Twenty Years of Freakonomics (with Stephen Dubner)

Stephen Dubner: Thanks, Russ. Very blissful to be right here.

Stephen Dubner: Yeah. I imply, to leap to the top, it has been a outstanding expertise. I had labored at The New York Occasions for a number of years as an editor. Now, I used to be off by myself as a author. This was going to be my third e book; and my editor on the time, his identify was Hugo Lindgren, requested me to jot down this profile–this man, Steve Levitt, at Chicago. I knew Levitt’s identify solely as a result of he had written, by that time, a well-known paper with John Donahue, a authorized scholar, in regards to the relationship between the legalization of abortion in the US and the crime price, arguing that crime in the end fell, in some massive half, due to the legalization of abortion, which led to fewer undesirable youngsters. So this can be a huge principle and concept that Freakonomics has turn out to be identified for, as a result of we included it in that e book.

I really turned down the project a few instances as a result of Levitt was not the–I referred to as Levitt, I chatted with him a bit, and I advised him, ‘I am engaged on this e book in regards to the psychology of cash.’ And, he says, ‘Oh, God, I do know nothing about that. Nothing.’ He stated, ‘I do not know something about cash. I do not know something about behavioral economics,’ which was true on the time. Levitt–I believe he in all probability knew Thaler, however they’d by no means accomplished actually a lot collectively.

However then, I used to be going to be in Chicago for one thing else, a very completely different reason–to give a chat on a distinct e book I might written. And I believed, ‘Let me learn some extra of Levitt’s papers simply to see what he is all about.’ And I began to learn them. I am like, ‘Oh, my gosh. This man is so fascinating.’ What I used to be actually struck by was that he approached his lane inside econ–a sort of utilized microeconomist–in a manner and with a ardour and with a way of journey and enjoyable that I attempted to method my lane inside nonfiction writing.

He did what he wished to do. He did not comply with the group. I believed he was an actual artistic thinker. And so, I went out, and I spent–he tells a narrative. I believe he is exaggerating just a little bit. He stated that I requested him for an hour or two for an interview, which–I do not know–maybe I did at first, however I ended up staying for a number of days. And that’s true. And I bear in mind calling my spouse from the resort after the primary day I spent with Levitt, and I stated, ‘I do not know if anybody goes to care in any respect about this text that I am writing on this man, however I’m simply having such time. He is obtained an fascinating mind. I ask a query that I believe I form of know the place he will go together with it, then he goes someplace completely completely different.’

And likewise, for me, this was a giant deal. I appreciated economics. I appreciated economists. I might learn quite a lot of economics by this level, however as an newbie, as a journalist. I might additionally learn quite a lot of psychology, and sociology, and anthropology. That does not make me an anthropologist or a sociologist, and I actually wasn’t something like an economist. However Levitt, from day one, actually turned a instructor for me. The best way that he defined an idea, the best way you’re taking that idea right into a sure knowledge set, the best way you attempt to establish the incentives that is likely to be at play, the best way you then look to the info to both help or don’t help or refute the fact of these incentives–it was like getting a grasp class.

After the article got here out, there was quite a lot of curiosity from a wide range of publishers for a e book of some form. Folks had been calling Levitt, asking him to jot down a e book, and he would inform them, ‘Have you ever ever learn my educational papers? You do not need me writing a e book.’ Folks had been calling me to jot down a e book as a result of I am the author, and I stated, ‘Properly, I do not wish to write a e book a couple of man that I simply wrote an article about, as fascinating as he’s, and I’ve obtained this different e book I am happening.’ Truly, Levitt referred to as me and said–we weren’t buddies in any respect. We weren’t antagonistic in any respect, however I used to be a journalist; he was a topic. However then, he referred to as and stated, ‘These persons are asking me to jot down a e book. I do not know what to do.’ I stated, ‘Properly, if you wish to write a e book, you might want to get an agent to discipline the requests and determine who is sweet, who’s unhealthy, what they need, what you wish to do.’

He stated, ‘Properly, have you learnt an agent?’ I stated, ‘Yeah, I’ve one of the best agent on the planet: Suzanne Gluck with William Morris.’ He stated, ‘Properly, are you able to join me?’ So, I linked them. They talked, they appreciated one another. After which Suzanne–I imply, the rationale I like this story is it exhibits how most of the issues that we expect we know–how they obtained to be that way–didn’t get to be the best way we expect. If Suzanne Gluck hadn’t had that decision, there would have been no Freakonomics, as a result of she stated, ‘Why do not the 2 of you do that collectively?’ And I believed, ‘Properly, that is loopy,’ as a result of he was a topic I used to be writing about as a journalist. However, there was no battle of curiosity. It wasn’t like I wrote about him hoping to get a e book. Levitt thought, ‘Properly, I do not actually know if I like Dubner that a lot. He is sort of a ache within the neck. He is a journalist asking all these questions.’

However then, we began to simply discuss and hang around, and it was a blast.

And that began–we started to hatch out a plan for: If we had been going to jot down a e book, what would it not be? Actually, we approached it with a way of marrying two robust nonfiction realms–journalism and educational analysis. So, we’re coming at this from a sort of shared background of: info matter, fact-checking issues, and so forth. However, we additionally wished to inform fascinating tales based mostly totally on the analysis that Levitt had accomplished.

So, we wrote it. It was actually enjoyable to jot down it. We did not have nice expectations, despite the fact that we knew that there was some expectation. After which, when it got here out, it simply did, like, stupidly properly. All good issues stored taking place again and again, and we simply marveled at it. And so, twenty years later, it sort of glided by in a blur. I believe we each tried to make the most of the benefit that we obtained and maintain doing good work, and that is the place we at the moment are.

Stephen Dubner: Okay. How was it? I am curious to know–

Stephen Dubner: since you’ve learn it now rather more lately than I’ve.

Stephen Dubner: I might like to discipline these questions, as a result of I–

Stephen Dubner: Hmm. Yeah.

Stephen Dubner: Yeah. So, initially, I very a lot admire your saying that. I clearly agree. I believe when something turns into common, there is a authentic motion nearly at all times to problem it, whether or not this can be a political motion, a popular culture factor, no matter. That is simply, I believe, the character of humankind almost–especially if it is coming from inside your realm.

The rationale the e book is written the best way it’s, is, I imagine, due to one thing I discussed earlier, which is that Levitt and I had been coming from two completely different traditions the place we each actually valued open pondering, analysis, info, fact-checking, and so on., and so on.

One of many issues about your field–about educational economics–that I actually liked once I first began studying econ papers was that, not like analysis papers within the different social sciences–psychology, actually, sociology, anthropology, and so on.–they’re all just a little bit completely different. Each self-discipline has its idiom and its traditions. However, the econ papers, particularly those written for the higher journals, had typically a template that I discovered actually engaging, which is: Right here is the thesis or argument that this paper is about to make. I will describe the info, the methodology, the challenges, the findings, and so on. However, earlier than I let you know why I am fairly certain that the proof I am providing in favor of my thesis is probably the most compelling set of proof that may verify this thesis, let me attempt to give you another potential explanations.

That is what economists do rather more typically than the opposite social scientists, in my expertise at the very least. I am not going to say that I am 100% authoritative on that, as a result of I am not a historian of academia, however that is the best way I see issues, having learn quite a lot of papers in all these realms.

To me, it feels just a little bit extra like a few of the onerous sciences. It is why I typically actually get pleasure from talking with physicists the identical manner that I get pleasure from talking with economists, as a result of some economists–just like some physicists–are actually good at a posh dynamic system, quite a lot of inputs and a bunch of outputs, and determining what the heck is inflicting what. And that may be a really troublesome factor to do, particularly in fashionable society.

Stephen Dubner: That is proper.

Stephen Dubner: Yeah. I believe there are a few causes for that. One is: I really like journalism, however I believe journalism is very flawed. You understand, I used to be at The New York Occasions for a bunch of years. There have been quite a lot of nice journalists there. There have been a bunch of not-great journalists there as properly. I had an extremely instructive interval there as a result of my job was–I used to be an editor on the Sunday Journal, which meant that I’d assign articles to writers, a few of whom weren’t Occasions staff, a lot of whom had been freelancers. Typically an project that had been assigned elsewhere would come throughout my desk, and I’d be the editor of that, after which I’d work with that piece and that author to get it publishable.

Among the largest names in journalism, I’d get their uncooked manuscripts, and I am like–not that this is not very good–although there was quite a lot of that–it was that this isn’t very well-reasoned.

I at all times thought that, to be journalist, you might want to be at the very least fairly good at three main areas: analysis or reporting–you’ve obtained to search out info, materials, knowledge, no matter it’s.

Then there’s the pondering. Which means being vital thinker. This dramatic occasion occurred as soon as. How anomalous is it? Properly, let’s give it a way of magnitude. Let’s give it a time collection, and so on., and so on. So, there’s that means to critically suppose.

After which, there’s the writing. Only a few individuals, in my expertise, are actually good in any respect three of these, and those which are are fairly well-known for achievement. However, I believe that there is quite a lot of journalism that’s dedicated with good intention that’s lacking at the very least a kind of three.

However, I had quite a lot of different benefits right here. I had a colleague–a co-writer–who was actually good at educating me the nuances to make with these arguments. So for example, I do not know the way lengthy the part is within the e book. It is in all probability solely, I do not know, half a web page, one page–you may remember–but we determined to–as we’re explaining, I believe we’re explaining the diploma to which the various things that oldsters do have an effect on the result of their youngsters. And at one level, we’re discussing a bunch of things having to do with the variety of books within the residence, visits to cultural establishments, and so on., and so on., and so on. We’re attempting to explain how one can persuade your self that these measurements are correct, or at the very least helpful. And so, Levitt stored saying, ‘Properly, you know–.’ I might say to him, ‘How do you try this?’ He’d say, ‘Properly, we use a regression evaluation.’ ‘Okay, what’s a regression evaluation?’

And so, Levitt then–I bear in mind having this dialog with him on the telephone as a result of he was in Chicago, I used to be in New York. We talked for hours and hours and hours of him describing precisely how an economist like him otherwise you would use regression evaluation to take a set of data–like this set of information that he had, which I believe, on this case, was from the Nationwide Childhood Studying–NCLS?–

Stephen Dubner: ELCS. What does that stand for?

Stephen Dubner: Yeah, so that is what I am saying. Levitt and I’d just–it was as if I used to be a comparatively shiny, possibly highschool sophomore who appreciated the thought of economics however had by no means studied it formally. And Levitt, in the course of the course of the e book, we principally had an econ masterclass that was constructed round not simply me studying the ideas, however constructed round utilizing these ideas to elucidate, to jot down, to make use of good rhetoric, to flesh out the analysis that he had accomplished, and do it in a manner that may persuade the listener that what we’re describing might be largely correct, whereas, as you stated, attempting to caveat it as a lot as we will. And likewise exhibiting our homework as typically as we will. [More to come, 20:23]

Levitt wrote a paper referred to as one thing like–it was one thing in regards to the general crime drop in the US that occurred within the Eighties and Nineteen Nineties, and his paper was referred to as one thing like “4 Components that Influenced the Crime Drop and Seven that Did Not,” or one thing like that.

Stephen Dubner: Within the e book, we then undergo the 4 and the seven, or regardless of the quantity was; and we clarify why it’s that, whereas one may prefer to imagine that, for example, capital punishment is a big deterrent in opposition to future criminals, the best way that capital punishment has traditionally been carried out on this nation, it does not act as a deterrent in any respect, and the info for that had been fairly clear. So, yeah, present the homework, talk clearly, be extraordinarily clear and sincere with the reader. These had been actually the hallmarks of how we had been attempting to jot down this e book.

Stephen Dubner: I imply, it has been the expertise of a lifetime. I considered myself as a author and as a journalist from the time I used to be sufficiently old to stroll. Actually, we had a household newspaper. I used to be the youngest of eight children, so it was very onerous to get a chunk within the household newspaper. My dad was a newspaper man. My mother was really a greater author than my dad, however she was a full-time mother with eight children, and she or he was sort of a farm lady, pioneer hero. My mom was completely superb, a complete function mannequin for me.

My dad died once I was a child, so my mother was the energy of that household. Writing was only a huge a part of what I did and the way I considered myself. After which began a highschool newspaper, wrote for the faculty newspaper, and so on.

Then I obtained waylaid just a little bit. I did music. I might additionally at all times accomplished music, and my first profession actually was enjoying in music. I obtained in a band. We had been unhealthy at first. We obtained higher, we stored going, we obtained a report deal. Moved to New York, after which I made a decision that I didn’t need that life in spite of everything. We had been on the rock star path, and I made a decision that was not a wholesome pursuit for me.

Then I obtained again into writing, went to grad faculty for writing. What Freakonomics Radio has been for me is just a technique to, as a author, have my very own mission each week the place there’s an concept, there’s analysis, there’s discovering the fitting voices to debate the analysis; then there’s interviewing, typically, a number of individuals. That is all accomplished with the assistance of quite a lot of producers that we now have on the present. Not rather a lot, however a small group of nice producers that we now have on the present.

We interview often three, 4, 5 individuals per episode. Then we now have quite a lot of tape; then we take that tape and deal with it the best way that an economist would deal with a giant knowledge set. You need to determine what’s most dear, what’s most consultant, what’s most fascinating, and so on. Then you definately put collectively a script and write narration round it. It is principally like writing a giant journal piece, or possibly a e book chapter, each week.

And it is exhausting. I would not advocate it to anybody. You need to be completely bonkers–and bonkers for it–to do it; however I’m bonkers for it. I really like the training. I really like the neighborhood. I really like talking with individuals who’ve devoted years of their lives to analysis and enthusiastic about these, typically arcane, however fascinating areas.

After which, I really like our neighborhood of listeners. Each time we do any sort of call-out for information–for occasion, we put out a call-out lately. We’re engaged on an episode about what’s referred to as the physician shortage–the doctor scarcity in the US. Which is a very difficult subject, rather more than you’d suppose. We simply put out a call-out. We would already interviewed a number of individuals. We simply wished just a little bit extra tape. We wished to listen to from physicians themselves, no matter their experiences were–on the entrance finish, on the again finish, medical faculty, no matter. And we simply obtained, within the final couple of days, this flood of emails–probably, I do not know, 100, 200 emails–from probably the most fascinating, passionate, well-intentioned people who find themselves so considerate about issues that go properly past their every day lifetime of follow.

That may be a neighborhood that we now have constructed through the years by being credible, by being curious, by being not a jerk. I believe simply not being a jerk will get you far in journalism, as a result of I believe lots of people you interview, their view of journalism is that somebody right here is out to get me, out to show me mistaken.

I ask quite a lot of questions of individuals, like, ‘I do not perceive the way you come to this conclusion. Are you able to share with me your proof?’ And, if they provide me the proof and the proof appears to me to not be very substantial, I will say, ‘That proof does not appear very substantial. How have you learnt that your discovering is true versus what might be one other clarification?’ I really feel that people who find themselves good and sincere are actually good at answering these questions. And, if they are not, then they’re often both not that good or not that sincere; or, they’re promoting one thing. Lots of people are promoting issues. I am not a lot of–I do not go for that, so I attempt to keep away from that.

Stephen Dubner: Properly, even worse, although, we asked–I should not say worse. Higher. We requested for voice memos, so it is emails with voice, so it is quite a lot of materials to type by way of.

Stephen Dubner: Oh. Yeah. I believe quite a lot of issues. They’re in all probability not binary adjustments. It is not like I used to imagine in Santa Claus, and now I did not. Sadly, there aren’t that many binary switches. I want there have been. It will make life less complicated.

I’ve come to essentially, actually, actually suppose onerous about what one of the best kind of–not simply authorities, however one of the best type of an economic system is. I believe we have all accomplished quite a lot of pondering on that within the final 10, 12, 15 years. I believe we’re at a real–I do know the phrase ‘inflection level’ is overused, and I believe it means nearly nothing to anyone anymore. However, it seems like we’re at some extent the place sufficient individuals at the moment are questioning what the proper of an financial/political system is, for lots of people to really feel that we’re on actually shaky floor.

The primary, I’d say, 5 to eight years of my fellowship with Steve Levitt and the opposite economists across the College of Chicago, it was very straightforward to subscribe to a sure type of late-period Milton Friedman, Free to Select ideology, about which I nonetheless suppose there’s an excellent, nice, nice deal of worth. I’d additionally argue that I believe Milton Friedman is kind of extensively misquoted, misunderstood by his opponents.

However, I believe the degrees of inequality–it’s not simply the degrees of inequality. It is the best way by which wealth is being created within the U.S. economic system specifically, that’s so heightened and so siloed off from the best way that the remainder of the individuals who take part within the economic system goes. I believe that is a subject that wants quite a lot of examination, quite a lot of daylight.

We have accomplished fairly a number of episodes through the years, and we’ll proceed to do, on one avenue of that concept, which is the function of personal fairness. And if you take a look at personal fairness firms–which are made up of individuals, typically very good individuals; and I do know many of those individuals, I am pals with them–and they’re taking in cash from investors–who are additionally fairly often good individuals, well-intentioned individuals, a lot of them institutional traders who symbolize universities, hospitals, and pension funds, all of whom are well-intentioned, all of whom imagine in all the nice issues {that a} good society has–I do really feel that when that amount of cash will get rolled up and begins to be utilized to all types of companies that, prior to now, had been smaller scale.

So we’re seeing personal fairness rolling up. We have accomplished episodes on pet care, pet healthcare. You see the roll-ups in pawn retailers, automobile washes, all types of human well being services–dentists, and physician’s offices–and so on, and so forth. The proof from individuals like–I wish to say Josh Lerner, who I wish to say is MIT [Massachusetts Institute of Technology], however possibly Harvard, possibly MIT–

Stephen Dubner: Yeah. So, the proof from Josh is sort of blended on the outcomes for each clients of those companies, staff of those companies. For shareholders, it tends to be good. However, quite a lot of the more-reported and anecdotal proof is far worse for purchasers and staff.

I’d say, as a client myself, my expertise is that if you’re coping with a agency that you’ve got handled for a very long time, and abruptly they begin sending 20 emails as a substitute of 1, and not one of the 20 is sensible, and so they’ve all obtained a authorized disclaimer that lengthy on the finish that has nothing to do with every little thing, and you may’t really determine what they’re asking you to do; and so they’re asking you to do one thing that they used to do–they’re asking you now to do your personal paperwork and functions and safety. Deal with your personal safety hygiene, and so forth. That is what it appears like when companies that was run fairly properly however had been extra mom-and-pop, at the moment are being ramped up and run by a extra distant company being.

So, I believe we have all had that have. And that’s only a shard of the mountain of, I believe, the path that the economic system has been heading in, as a result of scale actually issues to traders.

So, I believe there are quite a lot of potential downsides of that. I believe there are additionally potential upsides, too. My private-equity investor pals will inform me that they typically come into these sectors or companies that nobody else needs, after which they flip them ‘spherical and make them higher for shoppers and staff. And, I do know that’s true in some circumstances. However I’ve really–that’s been a giant awakening for me.

Stephen Dubner: I agree. I agree. This can be a subject that I discovered myself exploring over and again and again on Freakonomics Radio, for the very causes that you simply stated. I believe it is wildly naive for anybody to be a sort of financial anarchist lately whereas having fun with issues like air-con and cell transportation and cell expertise. I believe most individuals perceive how hypocritical that is–to say, ‘No, no, no, I do not like finance, capitalism, and so on.’ whereas many of the instruments that I am utilizing to attempt to assail it had been created by entrepreneurs, inventors, funders, and so on., and so on. So, let me declare that as a basis.

It is why I find–this goes to sound like an oxymoron, perhaps–but I hunt down what I’d think about consultant edge circumstances. So, what I imply by that’s: after I might accomplished a number of items about what personal fairness funding will sometimes do in a sector like pet healthcare–we did, I believe, a two-part collection on that the place we talked to all different types of individuals from the trade, on all sides of it, and customers, and so forth. And, by having good, deep conversations with individuals of their space of experience, you study quite a lot of fascinating stuff.

So, for example, I discovered that {one of the} huge causes that pet veterinary retailers, let’s say–whether it is a surgical procedure store or a basic pet care shop–why they’re so, for example, vulnerable to a non-public fairness takeover is as a result of they had been often based by one or two or possibly three vets–whatever–20, 30, 40 years in the past. They constructed a follow; it is a profitable follow. They put their total lives into it, and now they certain wish to retire and get the profit. They’d prefer to promote the enterprise, and the enterprise is price rather a lot. They have a fame, they have clientele, they have institutional data, and so forth. So, who do they promote to? Properly, what sometimes would occur in most companies prior to now is the subsequent era of proprietor would come from the agency.

So, who’re the vets who at the moment are, for example, between–and turning into a vet, it is a very difficult, lengthy, and costly course of. Accurately. Medication is difficult. And so, you are coping with veterinarians who could also be between, for example, early 30s and late 40s. Properly, guess what? They do not have the cash to purchase the follow as a result of the world has gotten dearer to reside in. Veterinary faculty has gotten rather more costly, and quite a lot of them are nonetheless working off their vet faculty debt.

So, what do you do? Who’s the subsequent purchaser? Properly, the subsequent purchaser in that case–the finest eligible buyer–is going to be, for example, a non-public fairness investor who is available in and says, ‘I like what you do. I just like the individuals you’ve got obtained lined as much as take over subsequent. I will offer you this worth to take over, and now we will modernize issues.’

So, in principle, you may see why that occurs the best way it does, and the way it might go properly, or the way it might go poorly. Most of the fantastic and horrible issues which have occurred on the planet are the results of one or two individuals who make selections, and people individuals both make good selections or unhealthy selections, or they’re both good individuals or unhealthy individuals.

I do not imply to make the quadrant that direct. However, Hitler was in the end a fairly unhealthy man who was actually good at doing unhealthy stuff, but it surely took rather a lot to perform that. That wasn’t going to occur by itself. Equally, individuals who construct nice things–it takes an unbelievable quantity of will, funding, and so forth. I’d by no means low cost how troublesome and costly it’s and the way unlikely it’s to construct any nice success, whether or not it is inside capitalism, academia, and so forth. So, I at all times take that as a given.

After I speak about searching for out a consultant edge case, I consider somebody like a man named Pete Stavros at KKR [Kohlberg, Kravis, Roberts, & Co.]. So, after we would accomplished a few episodes on the upsides and largely downsides of personal equity-funded consolidation within the pet healthcare trade, we did a follow-up of types the place I talked to Pete Stavros, who’s a senior associate, senior govt, no matter, at KKR–one of the massive personal fairness companies, {one of the} largest, {one of the} first–who has made it his mission to, inside the realm of KKR operations, give you a plan that may reward the workers of the companies that KKR buys.

So, KKR will purchase a agency from the personal homeowners. They’ll attempt to enhance the operations of that agency. They may attempt to lower prices. They may attempt to enhance revenues. However, within the meantime, they’d give the existing–and possibly even future–employees of that agency a chunk of the pie. Which is to say that when KKR would in the end promote that operation–because personal fairness companies do not dangle on to those companies for too lengthy; that is not their model–then these staff would money out.

So, they turn out to be, in essence, an employee-owned firm–to a small diploma. The overwhelming majority of it’s owned by the company, the massive traders. However, that, to me, is a mind-set about this type of subject, this type of problem–if you wish to name it that–of hyper-intensive, hyper-leveraged, hyper-successful capitalism, understanding that you might want to additionally combine the human scale–the human scale on this case being: How are you going to deal with the individuals who do the work?

That is, Russ, the place I felt like economics as a self-discipline actually wanted to stage up within the final 30 years, and I believe did, and partly by way of the work of the behavioralists. Now, I do know that quite a lot of economists–a lot of old-school economists, quite a lot of macroeconomists, certainly–might low cost quite a lot of the work of the behavioralists. And, if we discuss in regards to the behavioralists as a camp, usually, we might begin with Danny Kahneman and Amos Tversky, who, in fact, weren’t economists however had been psychologists. After which Richard Thaler, and others who had been psychologists, who started to create this mix that we now consider usually as Behavioral Economics. After I began studying economics papers, I used to be typically just a little stunned at how little the people that economists describe of their fashions represented any of the people that I knew.

And, that is now a really acquainted argument–that Homo economicus was a sort of, you already know, cardboard determine. Now, a really helpful determine.

However, I do suppose that it is easy, if you’re within the realm of macroeconomics or high-level finance–because the problems you are coping with are difficult, troublesome, the numbers are huge, the info units are huge, you’ve got obtained quite a lot of leverage–I do suppose it is easy to sort of neglect about who’s on the opposite finish of issues. And who’s on the opposite finish of issues are particular person people–employees, shoppers, residents, and so on.

I imply, this goes again to why I really like Adam Smith. You understand, I do not learn Adam Smith to know, you already know, what’s the easiest way to optimize the provision chain for that pin manufacturing facility in Kirkcaldy, Scotland. I learn Adam Smith because–the identical manner, I believe, that I really like your e book on Adam Smith, too–because he is enthusiastic about: Once you’re dealing with a change of this magnitude–in that case a interval of the Industrial Revolution, the place the best way we made issues was altering drastically and, subsequently, import-export was altering drastically–when we make these huge societal adjustments, how does that have an effect on individuals? How does that have an effect on the person who goes to work in that pin manufacturing facility? Now that that person–let’s say it is the husband in a family–has that job, what does that do to the remainder of his household? Is it extra revenue? Is he going to have extra children, fewer children? Are they going to get extra schooling, much less schooling?

These are amazingly fascinating inquiries to me. Economists occur to be fairly good at addressing–and typically answering–those questions. And, we’re in a time now the place there are extra questions like that than at any time in my life. And so, I believe there is no shortage of additional questions for economists to ask.

Stephen Dubner: Or in Japan, it might have been 20 generations in Japan. Yeah.

Stephen Dubner: Yeah. I admire your saying that. I do see it that manner.

After I stop enjoying music–which I believed was going to be my life and profession forever–and so it was just a little little bit of a shock when, abruptly, it wasn’t. I might accomplished it for about 5 years.

So, I used to be in my mid-20s by the point I quit–and there have been three issues that I believed I’d wish to be. Properly, sort of 4. One was a author, which I might at all times been. So, that was sort of at all times my predominant aim. However, the others had been a monetary advisor–I actually appreciated the thought of serving to individuals determine tips on how to handle cash for themselves and their households as a result of this has been an curiosity of mine for a very long time. I grew up with little or no cash in an space with little or no high-end employment: like, no high-end employment the place I grew up as a child within the nation. One of the best jobs–the richest guys on the town had been one physician and one plumber.

After which, the subsequent jobs that everyone inspired you to go after had been construction–highway construction–because it was a state job, good wage. And one of the best job was to be the flag individual on the freeway highway crew since you did not really must do any digging. That was the employment mannequin, okay?

So, I had a giant adjustment, for example, to determine tips on how to make your manner on the planet and tips on how to construct a profession, and so forth. By the point I stop enjoying music, I might been by way of school. What I used to be enthusiastic about had been monetary advisor, like I discussed; psychologist–which, once more, I’d have liked. I really like psychology. I really like studying psychology. However then I spotted I am a lot too–I do not wish to assist individuals clear up their issues all day. I am too egocentric. I wished to unravel my very own issues, and so forth.

After which, the opposite factor I actually wished to be was some sort of instructor.

And, once I went to grad faculty then, I went to–I obtained an MFA [Master of Fine Arts] in fiction writing at Columbia College. I’d have accomplished nonfiction, however their nonfiction program on the time was very small. Now it is a lot, a lot, a lot greater. And, I additionally obtained to show at Columbia, a course–a fantastic course. It was basically freshman comp. It was referred to as Logic and Rhetoric, and it had been designed by an excellent Shakespeare scholar. And, I liked educating it.

And, I spotted I wasn’t going to be an excellent instructor both, as a result of I used to be just a little bit too egocentric about my very own writing. I’d a lot reasonably do my very own writing than fear about different college students’ writing, and so forth.

However, I’ve at all times had the need, at the very least, to be man, to be individual, to contribute, and so forth. And so, despite the fact that it might sound loopy in 2025, every time we’re, to think about journalism as a form of–I am not attempting to carry myself up as any sort of standard-bearer right here, however I do imagine that the function of the journalist is not only to consolation the bothered and afflict the comfortable–which is one mantra from The New York Occasions–and I get it. It is also to elucidate the best way the world works. It is not for me to let you know how I believe it ought to work, but it surely’s actually simply to explain it. As a result of it may be difficult.

And so, actually all I do is attempt to hunt down individuals who know rather a lot, interview them; however then, within the presentation of the present, within the writing of the script, sure, then I am sort of entering into the marginally professorial function, or possibly the TA [Teaching Assistant] or the grad pupil who’s educating the category as a result of the professor shouldn’t be round.

Stephen Dubner: I believe the distinction between good journalism and unhealthy journalism could be very easy. One is storytelling with out knowledge. And, the issue with that’s it could possibly take the anomaly and make it appear normal–which information does all–that is actually the definition of stories. So, these of us who eat information and complain, like, ‘Oh my gosh, it is so sensationalistic. If it bleeds, it leads.’ Blah, blah, blah. This has been the criticism because the starting of stories. Canine bites man. Who cares? Man bites canine. Web page A1.

So, I get that. The issue is, storytelling must have–and I discovered this from through the years. I imply, Gary Becker, you talked about earlier. The discrimination work he did was superb. However quite a lot of the work Gary Becker did, once I was studying it earlier–just actually studying economics–within the story, you might want to embody time. Time is actually essential. If a stage of one thing adjustments from x to 10x, I must know if that was in a yr or 100 years. That is very, very significant. I must know the magnitude of the change. I must know the way consultant or how anomalous it’s. I must know what had been the incentives which will have modified to supply a distinct sort of habits. Was this habits modified due to vibes within the society? Was it a change due to a brand new tax regulation? Was it modified as a result of a bunch of individuals from one place moved to a different place and so they introduced with them completely different cultural norms, and so forth?

So, sure, storytelling is nice; but it surely’s obtained to have some rigor, and–and that is what we tried to do with Freakonomics–you’ve obtained to indicate your homework. If I wish to let you know a narrative, and I would like you to imagine it is true, I would like to provide you proof. Easy as that.

Stephen Dubner: It’s, however I prefer it.

Stephen Dubner: Possibly this implies I am ruder than you, however I really like that query rather a lot, and I do not even discover it inappropriate.

Stephen Dubner: Yeah, I believe it is an excellent query.

I ask extra layperson variations of that to lots of people, like, ‘What’s your finest proof?’ I often begin by asking, ‘Once you first began enthusiastic about this downside or query, or no matter it’s, what did you wish to know?’ Okay, that is the place I like to start out.

Then I say, ‘Properly, the place do you go for the info for that?’ As a result of presumably, if it is a good query, there have been different individuals who considered it, possibly, however could not discover the info. So, the place’s the info from, and the way good are the info, and so on–how dependable are they? After which, I prefer to ask them, ‘What had been you anticipating to search out if you first began to work with the info? What stunned you? What’s your diploma of confidence in your final discovering?’ After which, I learn–Richard Feynman is actually somebody I love an excellent deal. He requested fantastic questions, typically extraordinarily annoying to the those who had been being requested the questions. And he had another issues that made him–I discover him outstanding; different individuals discovered him annoying for different causes, together with the truth that he did not wish to settle for anyone else’s logic for a way they obtained to a discovering. He wished to do it himself.

It jogs my memory just a little bit of–if you are a golfer, Ben Hogan and others like to speak about how you bought to dig your swing out of the dust. It’s good to discover your swing. You may hearken to individuals, and there is likely to be some common truths, however each physique is just a little bit completely different, each thoughts is just a little bit completely different, and so forth.

And Feynman was like that. When he wished to just accept one thing as fact, he needed to work it out for himself. So, he would typically problem individuals. However, Feynman would ask quite a lot of questions that I actually like. Considered one of my favorites is, ‘In a given system,’–whether, if we’re speaking about physics, it is one sort of system, but when we’re speaking about economics, it is another–‘In a given system, inform me one thing that’s significantly scarce and one thing that’s significantly plentiful.’ And then you definately get into why.

And so, that is the place it is easy to make enjoyable of economics as only a social science, and I do really feel it is completely different from the opposite social sciences–especially if you see all the rubbish and fraud that is been related to particularly quite a lot of psychology over the previous bunch of years. And, that is very painful for the nice guys in that realm–the good individuals in that realm, I ought to say. And, for me, too, as a result of I’ve identified quite a lot of these individuals, and we have accomplished some episodes on the tutorial fraud, and it’s extremely, very, very troubling as a result of I’ve actually revered and seemed as much as quite a lot of lecturers through the years, and a few of them turned out to be a lot lower than honorable.

However, I do really feel that the scientific technique, whilst practiced within the social sciences, is a phenomenally good technique. You need to actually strive onerous with the follow. You need to be very, very particular. You need to be very intentional. You need to be very persistent. After which, it’s important to discover individuals which are reliable and ask them onerous questions. And, if you happen to do not suppose they’re reliable, neglect it.

Stephen Dubner: Yeah. I’ve so little endurance for individuals who say issues like that, particularly as a result of, when you’ve got ever been concerned in making or doing something and you know the way it’s made or accomplished, and somebody says, ‘Properly, no, that isn’t the best way it’s made or accomplished.’ This can be a little little bit of the issue of what social media helps with is, what would you name it? The unempirical denial. Proper?

Stephen Dubner: It is vitally straightforward to do.

Stephen Dubner: There you go. There you go.

So, the bagel man–let us see–his identify is Paul Feldman. Though I believe after we first wrote about him, if I recall accurately, he didn’t wish to be recognized at first, however in the end we did.

My chronology is just a little bit off right here. I believe he first wrote to Levitt after I had written this journal article about Levitt in The New York Occasions Journal. I believe that’s how he first made contact. And, he stated to Levitt, ‘I’m an economist.’ I believe he used to work in agricultural economics, possibly on the Division of Agriculture in D.C. [Washington, D.C.] He was within the D.C. space. I do’nt bear in mind the small print now. Anyway, lengthy story brief, he had both possibly semi-retired and began this door-to-door bagel and donut supply service for workplaces within the D.C. space. And, he had quite a lot of knowledge.

So, Levitt was . Levitt advised me about it. I used to be . I went right down to D.C. and met Paul in, I suppose it was in his storage, possibly suburban Maryland or Virginia. This was 21 or 22 years in the past, so I don’t have the small print on the high of my head, however I bear in mind assembly him at possibly 4 within the morning in his storage together with his automobile. Then I believe we drove to an everyday retail bagel store, and he picked up his order for the day, realizing what he would wish.

And, he had a system the place he would go to possibly between 10 and 20 workplaces per day, and he had completely different ones on completely different days, and he would depart them a set quantity that he had calculated based mostly on what he thought the demand can be.

And, it was an honor-box system. That was actually the important thing. That was what made it just a little bit fascinating, is you can then decide how, quote, “honorable” individuals had been, and so forth. So, there have been years and years of information.

Stephen Dubner: Easy as that. Yeah.

Stephen Dubner: That’s it. That is it. And, he–

Stephen Dubner: Yeah, cannot work; despite the fact that thousands and thousands of individuals from previous centuries would let you know, in fact it could possibly work as a result of that’s the manner it used to work in quite a lot of locations. I bear in mind somebody–it was both possibly Thaler or Tom Gilovich, someone who taught or teaches at Cornell–talked a couple of well-known farm stand at Cornell in Ithaca. So, in fact we all know that this will work.

However, yeah, he would say–let’s say I’m going to a specific workplace. This occurs to be a protection contractor, or a advertising agency, or the American Diabetes Affiliation. I understand how many individuals have entry to this espresso lounge on the third flooring, and I’m going to say: 50 bagels for them each Tuesday, no matter. After which, when he would come again, if each bagel was a greenback, he’s hoping to have $46 and 4 bagels, or some model thereof.

So, from that, the final discovering was that persons are fairly honorable. There have been quite a lot of findings inside that. You’re going to have higher reminiscence of this than I do, however I believe smaller companies in all probability had been just a little bit higher-paying than others.

The one controversial discovering from that was that, in {one of the} few workplaces the place he left bagels in several types of floors–an govt flooring and a lower-down floor–the govt pay price was decrease. From which some individuals may need concluded that, ‘You see? The individuals on the high, they cheat. They’re dishonest.’ One other clarification might be: In case you are an govt, you might be sort of accustomed to stuff being put out for you. And so, the thought that there’s a bagel in your flooring, you aren’t actually enthusiastic about, ‘There’s an honor field; and, a greenback,’ and so forth. So, these are deeply inconclusive channels by which to make a giant deal out of.

However, we made just a little deal out of it by writing in regards to the truth that–and then there have been different affiliate associations or associations with–we checked out funds after holidays. We appeared to see a fairly large spike after Sep 11, if I recall, which would appear to indicate–

Stephen Dubner: enchancment. Enchancment, yeah, which would appear to point that folks felt a renewed sense of honor, obligation, honesty, no matter, and so forth.

However, anyway, that was meant to be an especially slender little story of the best way that incentives can and do work. And, I’d say the chief incentive there being: if you need one thing good like this man is offering, then you might want to be honorable about it.

Now, the unwritten rule was that if the fee price dropped below–I have no idea, no matter it was, 80%, 70%–no extra bagels for you. He would cease delivering to you. So, it was not as if it was a wide-open, unending belief system. It was just a little commerce system by which an economist used what you may name social belief as an incentive to make his enterprise work. [More to come, 1:05:35]