Home > Economics, Politics > An evening with Steven Levitt, the “Freakonomics” guy

An evening with Steven Levitt, the “Freakonomics” guy

September 17, 2009

Illinois State University had a talk with Steven Levitt this evening.

Levitt is a microeconomics guy, hugely popular and controversial.  The Wall Street Journal describes him as “the Indiana Jones of economics”.  It’s not necessarily a compliment: Indy’s a lousy scientist, and Levitt spent the first ten minutes trying to impress us with how bad he is at math. 

But he is a very funny guy.  His tales of crack-gang and prostitute research make for excellent stand-up comedy.  And you just had to be there for the part about the Chicago police.  Humor may be the best approach to questions of human microeconomics anyway.

While I’m laughing, though, I also feel uncomfortable that such comedy derives from crack dealers who have a 7% fatality rate per year, while making less than they would make at McDonalds.  Human life is capable of getting caught in tragedy with no apparent escape.

I also take issue with his apparent conviction that the his altruism experiments say anything about human nature.  Possibly they say something about college students’ willingness to donate to other college students who are no worse off than they are, and who surely know the IRB committee wouldn’t really let any participants get ripped off even if they did “steal” the other participants’ money.  We have, after all, heard of the infamous Stanford prison experiment, and of Stanley Milgram at Yale.

In the Q&A period, many people asked macroeconomic questions like “How likely is it that the recession is over?”  Did they just not understand that he doesn’t study questions like that?  His answer consisted of first disclaiming any authority to speak on such large-scale issues, and then disagreeing strongly with Ben Bernanke on the recession.

He also felt that “Cash for clunkers” was a stupid program and a waste of money, which is certainly an arguable point of view.

We’ve heard some really interesting people at ISU, some of them also very insightful. 

Categories: Economics, Politics
  1. September 17, 2009 at 22:42 | #1

    Keep in mind that this is the same guy that in so many words denounced global warming on his blog with his co-author. As people we have a tendency to gravitate towards eloquent speakers and intelligent people like Levitt, yet it only makes sense to pay attention to them on issues they are experts on. Why get health food advice from an economist? Maybe his studies crossed over on the ability of organic food to provide extra nourishment or something, but chances are he may not know much about that particular topic. Just listen to him on social economic issues.

    However the global warming comes as a bit of a surprise given how highly educated and scientific he appears to be in his work.

  2. September 17, 2009 at 22:46 | #2

    I would also like to take this opportunity to denounce global warming.  It’s terrible!  :P

    Not sure I even want to listen to him on social economic issues.  He seems to have collected a lot of interesting data and said clever things about it.

  3. WeeDram
    September 18, 2009 at 15:57 | #3

    Well, I don’t know what the “IRB committee” is, and sadly I don’t fall into the “We have, after all, heard of the infamous Stanford prison experiment” group.  ;)

    What truly surprised me, however, is “crack dealers who have a 7% fatality rate per year, while making less than they would make at McDonalds.”  Say whaaa?  That puts a whole new light on certain things for me.

  4. September 18, 2009 at 16:50 | #4

    If that interests you go check out the book at the library. I think you would enjoy. It’s full of interesting analysis of data. Which sounds boring, but because of the subject matter of the data ends up being incredibly interesting.

  5. Lucas
    September 19, 2009 at 01:53 | #5

    webs: do you have a link to Levitt’s denunciation global warming.  Based on your comments to links on that blog on my shared items, I think you take a lot of the arguments there much more seriously than they’re intended.  I think a lot (maybe even most) of their posts are basically thought experiments—the sort of sanity checks politicians should do more of.  Frequently this takes the form of saying “well, the benefits of (cap’n trade, cash for clunkers, cutting taxes, whathaveyou) are obvious—what are the downsides?  Where could this go horribly wrong, as so many pieces of well-meaning legislation have in the past?”  Not necessarily saying “this is a terrible idea and we definitely shouldn’t do it” but more “it’s not all roses, and you can’t determine from one op-ed which cites no actual figures whether to support this or not.”

  6. September 19, 2009 at 08:14 | #6

    Everybody’s got a theory.

    I have been mulling, in a desultory kind of way, recent economic times. Our national religion of Capitalism seems to be be pretty raggedy around the edges, and maybe rotten to the core.

    What happened to that “invisible hand?” I am thinking here of such idiocies as bailing out incompetent, failing companies, and giving “cash for clunkers.”

  7. September 19, 2009 at 13:07 | #7

    Here is what sorta of set me back with the Freakonomic guys:

    I think the onus would be on them to prove how the media has done a good job of reporting global warming. Even today. The only sources of decent info on Global Warming seem to be from NPR, or science magazines and journals. Others either have opinions, bring on fake experts, or just misreport studies and facts. While Global Warming is getting more coverage and coverage has increased there still is a lack of urgency and worry. When was the last time you saw a discussion on CNN about ocean acidification or MSNBC, Fox News, or any other sources?

    So my opinion of Freakonomics guys might have been a tad overblown from the years I used to read their blog, back in 07 and quitting them right before 08. They seem to accept the idea of Global Warming but it’s one of no government interaction, and any change must come from the business. The problems with both of these should be obvious as we have been treating global warming this way for years. Not to mention the examples of where government intervention actually saved us such as CFCs. Maybe I just read too much into these posts:

    My real problem with approaching Global Warming this way is that things will get done slower and by the time market forces actually think there is a need it may be too late. Even though solar panels are expensive we need to look at the carbon reduction and investment side. Buying panels now at a high price will help spur investment and in the long run, bring the cost down sooner. Not having government involvement or waiting for the business to do something is essentially a way of not doing anything about the issue and avoid tackling it.

    I work for a business, a Fortune 50 one in the midwest. I lead an Enterprise-wide group on research into what our company can do to be more “green”. We brought in an expert from a solar panel company to do an audit on a smaller building, still pretty huge to me, with the perfect roof for panels (according to the expert). The building could have over 60% coverage of panels, which is supposed to be really good according to the expert. The payoff period was estimated to be right around 15 years with future incentives possibly bringing it down to 12, while the average life span of the panels is 22 years. The payoff period was too great for my company to consider because of the up front cost. This is what happens when you have little support from the government and leave the decision up to business. It becomes an issue of cost and nothing else matters. And this is just one example of this.

    We need people to hear about ocean acidification and understand the urgency and need. We need people to care. If the business is too slow to react then we need to say, “There is a real problem here and as your government we want to help speed things along. Here is a tax break or grant.” The way I look at is, what if someone told you that there is something that is going to destroy most of the life on the planet and could really mess things up for thousands of years if we don’t do anything. But to offset this something we need to invest 500 Billion dollars of which there will be little to no payoff at all. And you may not even know you just saved a disaster by spending that money. Would it be worth it? Would you think we need to invest that money? Or should economic concerns of efficiency and letting the market forces work take precedence? If businesses do not care about this something, should we sit by and wait for them?

  8. Lucas
    September 19, 2009 at 14:43 | #8

    Note how Dubner defines change coming from business:
    “The corporate level — where change will be produced as a result of both individual pressure (consumers clamoring for green products and procedures) and the governmental level (with new regulations).”

    I think most of the carbon reductions do need to occur on this level (and mostly as a result of regulation that increases the price of carbon emissions) because this is where most carbon emissions come from.  Seems completely sensible to me, and not at all incompatible with what you’re talking about.

    Regarding solar panel technology, it’s very sexy, and probably worth developing.  But a much better solution than encouraging the development of solar panels directly is to restrict carbon emissions, and let people figure out how to do it.  Maybe that involves solar panels on your roof.  Maybe it involves installing extra insulation and using waste heat on the factory floor.  Maybe it involves burying charcoal in midwestern farmland.  It almost certainly does not involve corn ethanol, which was supposed to combat global warming and is heavily subsidized by the government because a powerful lobby protects it.

  9. September 21, 2009 at 13:56 | #9

    Oh, and Webs … organics do not provide MORE nourishment (at least not any appreciable amount that I know of,) just better, even if simply less dangerous/toxic.  :)

    Thanks for the additional info.

  10. September 21, 2009 at 23:31 | #10

    Organics was just an example I was using above, I know they don’t provide anything extra. What organics do typically provide is no fructose/high fructose, as you said less toxic.

    While I do agree with your points I can’t get past the idea of let the market work/businesses work. With the terrible lack of science understanding/care for science in our society I still fail to see how we will get the change we need. If people pressure businesses fine, but that doesn’t seem to be happening in ample supply. I go back to my example with the fortune 50 company I work for where there is little to no pressure from customers or stakeholders. The only reason my company is greening their new engines is to compete overseas (mainly), tax incentives, and to be ahead of the competitors in the states. It’s not because my company cares about the environment and sees long term issues with an unsustainable way of life. This shows up in the fact the manufacturing plants are green and the rest of the company doesn’t really care. Minus of course plants outside the US that are forced to be green.

    Instead it seems more often than not that what we have are people who don’t see the changes happening directly to them and thus have little reason to care. Call it cognitive parsimony or a small monkey sphere. Now there are more and more people starting to care and stand up yes, but it has not become an issue we seem to hold our politicians accountable for yet. If I have to spend a few more tax dollars to use an inefficient technology (at least for right now) such as solar panels then personally I would support that. It seems to me in the long run to payoff.

    I agree with regulation of carbon emissions, but we need more than that. This issue is going to have to be tackled from multiple angles and government support is fine with me. Hell if we get rid of cold war spending from our military budget that would be over 20 billion right there. That’s a pretty sizable investment amount for green technology and for the future that wouldn’t increase anyone’s taxes.

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