Superfreakonomics

my name is Steve Pischke Stephen Dubner is thief livid thieves here I'm the only one who actually needs an introduction I'm a I'm a professor of economics here at the London School of Economics and I'm probably a fairly representative example of our breed I go to my office pretty much stay in the ivory tower and don't talk much to people on the outside like you but nevertheless every generation of economists does seem to have one or few individuals who do go out and talk to the wider public I'm thinking of Milton Friedman 4050 years ago who wrote capitalism and freedom or Paul Krugman 20 years ago the age of diminished expectations and then in my generation it turned out to be Steve Levitt if you'd asked me 15 years ago so to predict who would be the best-selling author of my generation of economists I probably wouldn't have picked but I underestimated him I didn't realize just how good an economist he was he understood the division of labor so how did this project come about I saw this so this project came about there was many years in the making backward six seven years ago I got a call from the New York Times Sunday magazine asking me if if I would submit to having a profile done and and like Steve I like to sit in my office and not talk to people like you and putter away on my computer and so I was very hesitant to do it but I have a rule of thumb which is I try to make my mother happy and one of the things my mother likes to see my name in the newspaper especially newspapers that she naturally beaks and so as a consequence I submitted to having this article written about me now Steven will tell you his own story but eventually he did come out to interview me and he said he'd be in Chicago and could he come and talk to me about the piece and I said sure you can be here Wednesday how about from say 11:00 to 12:00 you can come and talk to me wide-eyed hope for a little bit more more time than that and I said okay well 10:30 to 12:00 and and he's tactical skilled so in responses he's had fine 10:30 to 12:00 and then at 12 K and he said well what are you doing for lunch and I said okay you can you can come along to lunch and then after lunch he said well what if I just sit here maybe after you and I said I just want to see what your day is like and I said well unfortunately I'm going to go into my office I'm gonna shut the door I'm going to type it a keyboard doing data analysis of the afternoon I'm not going to talk to a single person so it's okay I'll just come in come and watch now the problem is when there's a reporter from the New York Times you just have to be nice to them you don't have any choice because they have tremendous power to embarrass you and so as much as I wanted him to leave and as much as I wanted him to sit quietly when he would ask me questions I felt obligated to answer those questions and so this went on to the end of the day and he said well this was really good but you know I'm in town tomorrow as well what once you pick me up at 9:00 a.m. and I go okay so the next day and at the end of the next day you can guess what he said well how about one more day I'll just come and watch you and it was excruciating but but we did it and eventually it led to the piece but you took your your side of story it's a little different when it tells is marginally different we mostly disagree about how much we disliked each other at the outset because you say it dislike me intensely I maintain you only dislike me moderately and can I say my my children are here and I just wanted Tommen on anything he didn't really hate me as much as he's pretending he does and we've always gotten along fine so I don't want you to be alarmed so so writing about Levitt was you know the beginning of this for me I've been working on a separate book project that ended up in a drawer it was a project about what I call the psychology of money and it was kind of about behavioral economics writ small and large so behavioral economics on campuses in research and also how money plays is very fundamentally emotional role in people's lives and I've been doing this research for about two years and spending a lot of time with a lot of economists who did work nothing like him who actually worked with money the way we think of most of kamas working whereas Leavitt worked with you know data from sumo matches and looking through the the names of all the babies born in California over the space of 30 years trying to determine if your first name had any influence on the way your life was unraveling and all these things that had nothing to do with what most people think of as economics and when the times asked me to write about him I I turned it down I turned the assignment out a few times actually in part because the biggest reason they wanted me to write about him was because he just won of an award which was a John Bates Clark medal which is within academic economics a really big deal it's considered kind of the junior Nobel Prize but economists being such masters of scarcity as they are since it used to be awarded only every two years they would infer that it was even more valuable than the Nobel Prize and it can be shared so the reason I didn't want to write about him was at the time was because most people after they won an award like that they start to get all awardee and do things that are not so pleasant and also usually they went into work for what they've done in the past and as a writer you want to write about what's going on in the future so as it turned out I was going to be in Chicago anyways Levitt said and I decided to download all his papers from the internet and read them and they were these bizarrely fascinating papers about sumo wrestling and baby names and and estate agents and things like that and so I decided to you know visit and maybe I did mask a little bit how much I'm the one who's been with you and I'm and I remember calling my way from Chicago after the end of the first day and saying that I don't know if anyone in the world at all is going to care at all about this article but I'm going to really enjoy writing it because as a journalist particularly events are one thing and trends are one thing but ideas are something else entirely and Levitt really trafficked in ideas that we're really thrilling as a writer who'd spent all this time around economist whose ideas were very different so I set about to write this article it was a long thing of five or eight thousand words in the New York Times Magazine and it was coming out in the in the beginning of August which is I just thought this article is going to be the biggest done in the history of journalism because it's an eight page article about an academic economist who's researching sumo wrestlers and estate agents and it's coming out right when people go to the beach and want to read something other than economics and so my feeling that it was going to be a total dud was reinforced when the morning the article was published the first phone call I got and the only phone call I got until much much later was from Levitz mom back in Minneapolis st. Paul wanting to thank me for treating her boy fair I thought oh god that was the biggest waste of time ever on earth and uh unfortunately I was wrong and well so there's one lasso till then had the book come so we haven't got another book came so so then a lot of people loved the portrayal of what Steve described which was largely fictional the way he characterized me because you know the way it seemed if you read this article about me I said you know someone comes through with a problem and I stay off into space a little I type on the computer and something scratch your head yes that's you and and some incredible solution comes to me and I solve the problem which couldn't be further from the truth but but it was an enticing kind of metaphor for what economists do and among the people who came to approach me or publisher saying do you want to write a book and what I said to them every time was go read five of my academic papers and if you still want me to write a book come back okay and so that was a good way to deter them but I think someone smarter than me thought of the fact well Dubner has already created this persona about you wanted you to get together and try to write a book together and obviously neither of us really were that excited about doing it but but uh but the thing the thing about economists is it's all eventually about prices right so for the right price the contents will do anything right we've got to get to that fight turns out the same is true of journalists and luckily it turned out we had about the same price and and the publishers were willing to pay more than that price and and we ended up writing this this football I said before and so you know when I told my my parents about how we're going to write this book my father actually interceded he said it's immoral to write that book I don't want you to write it and said immoral what loads them all about immoral about it said no one wants to read about the ridiculous things that you study it's a moral to take the money from the publishers when you know that you're not going to on a problem and I said I know no one's going to read the book but that does not make it immoral to take the public money I mean if they can't figure it out for themselves that's not my problem but anyway we wrote the book and much to our surprise and I think the publishers surprised as well a lot of people wanted to read do we answer your question I think that was the answer that last sentence was the answer to your question in terms of the actual division of labor it's very straightforward he does nouns and adjectives I do verbs and adverbs we fight we fight viciously over the prepositions I can imagine yeah in this original New York Times piece that you told us about you called the Levitt The Economist of odd questions what's odd about the questions is it just that they're about sumo wrestlers and real estate agents or they are in other ways I could answer the question first unless you want answer go ahead so I remember what made me really want to write this piece so I've been talking with him on the phone a bit cuz you do have to call up someone say if I if I can come out there and write a piece about you are you willing to have a piece written because obviously not everyone would would acquiesce and and I was working on some article for The Times for the New York Times at the time that was about young inheritors and how how certain inheritors of a certain age in certain generation get all this money from their parents who were mostly World War 2 era folks who'd made a lot of money leave it to the next generation and then that next generation kind of often got lost and didn't know how to feel like they deserved it they didn't know how to spend it responsibly and stuff like this and there was was then and is now pending legislation on what we call the estate tax or the death tax you know that the taxation upon a parent's death and I was talking to levy on the phone kinda I don't know a few a few times during this time about writing this piece I said by the way I'm working on this other piece and I just wonder if I could pick your brain for a minute because you're an economist at the University of Chicago and you're one of the few economists I'm talking to on a daily basis right now and I wonder if you could give me a few thoughts on the estate tax and I just hear this long silence and then finally says well you're gonna have to ask a real economist that question I just have no idea and I realized that any economist at the University of Chicago who would call himself not a real economist because he hadn't thought of that because most economists that I'd interviewed would talk to you ad nauseam about anything it didn't matter if they knew a thing about it they would go on and on and then what I realized is that his interests were actually much closer to what mine were as a writer because I you know the questions that he asked in content were unusual as you said sumo and baby names and real estate and crime a lot of things having to do with the inputs that create kind of criminals and stuff a lot of those were odd question but even more odd to me were the construct of those questions in other words it was a way of looking at the world that seemed much less like an academic economics researcher and more like a documentary filmmaker or a detective who's on someone's payroll who just kind of wanders around the world looking for threads to pull and if you pull the thread just the right way the whole thing may unravel and once in a while he had unraveled these mysteries there were these pieces of detective work catch are you am i embarrassing you by going on about how great you are but the piece that I thought was just a great piece of deduction was this piece about Catchings cheating schoolteachers in Chicago that was essentially he identified bad teachers cheating teachers by just using the test scores that their students had left behind and looking for patterns of ill behavior in their test scores and so I thought you know that's that's the kind of odd that I like and that I think could make really good stories it was all about really telling stories in sunset so the the tools I use the questions are different but the tools I use are absolutely standard among economists so when Steve Piske was my professor at MIT it was exactly the kind of things that we were being taught about you know forming models about thinking about incentives about using data to determine noded he's out the difference between correlation and causality through the use of natural experiments or what you might call accidental experience and and I do have a fund a fund mental belief in the power of economics and there's another piece to it too that it doesn't often get discussed directly but which is really important is that the economic approach really is not kind of cast aside moralism and and many people when you look at a question like abortion your mind immediately goes to is it right or wrong what are the moral occasions okay but only I think economists are able to look at abortion and say well abortion happened to what was impact on crime twenty years later if you if you're kind of in a moral and an ethical worldview it puts blinders on thinking about how things really play out and I think it really is the power of the economic way of thinking which which enables people like myself and his gay Piske to to tackle problems in a way that many others can't because of you know being moral ethical is not a bad thing but it does get in the way of getting the answers to questions sometimes okay Steve certainly tackles lots more questions than I do I was wondering you know comparing for economics to earlier books on economics I was wondering why is it so much fun economics is supposed to be the dismal science and usually economics books even popular ones or somehow about weighty topics like globalization and inflation and depression is that what makes for economics fun well I think I think two things one thing is it economics books even popular ones are written by economists okay and we talked about specialization in the division of labor economists do not get selected into being economists by virtue of being able to write okay but and it's actually interesting how why economists have been so slow to understand even in the wake of the success of for economics a lot of economists have responded by saying if that guy Leavitt could write a best-selling book I'm going to write the best-selling book of all time and I'm a much better count for him and yet so they're probably maybe twenty kind of copycat economics books but not one of them I can think of was written with a top with me what Steve another and I think that that so that's part of it a part of it is having someone who really knows how to write it's important part of it is our joint belief that storytelling is not a dirty word okay among economists the idea that you will go and tell stories it seems kind of dirty in the wrong way to do it but I've always believed that the way to get your point across is with stories and I mean you have to have the facts and the careful empirical one else to back it up but but but embedding embedding your work into stories has always been something that I've appreciated that you of course as a journalist appreciate well and I think that's a big part of why our books are so so when Krugman was writing about you know the next big depression or whatever it was not embedded in narratives about you know guys who were selling bagels you know door to door and things like that I mean it was was really it didn't have any of the natural thing which are part of the way people enjoy consuming ideas I think yeah plus I think there's the very obvious fact that it's a book about fifty or a hundred different topics there's short stories or long stories or short stories that are embedded in longer stories so we consciously didn't write a book that had one theme like a lot of you cannot economics so it's something again there were books that I really thought were fun like Steve Landis bird wrote a couple books that I you know I think for an economist he writes very very well and you know slate continually finds interesting economists who write iming very well about their own interesting research and other people's interesting research ah I'm a little bit more baffled as to why there haven't been there haven't been as many that are considered so much fun I think a lot of us lucked honestly I think ours was you know honestly we got very lucky four to two okay so if there are three things that our book did well we can claim no responsibility for two of them so one is the actual book itself which we did right okay but then there's the title which seemed to really sit so most people thought it was so terrible it was actually good in the end it was just so memorably horrible that it became the the title and levites sister came up with that we couldn't come up with a title then there was the Apple orange which ended up being this really oh you don't know the Apple orange oh so so apparently we're successful in Britain will there be a verb out there no no cover of the paperback because it already sold anything in hardcover and then if you remember the paper back had a cover that you never could have done in United States it's got like a gangster there and a pregnant lady smoking a cigarette or something which had nothing to do with our book I'm not sure what that had to do we had the sumo wrestler I mean it was it was politically incorrect in just the right way you know and then there were the tube ads which were apparently quite popular and I think again here a lot of the success was by coupling a title with an image with a book that once you read it people kind of liked it and they tell the friends that liked it and so if we could just get a few people to read it it would be kind of in the sort of viral way managed to penetrate the psyches of people but I think it is true so luck is so fundamental and people who have a little bit of success rarely will they admit ex-post that it was luck but my firm belief is that almost everyone who succeeds oh it's a great great share of that success - to luck and and it's in whether it's in book writing or sports or anything else music especially so I think we were we just you in the right place at the right time as much as anything so you mentioned the that it's really just a bunch of stories and if you alluded to this - so again in this New York Times piece you're talking about this episode when Steve Levitt was 26 and you write about how he didn't have a theme in his research so it's freakanomics still a collection of stories and pieces of research without a theme or is there something that ties it together wait before you add to that let me tell that story because this is a lot is about this is a great example of luck so I was a I was a graduate student at the University of Chicago I mean how does never mind you tell I'm tired I've been there but I'm changing - I was a graduate student at MIT and and I hear that one I'm going to standby I was a graduate of MIT and so I had just had the incredible good fortune to have sent a paper to one of the top journals the Journal of political economy and gotten in the hands of an editor who God knows why I accepted this paper to the jpe which was a very fortunate thing to happen this happened right before I had an interview with something called the Harvard Society fellows which is this very exclusive academic Club at Harvard and in order to get into this club you have to go into a room we're sitting in a semi-circle around the room are our I don't know 20 of the most eminent scholars in the world people like a Marquis of sin and Robert Nozick and very fit Bernard Bailyn very famous destroyed it's two or three Nobel Prize winning physicist okay you have no idea and they just sit around in a semi-circle and they bombard questions at you you have no idea what they're going to ask you and you just do the best you can you're just a kid you know you just know economics but but there are all these different interdisciplinary questions so I'm in there and they're bombarding questions it's going pretty well until one of the historian says so what's your unifying theme and I had never once in my life ever thought about a unifying theme uh and so I make up some incredibly dumb unifying theme and an Amartya Sen intercedes and he says no no no that's not I don't think that's his unifying theme is unifying theme with some completely other crazy thing that had no bearing on what I was actually doing and so I very enthusiastically embraced that as my unifying theme so no no I don't think that's as unifying theme and then there was another you know someone else give another example and the whole interview was going to do basically going down the toilet and with this discussion of why I didn't have the right theme in Robert Nozick interceded okay this is a guy who the philosopher I nothing in common with him but he had actually been one of my intellectual heroes although I had never met him and he just turns to me and he says how old are you and I said 26 I was glad to answer any question that didn't have to do with my name and he turned to the rest of people and he said why are you bothering with the idea of a unifying theme he's 26 years old who cares maybe she's just gonna be the kind of person who flits around from thing to thing and never has a unifying theme let's get on with the interview and hear what he actually has to say and I think that was rep moment was a turning point because it really changed the nature of the interview it allowed me to get this three year basically a three year position where the only obligation I had was to drink fancy wines and talk to most billion people in the world once a week over dinner and it allowed me to do the kind of research without any of the pressure of a ten year clock to take chances which eventually led in and really as I traced back the luck I can think of how different everything could have been had Robert Nozick not interceded and said it was okay for me not to have a unifying theme so do you so does this go Kevin unifying theme I don't think you guys could probably tell us better than we can I mean I'll be honest with you we when we sat down to write the first book what we had largely was a stack of Levitz papers from 12 or 15 years of research and so we thought about how to make a book out of that on a few levels which are probably it's probably boring to talk about for anyone other than a writer and I'm gathering there at that many writers shoes so I won't go into but one had to do with the way the stories go together and the other kind of had to do with the way themes related to each other and so themes in a book are quite obvious so we could have sat down and made a book with chapters that were about you know intentions and incentives and you know crime and these things or even or even fuzzier than crime and instead we decided to go exactly the opposite direction and partly I I think we should admit I mean we said it many times before we'll say it many times again we were inspired by books like Malcolm Gladwell's the tipping point Malcolm is you know a guy we like and admire a great deal and even though our book is in some ways the polar opposite of his books Malcolm takes one very interesting idea and then assembles a collection of stories to illustrate different pieces of that ideas so that by the end you're convinced or not convinced whatever the case may be but that's the idea you kind of march through the events and we had no central idea whatsoever nothing around which to could cement all these stories but what we did have from Malcolm was a bit of a road map of how you could put together different stories that were short stories and may not relate to each other so much so obviously but make them work together and there was another thing that Malcolm did very very well that a lot of writers do now including in our books which is create a different kind of interactivity for the reader so when I first read tipping point my favorite bit of it was I'll probably get wrong exactly was trying to accomplish but you remember there was a list of names from a phone book and I think he's trying to prove the point of connectors am i roughly right in here and it was a list of something like a hundred or two hundred last names from a real phone book and you were supposed to go through and just see how many people you and your own life knew who had that last name how many people you met or how many people you knew and depending on how many you scored you were either a big connector or a total loser essentially if you only knew a few and what that did it was amazing it was it literally I mean we joke about how a good actor or singer can recite the phone book and have it be or somehow and in a way mal that's exactly what Malcolm did he took this piece of telephone book and engaged the reader in a way so where you're going through every line every word every letter of it to try to get yourself into the way of thinking about what the writer is wanting you to think about and so to me I think that while we have no unifying theme of actually content because there's all this stuff in the first book and in the second book the unifying theme is kind of the way to look at the world and as banal and mushy and kind of useless as that sounds I think that is what we try to do would just just take the way you're used to looking at the world whether it's a political way or an ideological way or a religious way or moral way and just put on a kind of different set of lenses economic lenses and look at it differently so I wouldn't call it a theme but I would call it a unifying outlook let's say I also noticed in looking at the book there's certainly elements that pop up again and again and one that I noticed that or I'll take two together one is there's an element of surprise you seem to like to spring surprises on your region and the other one is that you don't you aren't shy to take on controversies you take positions that seem fairly far out you know one end of the spectrum are those parts of the theme so what does this mean about other people's position whether the surprises come from is this because other social scientists get it wrong well so I mean most of what I study no one else studies which has always been part of my game plan right so I I learned very early on so I got to MIT and I taken one math class my first year of college of university I had taken a course at Harvard called math 1a it was a lowest math class I offered at the University because I had done so I'd failed to learn calculus the first time around and that's the only math class I've ever taken and so in a discipline which is heavily mathematical when I got to MIT I was completely and utterly overmatched by my peers and it was obvious to me it was obvious to them and as a consequence I very early on decided that if I would ever have any success in this profession it would be by asking a set of questions that no one else would ever think to ask right and I picked it I did a good job right up picking questions that were so degrading and embarrassing that no real economist would want to have their name associate with it so in some sense I think you can come up with surprising results because it's not like I'm treading over the same territory that you know Keynes and you know in Friedman went over you know in which case it would have been hard to contribute but I think the element of surprise again relates to storytelling you know jokes stories the elements surprising important part of that and we in potentially kind of right things in ways which will lead you down one path let you kind of you know a lot of what a lot of what I've tried to do in my career is to look for conventional wisdom which don't stand up to the test of data okay and so it's easy to trick people if you talk about conventional wisdom and the way people usually do and then I slowly unravel with the data and show why that conventional wisdom is wrong I mean the other thing is I've got lots of papers that confirm conventional wisdom and those are just not that interesting to write about so a lot so there is a selection in that what comes out in the book is the stuff that's inherently more intriguing also the surprise stuff I think in terms of writing the stories maybe borrows a little bit from one piece of behavioral economics which you know is in my view a really interesting way to tell stories which has to do with framing and anchoring so like you know these very central ideas of behavioral economics is that we make decisions that are often irrational because the where we cut so alright so a an economist would think that the way a situation the way a set of prices are framed or where it's anchored is going to be very influential on what price you decide is actually an appropriate one or however you might might make a decision will be influenced very much by where the frame is set or where the anchor is set and to my mind that's a lot like you know Chekhov talked about writing stories you know one thing that makes checkout short stories so good is unlike a long story like a novel when you have a short story you have this arc that's very intense and you've got the beginning of the actual action the end of the actual action but almost never does a good short story writer begin at the beginning of the action and at the end of the action you want to cut you know checkouts phrases you want to cut into that arc and begin at that arc in the right place where you can give the reader a kind of back weight of evidence without actually having to tell it so set the tension establish the kind of wisdom establish the emotion and then as the story unravels more you cut the reader fills that in and then when you get to the end the end surprising I also think that you know sometimes we do use literally framing devices that are more common maybe in novels or in movies we just do it in nonfiction slike in the in the new book gotta know if anyone's read it here yet but in what's the altruism chapter third chapter where we start by telling the story of this famous murder in New York City the story of kitty Genovese and then we end with it as well and I won't spoil the story for those of you who haven't read it to tell you that you learn some things at the end that obviously you didn't know at the beginning and I just feel like it's a you know maybe it's a failing of mine as a magazine writer because that is the way you learn to write a magazine story you begin in a place that is not the very beginning and you want to get to an end that's not where you're expecting at the end not where you expected to go from the beginning you're not buying any of this sorry I I'm buying it it makes sense to me so we talked about the surprise as trying to get you to talk about the controversy a little bit oh we didn't yeah we yeah we can let me throw it another one with the controversy you know Steve Levitt is known to make mistakes being both shown in your academic papers and I think people are talking about the contents of your books as well does it mean we can't trust anything you guys say in economics super freak anomaly so so I think when you refer to mistakes you're talking about the abortion and crime stuff is that have I made other mistakes I'm trying to remember I don't remember a police hiring oh yeah that was actually that was actually the worst mistake that was worse than the that actually was a mistake as a gratitude I did make a mistake with my standard air I forgotten about that one it's been a while but yeah that was a mistake the abortion in crime I wouldn't actually call a mistake so the paper and abortion in crime which which conjectured that the legalized abortion in the 1970s the United States led to a reduction in crime in the nineteen anything and that was probably I would say one of the most scrutinized papers in economics of the last two decades and we probably gave out our data over a hundred over a hundred economists and there wasn't indeed in the very last table there was a programming error in the last table which was asked for at the eleventh hour by the editor but but when we did things more carefully that kind of stood up to that wasn't a big deal anyway but but I would say that given the number of papers I've written in the amount of scrutiny I think you take you take virtually any economics paper and the amount of decisions and data work that go into it be very often fine can find mistakes so I don't think I'm uncared for related to other economists and and with reference to the climb so I know we'll talk more about climate stuff but but let's be completely clear that there have been allegations in the blogosphere by environmentalists that we have completely missed the boat on climate science a we got the science wrong that the scientists that we are writing about have have have said that we got a clean deal we misquote of them misrepresenting them with it that is just simply not true every fact that we have in the chapter on climate science virtually is cited in the in the bib in in the endnotes there is almost no one at this point I think who is claiming that we have gotten the facts wrong on the chapter that people don't like the tone of the chapter people who don't like our conclusions but I do not think that it is fair to say that we have gotten the science wrong there are some incredibly minor points in one sentence that one of the scientists can call Barry didn't like which we're changing in the revised version to add the word may to which at his request we gave him a copy of the chapter and said we'll change anything you want and he asked us to take out his name say instead of saying called Barry's researcher to say research suggests instead of saying that carbon is not the right building it should also just be said that the phrase the one the one phrase that he wants change so the one the one phrase that the one scientist who's been largely written about as having his work misrepresented the chapter he was a participant in these long interviews that we did with a group of scientists and beyond that we did what is not always done with with book writing which is asked him and the other scientists actually read the entire chapter and offer any and all comments which we incorporated so then you know it became this game of a very strange case of going down a rabbit hole once some climate bloggers decided to attack on the grounds that he had been misrepresented and it turns out that his version was really quite different that he he claimed responsibility for having read passages not well enough or not not thoroughly enough and so I you know I just for the record I agree entirely with Levitt we're waiting and if there's anything factual or even the spirit of what we write that would be proved to be wrong or wrong minded I think we you know gladly step up and address it and change it that said we should back up and just say very briefly what the argument is but I have a feeling that you know these conversations in the blogosphere often travel in silos and they are very noisy within the silo and they often don't radiate out the point we're trying to make in the chapter is this global warming may be a really really bad problem and if so it appears that the current solutions on the table which is primarily carbon mitigation may not be a viable solution on the grounds that it may be too little and too late and it's too optimistic and approach so if the problem is large enough to worry about now which we argue it may very well be then the solutions on the table primarily because atmospheric carbon dioxide has a very long half-life so we could convert if somehow miraculously we could convert to a zero carbon society overnight which of course is impossible if we could the problem would not really be solved from that from the warming perspective because of the atmospheric half-life of co2 and so what we put on the on the table are some solutions that are the variety of solutions that generally fall into the rubric of geoengineering which are very which right in the book or some of them may be repugnant to certain kinds of environmentalists because they seem to be messing with nature in a way that really just goes against the grain of environmentalism and yet our argument is if the problem is really worth solving then we need to consider some solutions like that and also it's really interesting is the notion of repugnance itself shifts over time so 200 years ago it was considered vile and repugnant to have life insurance the whole notion that someone could profit from the loved one from a loved ones death was concerned way out of balance and of course now life insurance is you know you're considered kind of irresponsible if you don't have it and so what's repugnant now in terms of a climate change solution that we proposed ten years from now may very well not be so that's the core argument of the of the chapter but when you get into a topic like global warming about which there's huge emotion and also huge political and financial and you know almost a kind of you know an activist core work that where people feel very very strong about it it shouldn't be so surprising there's been a lot of reaction what's been surprising that's this kind of a level of reaction and I think just following up on what Stephen said I mean what's interesting when you read the climate science and then look at the conclusions people come to is it really the scientific we are taking the science has given just as the climate scientists are building and what climate tanks often then do is embed that science with a sense of moral ISM about what we owe to future generations okay and that's it really is a dose of climate science with the dose of ethics or morality that leads to a collusion what we do is we take the climate science and we put together with economics which is to try to answer what's I think an easier question which is if you had to cool the earth down in a real hurry what would be the cheapest way to do it okay and that's not the question that the climate scientist are talking a lot what the public debate has been about and yet it really is something that you want to know because if we come to a point where because of the you know being incredibly difficult problem of trying to get global cooperation so we're going to need the Chinese and the Indians to all get together and say we want to radically reduce carbon dioxide the fact that nothing has happened since Kyoto you know in a decade suggests that this is a hard problem and that even if we stop now we could have trouble and there's tremendous cost I mean left out of of the climate debate it's the fact that we are talking about to reduce carbon the estimates are something like you know 1 to 2 percent of GDP every year from now into the video that's a lot of money ok and if they're cheaper ways to do it if not even to solve the problem because the sort of geoengineering solutions we're talking about are not fixes they're kind of like band-aids they're ways to bide your time so that as technology progresses so we can pull carbon out of the air more effectively we end up having a lie we can keep the earth cool in the meantime while we come up with some better solutions I mean I think that's the way the spirit you do want to look at it and if you if you take away the emotion of it it just seems hard to argue with investments in this kind of knowledge whether or not we ever use them the R&D costs are so low relative to medical benefits that it's very strange to me how one can be demonized for proposing these kinds of solutions when it just seems to an economist into almost every economist look at the problem comes the exact same collusion that we should be investing heavily in these in these types of solutions you've been doing great you know I had a bunch of questions prepared and we always managed to answer the next one before I ask them that's so we can see you know so you know my list is done I think we should throw it open to the audience and get some questions from them to get somebody agree some microphones I think here's microphones coming from the back your idea about climate change solutions is very interesting but how would you put that idea into a story to make it interesting for people to read chapter 5 that's a great question I mean yeah the answer is in chapter 5 and uh but but actually putting it in the story form actually got some people upset too and by that I mean we began the chapter in the 1970s when there was this brief anxious period when scientists were concerned with not global warming but global cooling and it was not the same environment not the same science not the same not the same feel at all what's going on today was not the same degree of consensus yet not and very little research done on it frankly but what really happened was that in the 70s and then going on we started cleaning up our air through different Clean Air Act's around the world so and it turns out that all that junk all that heavy particulate pollution that had gone into the air from our manufacturing was actually cooling the earth and the evidence of that is kind of getting stronger now by the year which actually interestingly we were accused of hyping the fact that the world had cooled 30 years ago and therefore may again which was not our intention at all what it actually may show that cooler that brief cooling period that cooling period of the 70s was that the warming we should be even more concerned about because if there was cooling then as a result of the artificial of the particulate in the air once that's cleaned up the rate now could accelerate more so as we do clean up more particular but in terms of the story of geoengineering we actually do tell it in a form that's built around characters I mean that's something that we try to do repeatedly is so we tell stories of people in the book who do interesting things and have interesting thoughts and let it kind of gets left out of a lot of these so even though he's an originator of a lot of these studies or at least a co-author on the studies in the new book there are stories about prostitution with a researcher named Sudhir Venkatesh there's a story about doctor skill and who a good doctor or a bad doctor in the emergency room there is a story set right here about trying to catch terrorists by using retail banking data that's centers around a UK banker and a bunch of other stories in which Levitt actually did a lot of the analysis and work as well but we leave him out since he's an author and we build these stories around the researchers and the characters and the people who are thinking these thoughts in the case of geoengineering there's this group of very very unusual very bright very interdisciplinary very motivated people at a company called intellectual Ventures in Seattle founded by a couple former Microsoft guys and they basically collected a group of science geeks and brainiacs who work in everything from medicine computers to climate change and they basically looked around and said we're working on all these things having to do with the inputs with energy they have all these projects about a better nuclear reactor better batteries better solar power so they were working on all the energy solutions that thankfully people around the world of working on they also said wait a minute what if even if we get to all this in 15 or 20 or 50 years from now what if it's too late what if the heat is a problem and that's when the climate scientists and the astrophysicists and the engineers and this you know the guys would build star wars systems said what if we can collaborate to try to find a way to cool the earth if need be so that's that's how we came to the story of global cooling global global warming and finding a way to cool the earth you made up characters oh we didn't know they're not fictional they're real I can will give you their phone numbers afterwards if you'd like yeah no they're uh yeah there's nobody fake in the book the only the only things not real in the book we had to change the names of uh I think two people the British banker for reasons that are very obvious once you read it and a high end call girl for reasons that are also quite obvious although I will give you her number as well she's always looking for what made you decide to include the theme of chapter 5 in the book so chapter 5 is about is about the global-warming well I think all of the so maybe abroad of course why do we write about anything why do we include anything and I think it comes down to where we think we have something interesting to say about an issue and in particular what what I had been increasingly been a consumer of the climate science research and very few economists have really been engaged in thinking about it and the more the more I began to read this literature the more sort of surprising I found the the almost universal policy prescription which was that carbon mitigation was the right answer because it wasn't just me but but the economists that I respected all of us independently we're coming to this conclusion it just didn't seem right and to us and so I think that's where you know I think we were I felt like it was a very interesting story because it's important it's relevant and I really felt like it was a way to showcase how economists think differently about questions in some sense then do then do other you know even the climate scientist and so you know so in the sense that was it did we have a political agenda or something absolutely not are we deniers no not at all I really do think so that unlike much of what we write about which has no policy implications I think getting climates getting climate change right matters all right okay so it either matters because the world as we know it is you know going down the tubes and we got to do something to solve that problem or it matters because you know it's not that big a threat and we're going to be spending 2% of GDP on that one could be sending 2% of GDP on you know finding the cure to cancer or solving poverty or something else and so you know I don't think I don't know the answer on that I mean we don't really take a stand on the climate science we go with what the climate area six a but I think that that you know that makes it sort of intrinsically more interesting than not to what we write about but it is different it's a different kind of one really essential essential way in which it's different which again was appealing but which made it gave it the reason that comes at the end of the book and the reason it kind of follows the flow that it does is it's the one chapter that we've ever written that doesn't have to do with the past that has to do with the future and so you know basically you know one could argue with conclusions that we've written about anything from prostitutes to real estate to you know gang wars and crack selling and all this stuff but you know it's something that happened in the past and for which there was a lot of data and we can look at those data and try to describe what happened the very reasons this problem is so troubling is because a it takes place in the future B we know that predicting the future in any realm is really really hard even with really good models as we look you know we're sitting barely a year removed from a point when financial models that were thought to be as reliable if not more so than climate models turned out to be really not so good and so looking at the future even with very sophisticated science turns out to often be far more difficult than one things the biggest factor though is uncertainty the future inherently leads to uncertainty and we write a little bit about this in the book probably could have done more one reason it's so troubling to so people it's because uncertainty itself makes us kind of not necessary not necessarily irrational but we bring more emotion to the decisions so it was an opportunity to try to address a topic that inherently lies in the future for which there exists therefore great uncertainty but try to take a step in to say well okay even assuming a very small probability of great catastrophe what do you do here and now so I think that a reason why some people are upset by it is because it is a different nature of chapter rather than describing a group of people's behavior that we can kind of write down the numbers and show exactly what they did and therefore what it means it's a totally different enterprise but again because the stakes were high because the stakes are high on the topic I felt I think that's what compelled us to you know take a shot at it really okay we get a question from upstairs maybe over there in the back row how are you choosing how are you deciding who to pick on here hello randomly yes yeah hi you talked about that in a lot of cases your analysis actually proved that conventional wisdom is true and I was wondering if you could talk about a case or two where conventional wisdom is actually descriptive of how things actually are sure so one is one where I've been researches on on drunk driving so it turns out that going over the data and building models I found that drunk driver is about 13 times more likely to cause a fatal crash relative to a sober driver and those numbers actually turned out to be quite similar to the kinds of numbers that people you know researchers had found before although my methods were worth somewhat different the same is true of seatbelts so I've looked at the efficacy of seatbelts and it turns out that seatbelts are are extremely effective and that's something that previous researchers have found now still in the area of traffic turned out well coming up with these two pieces of research which support the conventional wisdom I also stumbled onto two things that were somewhat more surprising the first of these relate to drunk walking okay if it turns out that walking drunk according to our estimates is eight times as dangerous as driving drunk okay so if you have you know if you get drunk at a party and you have to walk a mile it's even exaggerated in urban settings you are eight times or more likely to die walking home drunk as opposed to driving home drunk now obviously you're not going to kill anybody else walking home drunk oh you really have to work hard to do it at least but but even when you factor in the risks that you pose to others of government the total number of deaths per mile walk drunk is five times as high as the total miles the total number of deaths per mile driven drunk no I don't of course I don't need to tell you that I'm not endorsing drunk driving but but I'm also it's important today you know it's like an important policy but a thousand people a year die walking drunk in the United States is not a trivial number and you should think about that the next time either don't drink so much or sleep over do something but get a taxi but don't go especially in London where people are getting hit by cars all the time it's probably a terrible I'll tell you another another piece of conventional wisdom which didn't turn out to be true in this area as I studied seatbelts I stumbled onto this interesting fact that it did not look like children's car seats were any more or much more just a little teensy bit more effective than adult seatbelts okay and and this is a shocking realization to many people and not everyone agrees with all say there's some competing research that finds a different result but really if you just take 30 years of crash data it looks like car seats just aren't that good and that's a case where once you start thinking harder we've all been someone doctrine aidid's the idea is that car seats are the answer to you know every ill under a on the planet but once you start thinking about the actual mechanism so you know what do you have you have a seat belt that designed for adults ok and then you're going to have 50 different car seat manufacturers have to build car seats that have to fit into every different kind of vehicle you're going to string the adults you've got through the back of this thing and it's going to turn out to be so complicated that parents can't figure out how to put this in correctly like more you think about the more thing why would people think that that would be a particularly good solution to keeping kids safe as opposed to say starting from scratch and integrating the car seat right into the seat we know where the auto manufacturer is responsible for it so the more you the more I thought about that the more it became reasonable to me to think that there were good theoretical reasons why car seats are not much better than adult seat belts among the other reasons is that when we actually ran crash tests and put crash test dummies little children crash test dummies with car seats in with seat belts it turned out - the seat belt passed every US government regulation about what a car seat had to do so if you didn't tell the government that you had a kid in adult seat belt and you sent them the data and say this is a great new car seat feel free market okay and once you know that's the case is it surprising at all that car seats are no better than or very little better than adult seatbelts and protecting kids okay let's have a question over here hi my question was relating to your global warming chapter still are you worried about unintended consequences is all at all for example it's one thing in Seattle to be you know zapping mosquitoes with a laser it's another thing to be you know pumping a bunch of sulfur dioxide up in the atmosphere and also when you said that little thing about global cooling I read that you mentioned a few news articles but can you prove that there was a consensus back in the 1970s that said you know that said that worried about global cooling where were they just a few you know fringe so yeah oh so you take you take the second one I'll take the first okay yeah this didn't talk about that you're right we we quoted what we quoted was news articles from Newsweek and the New York Times but they were actually citing and then I asked her for National Academy of Sciences report so there was science on it and it turns out that the science was even though was not what we now think of as a consensus about global ground temperatures I mean for a variety of reasons or just were that there weren't that many climate scientists there weren't working with the anywhere near the amount of data they're working with now they knew less than they do now that said they considered the problem significant enough to come up with in the 1970s their own geoengineering solutions including it sounds insane spreading black soot over the polar ice cap to help melt it that's how that's how different the idea was then that said there is nothing in that writing or nothing in our writing to suggest that there's kind of a parallel between consensus about warming now and cool I think that I think that the point of that storytelling about that episode partly was the the you know it's interesting right because I was probably none of you but very few of you in this audience had ever heard of that of that episode and I think it is useful from the perspective there is enormous amounts of uncertainty about climate science uncertainty could be on the side of getting it wrong by being you know overly zealous and saying the world's about to explode more than certainly could be on the other side is that the world is literally about to you know about to explode and we aren't our models haven't captured all the feedback loops which will exaggerate things now the the first part of the question had to do with unintended consequences okay and obviously there are risks when you start playing with the global environment there are of course risks to not playing with the global environment live it we do not it will not live in a world which has pre-industrial levels of carbon the world is changing is changing because of man's intervention to say that we shouldn't try to change it in a more determined way is I think to be blind to the idea that we're changing anyway and as long as we're changing it let's at least try to change it in a way that's productive so what is the benefit of these kinds of geoengineering solutions that we proposed one of them is injecting sulfur dioxide into the in the stratosphere there to AVI in addition to being very cheap okay and being able to do it very quickly and to feel the results right away that we could cool the globe I think a scientist would agree that we could cool the globe dramatically within it you know within you know within a year or two if we put our mind to put yourself four dioxide up there the two keys I have not mentioned are the following one is that we have a certain sort of natural experiment that that informs us about this exercise and that is the eruption of volcanoes that when big volcanoes like Mount Pinatubo explode Mount Pinatubo in 1991 they inject enormous amounts of sulfuric ass into the atmosphere most of it into the troposphere which is just a not good at all it's bad for everybody you ask the brain etc but also some of it gets into the stratosphere and it cools here so we have certain kind of model for what's happened the second is that the beauty of these kinds of interventions from the perspective of learning is that number one you can do it very quickly you see the results very quickly and number two if you decide that it's not working okay initially you just stop injecting the sulfur dioxide and within about a year or two all the sulfur dioxide has come down and you're back onto the path you were born now the flip side is if you do this for 50 years or 75 years and you keep on pumping carbon in the air then if you suddenly because it's a you know the Machine the pump breaks or something you can't get a pump you they don't make the pump anymore okay and so you can't get that so for that setup there then you're in real trouble right that is the biggest fish you have is that then you're going to get a heating of the earth that is absolutely unprecedented I mean off-the-charts and so obviously if you commit to this path you you want to commit to the path of you know trying to figure out ways to get carbon dioxide out of the air so that you don't become dependent on it I mean this is a you know I would equate these kinds of solutions are like methadone like Jinja kneeing is methadone to the heroin addict okay and that is not as it doesn't get at the root causes but you know look at you can be a heroin if the choice is like dying of heroin addiction or being addicted to methadone well you'd rather be addicted to methadone be better to just get off everything altogether but if you don't have the political will or the you know the ability to do that I think it is something that that you know but so the key is reversibility okay and learning quickly and those are incredibly important elements and their elements that are missing from the carbon mitigation strategy because we can cut carbon now and we won't really know what's going to happen for another 40 or 50 years we won't be able to learn in a just right quickly yeah the other the other key to the so2 the amount that would be intentionally put into the stratosphere repeted relative to a volcano certainly because of alkane oh you know you might think hey if Pinatubo you know cooled the earth let's just you know blow up a volcano every two years right and that would be very messy for any number of reasons including the fact that as a delivery system for so2 into the stratosphere is extremely inefficient so the plan this garden hose to the sky plan calls for basically putting in less than 1% of the amount of so2 that currently is going into the atmosphere from cold coal-fired power plants which goes into the troposphere where as lettuce said it isn't so good it falls back more locally as acid rain and the so2 that goes into the atmosphere from nature already from I mean there's a lot of volcanoes of blow up every year around the world there's there's so2 in you know the ocean it's a naturally occurring substance obviously so the point is by using the leverage of physics essentially which is why the solution that these guys in Seattle have come up with is a solution that really would have been arrived at only by people like astrophysicists and engineers because what they the questions they were answering was a different one which is if we want to cool the earth the way a volcano naturally does how could we do it in a controlled reversible way that was also taking advantage of the leverage of physics which is to put it in the right place and therefore the volume needed would be much less so the questions of acid rain would you need to think about that absolutely but the volume would be small enough that that would probably not be the largest danger you're worried about not that there aren't larger dangers for me I think we should reward the gentleman yeah I drove but no one ever wants to sit in the front row so we'll repeat your question we don't need a microphone we'll just repeat question is a lot of a certain right about has a big effect on public policy the quality of debate on public policy on both sides McMahon team right now doesn't seem to be very high what can you do what can we all do to improve quality that debate and I guess the answer isn't really your time okay so let me repeat the question people here so the first conjecture was that our work has a big effect on public policy Falls okay which is well I was going to get that this is the second one should or should have okay that's all I like that that's okay and but the correct quality of the public debate on both sides of the Atlantic doesn't seem very high what can we do about that you know I think the nature of politics so I do want to say I think that what we do freaking out with a super freaking house has had almost zero effect on I have a hard pressed to think of any public there's one little teeny minor public policy that that we were told money we don't really affect one city in California decided to use our chapter about how how poorly paid crack dealers are to preach to their urban youth that they should not deal crap so what I think the nature of political debate right political debates end up not being about fatso and through my entire career whenever politicians have come to me to want to use my research they have always come to the position they want to be first and then searched in the research to see what supported and it didn't the quality of research wasn't that important I think that the to change so here's one thing which would be risky you talk about under 10 constants it's my own belief that if economists were allowed a bigger role in public policy debates you would have a different kind of debate now you might have I mean a society run by economists would be a crazy a very frightening kind of a world okay but on the other hand I don't think it would hurt okay on the margin to push a little more economics into into the decision-making and you like to point out in in a lot of developing nations people come they study they get PT genomics and then they go back and they essentially become presidents of the country around the country it's interesting it would never happen I don't see how that could happen in in the United States I don't know about the UK but unity would just never happened but economists have the virtue of largely focusing on the facts and trying to you know trying to get consistent models of how things work now there are other models that we're also useful I I just think that um that the political model the partisan model is it just does not I don't think the debate I don't think that the level of debate is any worse now than it was in the past I think it's just the nature of debate unless you have a truly sort of a visionary leader who kind of is about who's a benevolent and intelligent in a way that he or she can rise above the battle and and do the right thing I think those are rare where heart fine okay had a question from about there I have a question for our professor Levitt how long how long do you seem to do a lot of our research on many different topics wondering how long do you spend on a three sec topic and also do you have a like a to-do list of like topics you'd like to get around so yeah that's it that's a good question I what I do tend to do is work on a lot of topics at once so I would do when I try to tell you if I'd say in any given time I might have 25 research projects going at a time now obviously don't make very much progress on any of them right it's like if you work on each of them one day a month that's your whole month and so as a result my products tended to you know drag on endlessly so but you know my goal would be probably what I'm you know is to try to write something like six to ten academic papers a year and so you know if you kind of weigh it all out it's you know something like a month of my time now I have co-authors and they spend a lot of time and I have research assistants to help as well do I have a to decide you know I have two kinds of to do this I have the to do list which is the 22 projects which I'm working on in principle but I haven't thought of in the last two or three weeks and I wish if I have infinite amount of time I could push those all along but but the more important to-do lists are the set of questions which I I D azide had but haven't been able to answer is because I couldn't find the right data or couldn't think of how to solve the problem and that's the to do this which is just inside my head which is all the really good stuff that you know 99% of those will never ever be solved but you know on the real rare occasion where I get a breakthrough on those that's where you know that's where I get really really okay but over there economics has had a rather hard time of the last year what do you think can be done to reconnect the public with the social science well you know I think you know at the risk of offending people in the room who are macroeconomists I think that macroeconomics is just an incredibly demanding set of questions that that the complexity of the system that generates macroeconomic fluctuations is in many ways I think I don't know my mind beyond what we really are the expertise that we have and most of the public persona of economics is about macroeconomics right and and macroeconomics isn't just complicated it's not just complicated we say because policymakers don't understand thing is because you know you have players like big banks where like one rogue trader can can create enormous amounts of risk and destabilize the entire system and you just can't write down models that can can effectively incorporate that so in that regard I think you know it would my belief is that macro economics has always been on tenuous footing as as a means of describing in a forward-looking way what's going to happen to the economy okay so I think just an admission of that by economists which is not something that I can look economist don't want to admit that we don't have the answers it's a it's not the way we operate but I think in some sense our hand was forced right the the events of the last year-and-a-half of forced economists to come to terms with that so I think one thing it has done is its refocused macroeconomic macro economist I'm moving away from there's been it again I'll probably offend the macro consumer but I think there's been an unhealthy tendency for macro economists to get caught up in the math in the mathematics of the problems right to build complicated models built from micro foundations which are very but don't necessarily correspond because of the complexity of the system what we're observing in and I think that there might be a healthy move away from some of those models towards just trying to be more descriptive in what we do to not think that really macroeconomics is a science but to think of it as something more more more descriptive that being said I think that another way to boost economics and the idea in the minds of the public is each to make the ideas in macro I'm sorry in microeconomics write about individual behavior I think those we understand better there's tremendous amounts interesting research out there and finding ways like our books to communicate those ideas that Tim Harford's column I think will be in many books are another great example of getting those ideas out in the public where they could be useful and I think also teaching I think teaching younger people you know junior high students you know secondary students teaching them the basics of microeconomics could be a very valuable thing I think that I think that those kind of tools for analyze in the world if we if we more broadly spread them could could benefit a good benefit society okay maybe we'll take one more question before we wrap up maybe all the way in the back little thank you I want to ask professor Leavitt how he avoids data snooping how I wet avoid data snooping Oh data snooping well that's you know I I think that economists don't avoid data snooping I think how would in in the idealized scientific method what you do is you create a hypothesis you write down exactly what test you're going to do on the data you hit you know return on your program the results come up and you write them up as is and it's simply for better force not the way economists do the results you generate hypotheses sometimes you know you look at the data first sometimes you learn right you can learn from looking the data so I think so I guess I don't know if I want it so I don't think data snooping is necessarily a complete negative now obviously what you don't want to do is have a rule of thumb which is you generate a hypothesis and you play with the data until the data confirm the hypothesis okay that is the wrong way to do I love some people do research that way but you know we have strong incentives in our profession not to do that right because because people will come especially if your hope for a high profile and they'll try to you know try to rip holes in what you do and so so ultimately I think as an economist what I try to do is I try to embed my data analysis in sensible theories and I try to be as transparent as possible and I try to test as many of the secondary and tertiary predictions of the models I have in mind because if you could really have if you have nine predictions of a model and eight out of nine work you can be much more confident you're on the right path and if you have a model that has you know one prediction and it works or if you have a model of those nine predictions they're only three work and so if I have a bottle that makes nine predictions only three work you usually never see that paper because I just it's not it's not going to to cut it may I ask one final question sure professor Leavitt one of my favorite parts of the book my children are there I'm just coming yeah yeah thank you sweetie concerns Ally the high-priced prostitute at the end of chapter one you can uncover now tell me how did you meet her one of the benefits of writing a book like free economics is that we have a lot of reader input people would contact us and so so it turns out in that that someone who I know happened to meet this high-priced call girl and visited her apartment where she did her activities and much to his surprise it turns out that sitting on the coffee table was a copy of freakanomics okay and so when he explained to her that I was doing research on the subject collecting data she emailed me the next day and said I'm a high-priced call girl in the city of Chicago and I learned from a mutual acquaintance of ours about your new research agenda collecting data in Chicago and I wonder I have a PalmPilot with all the information all the clients have ever served is that the kind of information you were hoping to collect and I said absolutely that's exactly kind of damned ugly so she said well why don't we meet for brunch on Saturday I said great I'll see you there now I have a wife and four young children I had to explain to my wife said it was the the prostitute was calling me not vice-versa she was the one and my wife is understanding she approved am I going to meet this fascinating woman so it turns out she had a college degree she was a computer programmer she was making $80,000 a year working for a major company and decided that dropping out of the little work force in being a prostitute was a better career path and she used her computer programming skills to build a website within just a few months she was charging 300 dollars an hour and she was earning $200,000 a year working just you know 10 or 15 hours a week and she could not have been happier so we so we met and it only took about 10 minutes to discuss the data issues but here we were for a whole brunch okay so what am I going to talk to her about for the next 35 minutes so being socially awkward the only thing I could think about the tonker was about economic so I started asking her all these questions about about the economics of her of her business and she gave really good answers impressive answers until after about how she chose what price to charge because it turns out one of the hardest choices that any business makes is deciding what price they should charge for the and she just shrugged her shoulders that I don't I didn't know what to charge I just looked at what the other women on the internet were charging $300 an hour and I charged the same thing so I so I asked myself so what you know what question could I asked her which could tell me if she was charging the right price okay and finally I hit on it it turns out that there's a she has a dedicated phone line that only her clients caller on and I asked her how do you feel when the telephone rings okay and she thought about she said well I'm pretty much indifferent I don't care if the phone rings or not any of your economics majors you'll be able to do such you can't possibly be charging a high enough price okay because she's got a downward sloping demand curve which means she's restricting demand and marking up over over her marginal cost and so she should want if she could sell one more unit at the same price she'd want to sell that unit the fact that she was indifferent between doing or not because she wasn't charging a high enough price okay I tried to explain it to write off the guys any more coaches I explained it to her than I which wasn't you should no idea what I was talking about look I wasn't there to maximize her profits I was trying to get her all by so I left with that anyway so I thought you know I thought that was it you know we we left and then I teach to the undergraduate to the University of Chicago course on economic crime and as I began to study prostitution I thought well I should add a lecture to this course but it's not easy to write a good lecture and I struggled to try to make it a good lecture and finally I said what am i doing why I just call up Haley my friend and have her guest lecture for me that my solve all my problems she knows a lot more about prostitution than I do and I won't have to write the lecture so I called her up and I asked her if she'd do it and said oh no I'm a very private person I'm not a good public speaker okay but like journalist and like honest I know with prostitutes at all about prices he's got to get to the right price I said that had to feel what it was so so I said well what if I pay you your hourly wage at home hourly wage I didn't understand what you were talking about from an hourly wage I'd be delighted to come give your and indeed she came and she gave an unbelievably great lecture 1/3 of my students said it was a single best lecture they saw in four years a university which is a British a statement about what me and my peers I do it in the classroom but honestly I have to agree it was an unbelievable lecture and and so one of the so I don't know if I told you so did I not say so anyway so she charged three hundred dollars an hour so that's what she had told me when I met her and that's what but but in the negotiations for price I just you know I seem to be delicate I hadn't said anything about about the price I just said I'd pay hourly wage so then the Q&A session one of the students says well how much do you charge it ceases four hundred dollars an hour okay and I'm absolutely furious because you know I think I was trying to be you know delicate with her and you'd like respect your privacy when not by like not quoting a dollar value and make this some kind of like market transaction and then she just lies to the students and says that she charges $400 an arm thing you cannot trust the prostitute about anything I thought we had relationship together of trusted and here it turns out she's lying and what am i it's not like I can charge this to like you know to the National Science Foundation right and say you know I'm paying this right out of my pocket you know I think you know you can't say that oh well time to lazy to teach my own lecture so I heard a prosecutor so I'm sitting over where Steve is sitting absolutely furious okay just fuming and the next student raises their hand in and she says how did you decide how much to charge if he turns to me Ellie does with this big beaming smile on her face and she says well the first time I was with professor Levin she says the first time I was with professor Levin he convinced me my services were far more valuable than I raised my price to $400 and it has been the best thing that ever happened so on that note thank you very much you

Channel: LSE

Views: 24,981

Keywords: LSE, London School of Economics, Public, Lecture, Event, Seminar, Stephen J Dubner, Stephen Dubner, Professor, Steven D Levitt, Steven Levitt, Freakonomics, Superreakonomics

Id: o0fC5ZIChDM

Length: 79min 42sec (4782 seconds)

Published: Fri Dec 17 2010