smarter goals and measures. The Little Big Number explores a possible roadmap for a future that advances quality of life rather than indiscriminate growth.

What are Wall Street’s smartest people reading? Lasse Pedersen’s EFFICIENTLY INEFFICIENT

Pedersen jacketLasse Pedersen’s new book, Efficiently Inefficient, a look at the key trading strategies used by hedge funds, just made two lists of top investment books. The Wall Street Journal included it in a list of “the books Wall Street’s smartest people think you should read this summer”, where it was recommended by Torsten Slok, ‎chief international economist at Deutsche Bank. also gave the book a shout out, naming it one of the “must read books for serious investors”.

Lasse Pedersen, a finance professor at Copenhagen Business School and New York University’s Stern School of Business, and a principal at AQR Capital Management, is determined to show how markets really work in a world where they are neither perfectly efficient nor completely inefficient. So what exactly does he mean by the contradiction in terms “efficiently inefficient”? From

Imperfectly Efficient

Regarding the book’s title, Pedersen explains: “Markets cannot be perfectly efficient and always reflect all information. If they were perfect, no one would have any incentive to collect information and trade on it, and then how could markets become efficient in the first place? Markets also cannot be so inefficient that making money is very easy because, in that case, hedge funds and other active investors would have an incentive to trade more and more.”

Efficiently Inefficient includes an array of interviews with leading hedge fund managers, including Lee Ainslie, Cliff Asness, Jim Chanos, Ken Griffin, David Harding, John Paulson, Myron Scholes, and George Soros. Free problem sets are available online on Pedersen’s website. The introduction is available for download here.

Lasse Pedersen, author of Efficiently Inefficient, interviewed on Money Life

Lasse Pederson, author of Efficiently Inefficient: How Smart Money Invests and Market Prices are Determinedwas interviewed by Chuck Jaffe, a columnist for MarketWatch and host of the Money Life radio show. Listen to the interview here.


Efficiently Inefficient describes the key trading strategies used by hedge funds and demystifies the secret world of active investing. Jeremy Stein from Harvard University writes, “Lasse Pedersen is a gifted financial market theorist who understands that theory is most satisfying when it is combined with a deep practical understanding of institutional detail and market frictions. This terrific book showcases his strengths in all of these dimensions.”

Ian Goldin on Ebola and the consequences of globalization

goldinIan Goldin, co-author (with Mike Mariathasan) of The Butterfly Defect: How Globalization Creates Systemic Risks, and What to Do About It, voiced (or rather, wrote) his opinion on the Ebola outbreak and the role globalization has played thus far. In his PBS Newshour article, which can be read in its entirety, here, Goldin states, “globalization does not only lead to the spreading of ‘goods,’ such as economic opportunity and vaccines, but also to the spreading of ‘bads,’ such as diseases, financial crises and cyber attacks.” Ebola is just the most recent “bad” to come from greater globalization.

Goldin’s solution to prevent future infectious disease outbreaks (and other “bads”)  may not be popular among government officials responsible for budgeting resources, but it may be the only option. Outbreaks, like we’ve seen with Ebola, might become more common in an age of higher population density and increased international travel, yet the organization most responsible for preventing the spread of these diseases, the World Health Organization (WHO), is terribly underfunded according to Goldin.

“A breakdown or absence of public health infrastructure is the driving factor in over 40 percent of infectious disease outbreaks internationally,” writes Goldin. He also notes that the international organizations–WHO, International Monetary Fund, World Bank and UN Security Council, to name a few–needed to handle international crises “lack the leadership, legitimacy or capability to manage the spill-overs of globalization or emergent threats” because “national governments have stymied vital reforms…and attempt[ed] to wrest power back from what they think are mysterious, distant institutions.”

Goldin concludes his article with an ultimatum: “In order to harvest the ‘goods’ of globalization we need to invest in the institutions that manage the ‘bads.'”


Congratulations to Jean Tirole, recipient of 2014 Nobel Prize in Economic Science

Around this time last year the Press could not have been more excited. Why? Two of the three 2013 Nobel Prize in Economic Sciences awards went to PUP authors Lars Peter Hansen and Robert J. Shiller, authors of Robustness and Irrational Exuberance, respectively. To see just how excited we were, click here, here, or here. Amazingly enough, there was no shortage of excitement at the Press following this year’s announcement of the 2014 Nobel Prize in Economic Sciences award as Jean Tirole, author of Financial Crises, Liquidity, and the International Monetary System, The Theory of Corporate Finance, and co-author of Balancing the Banks: Global Lessons from the Financial Crisis, is the sole recipient.

“If we had more researchers like Jean Tirole it would be a very good thing for the world.”

The official Nobel Prize press release states Jean Tirole, head of economics at Toulouse University in France, won The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for 2014, “for his analysis of market power and regulation,” but this is just a fraction of the contribution he has made to economic theory and its real world implications. In an interview (which can be seen below) Chairman of the Committee for the Prize in Economic Sciences in Memory of Alfred Nobel, Tore Ellingsen, praised Tirole for his tireless efforts to better understand and explain how governments could regulate industries dominated by monopolies. When asked if it was difficult to choose a winner for the award this year, Ellingsen explained, “Yes and no. It’s been clear for some time now that Jean Tirole is a worthy recipient, but the question has been for what, alone or with whom, and when?” The interview concludes with wishful thinking; “If we had more researches like Jean Tirole it would be a very good thing for the world.”

Tirole has been an active member and contributor to economic theory since the 1980’s, and although “his work is largely theoretical…it has translated easily to practical use.” As a New York Times article further notes, “[Tirole’s] work is also wide ranging. A description of his influence published by the prize committee cited more than 60 papers, an unusually large number.”

Peter J. Dougherty, Director of Princeton University Press had the following to say about Tirole’s impact on the field of economics and his much deserved recognition. “Jean Tirole’s 2006 book, The Theory of Corporate Finance, marked an important moment in economics as well as in the history of Princeton’s economics list. We extend our most heartfelt congratulations to Professor Tirole on the occasion of his Nobel prize.”

Again, on behalf of all of us at PUP, we would like to congratulate and thank Jean Tirole for keeping the Nobel Prize in Economic Sciences award in house. And who knows, maybe next year we’ll be posting about a three-peat… fingers crossed!

And the REAL World Cup Winner is…

IPHWell, surely everybody knows by now – the 2014 World Cup is over, and Germany went home with the trophy.

But there’s another “winner” worth mentioning: Princeton University Press author and London School of Economics professor Ignacio Palacios-Huerta, whose latest book, Beautiful Game Theory: How Soccer Can Help Economics, garnered some wonderful press over the course of the tournament. Mr. Palacios-Heurta not only received a mention in the Science section of the New York Times and was the subject of a full-length article in strategy+business; he also penned an op-ed for the New York Times’s Sunday Review and was featured in stories in both the Financial Times and Worldcrunch.

Sure, he can’t rally like Ronaldo or kick it like Klose; but this fùtbol fanatic’s research presents advantages that extend far beyond the pitch.

Palacios-Huerta is unique in that he utilizes soccer data to test economic theories. In his op-ed in the Times, Palacios-Huerta lays out the basics of this experiment by explaining its origins in the Nash Equilibrium, which analyzes how people should behave in “strategic situations” and stresses that, in order to “win,” they shouldn’t repeat their choices. He says that, “according to Mr. Nash’s theory, in a zero-sum game (i.e., where a win for one player entails a corresponding loss for the other) the best approach is to vary your moves unpredictably and in such proportions that your probability of winning is the same for each move.”

He chooses penalty kicks to demonstrate this theory because they’re zero-sum games, wherein it’s ill-advised to use a strategy repeatedly. The explanation for this is relatively simple: a player’s shots become predictable if he always kicks to the same side of the net, making them easier to block. A lot of legwork (pun somewhat-intended) has gone into proving this idea: Palacios-Huerta analyzed 9,017 penalty kicks between 1995 and 2012, to find that successful players typically distributed their shots unpredictably and in just the right proportions. We won’t get into the numbers here, but they’re abundant in both the book and the op-ed.

Other research by me and others has shown that data from soccer can shed light on the economics of discrimination, fear, corruption and the dark side of incentives in organizations. In other words, aspects of the beautiful game that are less than beautiful from a fan’s perspective can still be illuminating for economists.”

And penalty kicks are just one handy example. Data from soccer can also illuminate one of the most prominent theories of the stock market: the efficient-market hypothesis, which essentially posits that the market processes economic data so quickly that any news relating to a stock is incorporated into its price before anyone can even act on it, diminishing the risk of insider trading.

We’re excited to see more of what these soccer stats can do to advance economic theory, and more importantly, how Palacios-Huerta can translate something so complicated, using something so, well…beautiful.


Ignacio Palacios-Huerta is the author of:

BGT Beautiful Game Theory: How Soccer Can Help Economics by Ignacio Palacios-Huerta
Hardcover | 2014 | $35.00 / £24.95 | ISBN: 9780691144023
224 pp. | 6 x 9 | 30 line illus. | eBook | ISBN: 9781400850310 | Reviews Table of Contents   Introduction[PDF] 

Princeton at Hay Festival

Hay on Monday evening
Blackburn at Hay
Simon Blackburn talks to Rosie Boycott
Mitton at Hay
Jacqueline Mitton broadens our knowledge of the solar system
Bethencourt at Hay
Francisco Bethencourt discusses “Racisms”

Last week was an important week in the British literary calendar–the week of Hay Festival! Set in beautiful Hay-on-Wye on the Welsh Borders, and running since 1988, the festival attracts thousands of book and culture enthusiasts from around the world every year. This year’s line-up was as strong as ever: with names such as Toni Morrison, Richard Dawkins, Stephen Fry, Mervin King, Jeremy Paxman, Simon Schama, Sebastian Faulks, William Dalrymple, Benedict Cumberbatch, Bear Grylls, Max Hastings, Rob Brydon, Bill Bailey and Dame Judi Dench (to name but a few to catch my eye in the jam-packed programme), 2014’s Festival could not fail to enthrall and delight anyone who walked its muddy paths.

And of course, Princeton University Press authors have been gracing the Hay stages this year, with a variety of wonderful events. From Diane Coyle, explaining GDP to us in plain English (and lo0king very stylish in her Hay wellies) to Michael Wood (translator of Dictionary of Untranslatables) discussing words that defy easy–or any–translation from one language and culture to another, to Ian Goldin’s talk about globalization and risk (The Butterfly Defect), last weekend got off to a great start.

Then, earlier in the week, Jacqueline Mitton (author of From Dust to Life) took a gripped audience on a journey through the history of our solar system in her “John Maddox Lecture”.  On Tuesday, Rosie Boycott spoke to Simon Blackburn about his book Mirror, Mirror–a fascinating conversation which covered everything from psychopathic tendencies displayed in senior management to whether Facebook is really that damaging to the young. Francisco Bethencourt, meanwhile, managed to squeeze a history of racisms into an hour and gave us lots to ponder.

If all this leaves you wishing you’d been there, there is still more to envy! Later in the week, Roger Scruton, Will Gompertz and others discussed the value of a Fine Art degree – does contemporary art celebrate concept without skill? On a parallel stage, renowned historian Averil Cameron (author of Byzantine Matters) convinced us that an understanding of the Byzantine era is just as important as studying, say, Rome or Greece. Finally, Michael Scott (author of Delphi), whom it is almost impossible to miss on the BBC these days, delivered a talk about Delphi: A History of the Center of the Ancient World on Friday.

Whether you swoon for science are potty for poetry, whether you want to dance the night away in a frenzy of jazz or are hoping to meet your favourite on-screen star, Hay Festival offers something new and exciting every year.