Transcript

'Freakonomics' -- A New York Times Writer and a Rogue Economist Explore the Hidden Side of Everything

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Stephen Dubner
Co-Author
Wednesday, June 8, 2005; 11:00 AM

What is more dangerous, a gun or a swimming pool?

What kind of impact did Roe v. Wade have on violent crime?

Why do drug dealers still live with their moms?

Author Stephen Dubner is online to discuss his new book, "Freakonomics." The top-selling book, which he co-wrote with Steven Levitt, delves into the world of behavioral economics -- the art of applying the logic of economics in order to understand human behavior.

About Stephen Dubner: A writer for the New York Times and the New Yorker, Stephen Dubner is also the author of "Turbulent Souls" and "Confessions of a Hero Worshiper."

A transcript follows.

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Stephen Dubner: Good morning. Thanks (WashPost) for having me, and thanks (readers) for coming by. Let me say a few quick things. I'm Stephen Dubner, the co-author of "Freakonomics." I'm an author and journalist who's written about lots of things: sports, politics, religion, and now economics. My writing partner on "Freakonomics" is Steve Levitt of the University of Chicago. He is a wizard, or at least a genius; he is also an economist, which I am not. Therefore: I'm willing and eager to answer any kind of question I can but if you want to know about interest rates or inflation or the stock market, I'm afraid you've come to the wrong place. (In fact, even Levitt doesn't know or care so much about those subjects -- which is what made his research so appealing to me.) With those caveats in mind, I proceed enthusiastically. Thanks again. SJD

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Aspen Hill, Md.: I loved the book. Probably one of the most fun books on economics ever written. Probably due to having a professional writer assisting the professional economist. Are you and Prof. Leavitt planning another book? Hopefully, it could be one that helps people realize how important the understanding of basic economic concepts is to everyday life.

Stephen Dubner: There's a term in economics -- "complementarities" -- that describes what we've tried to do: bring two people together with disparate skills to produce something that neither of us could have produced on our own. Frankly, I'm surprised the model isn't used more often in publishing. Yes, we are planning another book, but it will be a few years down the line (the heavy-duty empirical research that Levitt does is very time consuming). In the meantime, we've started a monthly "Freakonomics" column in the New York Times Magazine, and we keep a pretty active Web site and blog at www.freakonomics.com. (Sorry for this naked self-promotion; I'll try to refrain from now on.)

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Arlington Va.: Stephen,

Great idea for an economic examination. For me it brings makes economic sense out of human behavior. Have you heard of your book changing people minds? If so, how?

Stephen Dubner: Yes, we hear of a lot of mind-changing, or at least mind-opening. On some topics we write about, people have a hard time divorcing their beliefs from the data. (I'm particularly talking about Levitt's theory that Roe v. Wade led to a huge drop, a generation later, in violent crime.) But we have heard from hundreds of people already who are ready to entertain a new way of looking at things, particularly at challenging conventional wisdom, which is often shoddily formed, or formed by people with huge self-interest. Steve Levitt is going to appear on The 700 Club in a couple weeks, so it'll be interesting to see how that audience treats some of his research.

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washingtonpost.com: Freakonomics

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Silver Spring, Md.: How did you and Leavitt come up with the idea for this book? And how long did it take you to research, develop, and, finally, write it?

Stephen Dubner: I wrote a profile of Levitt for the N.Y. Times Magazine in Aug. 2003. It was the most fun I'd ever had writing an article. I was deeply intrigued with Levitt's research, particularly his creativity. That said, I thought maybe 5 people would read the article. I mean, c'mon, a 5,000 word piece on a research economist published in the dead of summer? But there was a very large and very broad response. Some publishers asked me to write a book about Levitt and his work. Others asked him to write a book. My agent, Suzanne Gluck of William Morris Agency, wondered if perhaps we should collaborate. At that point, I hadn't even spoken to Levitt since the article was published; we were hardly friends, much less partners. I was slightly reluctant to cross over the line from journalist to collaborator, but since there'd plainly been no conflict of interest, I thought it over and we decided to work together. Since then, we *have* become good friends. We wrote the book in just under a year. That was possible because we were mostly working with research that he'd already done, over the past 15 years. The next book we write will be harder -- but, we are convinced, it will also be better, because we really know what we're doing now.

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Washington, D.C.: Why DO drug dealers live with their mothers?

Stephen Dubner: Because the typical street dealer earns less than minimum wage, so they can't afford *not* to live with their moms. In one chapter, we present an economic analysis of a Chicago crack gang. A wonderful sociologist named Sudhir Venkatesh (now at Columbia) essentially lived with the gang for 6 years, and was given their financial records. Levitt was able to lay out their business structure, which looks an awful lot like the structure of McDonald's. There's a lot of money to be made at the top of the pyramid but it's a very big pyramid, and anyone near the bottom is not making much money at all.

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Morristown, N.J.: Are there real or perceived economic benefits to being a "person of faith"?

Stephen Dubner: That's a great question, one that we're very interested in writing about, and one that several other economists are now studying. I wish I had the cite at my fingertips (I don't) -- but if you Google around a bit (maybe "economist ... religion ... NBER (National Bureau of Economic Research)" you might turn up something.

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Fairfield, Ohio: Does weather have any long term affect on crime rates?

Stephen Dubner: Violent crime certainly goes up in the summer, which is likely due to a host of factors. There's one story we tell in "Freakonomics," a story that's actually set in D.C., about a guy who delivers bagels to dozens of companies, leaving the bagels behind in the snack room with a cash box -- an honor-system payment scheme. This guy also happens to be a retired economist, so he kept great data. From the data, we were able to measure how honest people were (i.e., how much money they left for the bagels), and especially when and why and how people are being dishonest. In that data, there was a strong correlation between honesty (or, if you'd prefer to call it "stealing," you could) and weather. People were far more honest when the weather was unseasonably pleasant, and dishonest when the weather was unseasonably bad. Which would seem to suggest that mood is an important factor in crime -- even if the crime is writ as small as bagel theft.

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Arlington, Va.: If drug dealers earn so little, why do they not seek alternative employment? It sounds as if even McDonald's could be more lucrative.

Stephen Dubner: A lot of the street crack dealers we wrote about *did* hold down legit jobs as well, at McDonald's and elsewhere. But if you're earning $3.30 an hour selling crack (with the hope of advancing to a lieutenant, which still paid not even $10/hr) and $5.35 at McDonald's, you still aren't making much. A lot of the dealers asked Sudhir Venkatesh, the sociologist, to help them get "a good job" -- as a janitor at the University of Chicago. These were kids who had no sense of how to build a career.

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Arlington, Va.: Do you think the interest in your might help students see that there is an interesting side to economics? My undergrad degree is in economics because I loved the theory and analysis, but I wasn't able to convince many of my classmates or friends that economics can be fun. Do you foresee an uptick in the number of Econ majors at universities?

Stephen Dubner: We've only got anecdotal information so far, but we do know that "Freakonomics" has been adopted in a lot of Econ. courses already. And I do know that a lot of Econ. students, undergrad and grad, very much admire the creativity that Steve Levitt has brought to the discipline. (Not that he's the only one, of course, but he's the most visible.)

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Washington, D.C.: Do you think people can ever be satisfied? And, if people are generally not satisfied, do you feel that is due to advertising, plethora of products available to make one appear richer, thinner, wiser, better . . . OR is this just part of human nature and the innate desire to satisfy basic needs.

Stephen Dubner: That's a great question, and not one that's been answered completely yet. But there are smart people working on it. In "The Paradox of Choice," Barry Schwartz writes about "maximizers" vs. "satisficers" (I don't believe he coined either term, for the record.) A maximizer must find/own/buy/create the very best of everything; a satisficer wants a good-enough solution. I've found that most people, when they read this construct, immediately know which category fits them. There's also the psychological concept of "accommodation": something great happens to you, but then you get used to it, and need something *greater*.

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Washington, D.C.: Do you think your book is a good introduction to economics for novices? I like "Naked Economics" for a basic, real life application, whereas "Freakonomics" is a much more specific but interesting application of economics to daily life. In any case, I'm happy to see people thinking that economists aren't just nerdier accountants!

Stephen Dubner: Well, "Freakonomics" wasn't really written to be an intro to Econ. book, though we're finding that a lot of Econ. professors are using it now as a supplement. It was really intended as a book of fascinating true stories that are informed by an economic worldview. That said, you do learn a good bit about economics qua economics in the book. (Though anyone of grad level or above would certainly not learn anything in that regard.) The thing is, aside from being a great researcher, Steve Levitt is also a wonderful teacher and explainer. As his co-author, I greatly benefited from that, and I think the reader does too. Einstein obviously had an awesome brain but it was very very hard for a layperson to download it.

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washingtonpost.com: The Paradox of Choice (amazon.com)

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Annapolis, Md. : Have you explored why some people vote against their own economic interest?

Stephen Dubner: No. But it's not that surprising, since one vote is really worth very very little. It probably comes down to the fact that most people consider a single vote to be worth far less in electoral oomph than in the value it gives them in terms of their conscience, or belief, or style, or whatever you want to call it. In "What's the Matter With Kansas?", Thomas Frank makes much of the fact that blue-collar Republicans are voting against their economic self-interest, which is true. But again, I don't find it so surprising. Steven Spielberg is voting against his economic self-interest by voting Democratic, no? I think the voting paradigm we all cling too -- that economic self-interest rules all -- is pretty weak. (I should also note that I don't know a single economist who bothers to vote, so worthless do they consider the act.)

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Arlington, Va.: It seems to me that the direction of your book, column and blog could lead you to pursue any number of topics. How do you go about finding new areas of research?

Stephen Dubner: There are a few simple criteria: Is it fascinating (to us, at least)? Is it important (in some way, however narrow)? And is there data to work with? Levitt is an empirical researcher, which means that he wrestles stacks and stacks of data into a telling conclusion or two. That's what makes his research valuable. It's not opinion or whim or dogma. So 9 out of 10 things that we'd *like* to write about aren't possible because we can't get hold of the data. Also, however, since the publication of "Freakonomics," we've gotten some great suggestions from readers for research projects, and offers of data as well. So we've gained a nice advantage there.

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Fairfax, Va.: Have you gotten any rebuttal from Real Estate agents about your data that suggests that agents have their best interest in mind more so than their clients?

Stephen Dubner: Yes, plenty. But believe it or not, we've heard from a lot *more* agents who confirm our story: that the typical agent pushes a seller to take the first decent offer, since the agent's personal take on an extra $10,000, for instance, isn't worth the extra work.

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Washington, D.C.: Be honest -- aren't you bummed that Levitt was on The Daily Show and you had to miss it?!

Stephen Dubner: Are you kidding? Majorly bummed. I actually went to the show with him, hung out in the green room. It was his first time on TV, so I wanted to be supportive. I also brought a young friend of mine, twelve years old, who's got some serious health problems and is a big fan of Jon Stewart. When Stewart came into the green room before the show, he didn't even say hello to me or Levitt -- he went straight to the kid and spent a solid 5 or 10 minutes chatting, joking, autographing stuff for him. I almost cried then, and I'm almost crying now. It was an act of pure and sweet generosity. I hope Stewart runs for president of something some day so I can vote for him.

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Dayton, Ohio: How much of the book is a result of investigative journalism (as in the case of the drug dealers) as opposed to strict data analysis?

Stephen Dubner: Well, the crack gang was the result of journalism but also of sociological research. I know a lot of great journalists but I don't know any who spend 6 years with a crack gang (as Sudhir Venkatesh did) and emerge with the sort of ethnographic material he did. But other parts of the book are more clearly journalism than data analysis -- like the story about this incredible fellow Stetson Kennedy, who infiltrated the Ku Klux Klan in the 1940's in order to bring them down. But the *point* of that story was really about "information asymmetry," a fundamental point in economics. So it's the marriage of economic analysis and journalism that makes "Freakonomics" what it is, for better or worse.

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Springfield, Va.: Have you done any work on, or considered, marriage and relationships from an economic perspective?

Stephen Dubner: We'd love to but it's really been done, brilliantly, by Gary Becker, also of the University of Chicago. He won a Nobel maybe 15 years ago. When he was doing his work on marriage and the family, I believe in the early 1970's, he was considered a heretic, a fool, and a few other things. Opinion has obviously changed. Becker is still a wonderful economist (and keeps a great blog, with Richard Posner) who was also a mentor of Steve Levitt, and one of the big reasons Levitt settled at the Univ. of Chicago. It's a bit tough going for the lay reader, but still, I would heavily recommend Becker's "A Treatise on the Family" as well as "The Economic Approach to Human Behavior." It's important to note that Steve Levitt is hardly the first guy to use economics to stray afield from interest rates and the like. It's also worth remembering that Adam Smith, the founder of classical economics, was first and foremost a *philosopher*. The idea that economics is a narrow mathematical science was a 20th century idea, which is starting now to recede.

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Chicago, Ill.: You seem awful full of yourself. Is your book an ethos or just a bunch of interesting facts that may or may not have a correlation.

Stephen Dubner: Finally, a crank. Full of ourselves? I guess that's for you to judge. You may be mistaking enthusiasm for self-aggrandizing, but that's okay. "An ethos or just a bunch of interesting facts that may or may not have a correlation"? If there's an ethos involved, it's the belief that people lie/cheat/deceive but that numbers, when treated judiciously, generally don't. I don't know what you mean about the facts having a correlation -- to what? To one another? It's true that we don't really have a unifying theme in this book, but I don't know if that's necessarily a weakness. A lot of books that have such a theme must then make everything fit said theme, whereas we decided to roam the landscape in search of interesting stories that can be supported by the data.

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New York, N.Y.: People's expectations of how and why humans should behave a certain way are generally based on emotions and faith and not economics. Therefore, I am sure that some of the results published in you book will face a strong emotional resistance before they might be accepted. Have you noticed any one particular set of results receiving the most resistance from readers? If so, which?

Stephen Dubner: The link between legalized abortion and a drop in crime has certainly been the big issue that people get emotional about. (For the record, let's remember that this argument is based on research that Steve Levitt did in concert with John Donohue, a legal scholar now at Yale.)But the point of "Freakonomics," if it really has a point, is that it's fruitful to sometimes look at the world *divorced* of your own emotions and faith. Here's what we argue: Morality, it could be said, is how each of us would like to the world to work; economics, meanwhile, can measure how the world actually does work. It can be very very hard to set aside beliefs, emotions, even preferences; but what we try to do is put forth stories -- whether about crime, cheating, sports, parenting, etc. -- that are derived from nothing but the data, and we try to present the argument and the data in as non-partisan a manner possible.

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Hartford, Conn.: Economics isn't necessarily an obvious subject for a book designed for the general public. What was it about this work that convinced you it would be accessible to those of us who are often nervous around the language of economics?

Stephen Dubner: I'm as nervous about the language of economics as anyone. (Well, not so much the *language*, but the math.) But in the few years before I met Levitt, I had been interviewing a lot of behavioral economics, people who are blending economics, psychology, even neuroscience, to explore human behavior. Much of this work is fascinating. One of the founders of the field, Daniel Kahneman, won a Nobel in Economics a few years ago -- and he's a psychologist. Most of his research has to do with decision-making. (Sadly, his research partner, Amos Tversky, had died, and Nobels are not awarded posthumously.) Then there's Richard Thaler at the University of Chicago, an en economist who took the Kahneman/Tversky work and brought it into economics. The debut "Freakonomics" column that Levitt and I just wrote for the New York Times Magazine (June 5) was about a young behavioral economist at Yale who is teaching capuchin monkeys to use money to see what they do with it. Fascinating stuff. And what it proves, to me at least, is that economics can be a great explainer of human nature, especially when it applies creative thinking to real data.

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Alexandria, Va: I just stumbled on to this chat, and then looked at the article "What the Bagel Man Saw" on freakonomics.com. I work at a Federal Facility on Ft. Belvoir, and we have bagel sales every Wed. morn, during which we sit with the products and sell them along w/ Cream Cheese, Muffins, and Croissants. We leave the leftovers out though so that people can buy them later if they wish. It is on the honor system, and I keep track of the revenue. BMCs (Bagels, Muffins, and Croissants) are $1 Wed, $0.75 Thurs, and $0.50 Friday. I've kept track fairly religiously of what's been left at the end of each day for the past nine months. At the end of 1st quarter 05 I posted a sign saying that people were only paying %66 of what they should, which they were. Since posting that sign, honesty rates have jumped up to %90-%100. I am definitely going to read your book now, and look for other contributing factors.

Thanks.

Stephen Dubner: 66%! You're working in a den of thieves. Smart move, though, posting that note. It turns out that moral and social incentives (shaming, e.g.) are often just as strong, if not more so, than economic incentives. We tell another story in the book about an Israeli daycare center that instituted a $3 fee for parents who were late picking up their kids. And the number of late-arriving parents promptly went ... up! The $3 was too cheap -- it allowed the parents to buy off their guilt over arriving late.

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Stephen Dubner: My time here, I see, is just about done. I've enjoyed it very much, and I thank you. Please pardon typos and miscellaneous stupidities. We're happy to keep the conversation going at www.freakonomics.com. There's also more information there, and links to Levitt's original academic articles, some blogging, etc. Again, many thanks to all.

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