Twenty Years of Freakonomics (with Stephen Dubner)

Russ Roberts: So, what started as a simple magazine article assignment led to a life-changing collaboration between Stephen Dubner and Steven Levitt. Dubner’s initial reluctance to cover Levitt’s work quickly turned into admiration and curiosity as he delved deeper into the economist’s research and approach. Levitt’s unconventional thinking and passion for applying economics to real-world problems resonated with Dubner, who saw in him a kindred spirit in terms of creativity and intellectual curiosity.

Dubner’s time spent with Levitt in Chicago was transformative, as he found himself captivated by the economist’s ability to think outside the box and challenge conventional wisdom. What started as a brief interview turned into several days of engaging discussions and insights that left Dubner inspired and eager to learn more. Levitt’s unique perspective on economics as a tool for understanding human behavior and incentives opened up a whole new world for Dubner, who saw in him a mentor and teacher.

After the magazine article was published, the interest in a potential book collaboration between Dubner and Levitt grew rapidly. Publishers saw the potential in their partnership and wanted to capitalize on the success of their initial work. However, both Dubner and Levitt were initially hesitant to pursue a book project together, as they were unsure of how their dynamic as journalist and subject would translate into a co-authored book.

It was Suzanne Gluck, Dubner’s agent, who saw the potential in bringing Dubner and Levitt together for a book project. Her intuition and foresight ultimately led to the creation of “Freakonomics,” a groundbreaking book that challenged traditional economic thinking and introduced a new way of looking at the world. The success of “Freakonomics” can be attributed to the unique partnership between Dubner and Levitt, who complemented each other’s strengths and brought out the best in each other.

The journey from a simple magazine article to a bestselling book and podcast series was a testament to the power of collaboration and open-mindedness. Dubner’s initial skepticism turned into a lifelong partnership with Levitt, as they continued to explore the hidden side of everything through their work. The 20th-anniversary edition of “Freakonomics” serves as a reminder of the impact their collaboration has had on economics, journalism, and popular culture. It wasn’t like I wrote about him hoping to get a book. Levitt thought, ‘Well, I don’t really know if I like Dubner that much. He’s kind of a pain in the neck. He’s a journalist asking all these questions.’ But then, we started to just talk and hang out, and it was a blast.

And that began–we began to hatch out a plan for: If we were going to write a book, what would it be? Honestly, we approached it with a sense of marrying two strong nonfiction realms–journalism and academic research. So, we’re coming at this from a kind of shared background of: facts matter, fact-checking matters, and so on. But, we also wanted to tell interesting stories based primarily on the research that Levitt had done.

So, we wrote it. It was really fun to write it. We didn’t have great expectations, even though we knew that there was some expectation. And then, when it came out, it just did, like, stupidly well. All good things kept happening over and over again, and we just marveled at it. And so, twenty years later, it kind of went by in a blur. I think we both tried to take advantage of the advantage that we got and keep doing good work, and that’s where we are now.

Russ Roberts: Well, I’m sure many of my listeners have read the book, but I’m going to make a confession, which is that I never read the book until the last few days.

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

Russ Roberts: I’m going to tell you–

Stephen Dubner: because you’ve read it now much more recently than I have.

Russ Roberts: And, I’ve read it more carefully than you[?], probably. If you’re like me, it’s sometimes hard to go back to books.

I knew the book, of course, from much of its research, and I have to confess–a second confession–I was jealous of how successful this book was, because I would have liked to have written a book like this that popularized economics.

And I didn’t like some of the findings of the book, which were constantly being told to me by young people at cocktail parties who would say–because I’m an economist–‘I just read this great book on economics.’ I’d say, ‘Oh, really? What is it?’ ‘Freakonomics.’ And I’d say, ‘Hmm.’ And then, they’d tell me something from the book, and I’d say, ‘Well, I don’t think that’s true’; and I still think some of it’s not true. We’ll talk about that during the conversation.

Stephen Dubner: I’d love to field those questions, because I–

Russ Roberts: Well, we’ll talk about it, but here’s the, to me, more interesting part, which is that–and I think every author of a nonfiction book can relate to this: Their enthusiasm was the enthusiasm of the convert. Most of these people had never read economics. They didn’t know much about it. They’d been given this book, and it opened their eyes, and so they were enthusiastic about it, which was reasonable.

But, you helped spawn–I don’t know if you were early or middle in this phenomenon–but you helped spawn a phenomenon I really don’t care much for, which is the, ‘I’m going to tell you a bunch of things about the world and about life, and it’s based on science. I’m going to quote all these research studies.’

And, when I read those books, there’s a little secret, which is: A lot of that science isn’t true. That study was refuted; that study wasn’t reliable; that study was–etc., etc. And, that genre, particularly in the area of psychology, is run amok in my view.

But, here’s the funny thing. So, I’ve always held that against your book. But, your book isn’t like that. Your book is so much better than that. I’m going to pay you and Steven a compliment that I think you’ll both appreciate, which is that reading this book reminded me a little bit of reading The Economics of Discrimination by Gary Becker.

Stephen Dubner: Hmm. Yeah.

Russ Roberts: We’ve talked about that book on this program before. The reason I love that book is that it’s not pat. It’s not: ‘Here’s how it is.’ It’s: ‘Well, this is really complicated. Here are some of the things I found, some of which might be true, some of them might not be true.’

There’s a huge amount of nuance in Freakonomics that I was unprepared for when I read it in book form, as opposed, say, to the research version that Steven Levitt published. And I remind listeners: I have an interview with Steve Levitt that goes into some of these issues and other things as well from a while back.

But my point is, is that, unlike the standard book that leans on social science research to shock you and to tell all these cool things you can repeat to people–like legalization of abortion reduces the amount of crime, or parenting is more complicated than you think and maybe it doesn’t matter–there’s an enormous amount of thinking out loud in the book of other possibilities, of why this result or this conclusion might be more complicated than it might appear at first. And in that sense, it’s a fantastic introduction to economic analytical thinking of an applied economist.

And, it’s really quite shocking to read it 20 years later, because it is not the way books like that read anymore. Nobody would write a book like this.

It’s also very often, quote, “politically incorrect.” You entertain ideas and hypotheses that people are uncomfortable hearing, and you say so, and you say, ‘Well, it’s the way it is. There’s an idea.’ In that sense, it’s very much like the Faculty Lounge at the University of Chicago, where nothing was off-limits. People were allowed to speculate about anything and any application of economics.

So in that sense, I think the book is really quite wonderful. I don’t know if that rings true with your own personal experience as the author, but it very much is pulling the curtain back on how good empirical work is done, how good thinking is done, and our appreciation for complexity. Even though I don’t agree with all of it. The collaborative work of Stephen Dubner and Steven Levitt in their book “Freakonomics” has sparked a new way of thinking about economics and social sciences. In a recent interview, Dubner discusses the process of writing the book and the importance of critical thinking in the field of economics.

Dubner acknowledges the skepticism that often arises when a new idea or concept becomes popular. He believes that it is natural for people to challenge established norms, whether it be in politics, pop culture, or academia. However, he emphasizes the need for open thinking, research, and fact-checking in order to support and validate new ideas.

One of the reasons why “Freakonomics” is written in a unique and engaging way is due to the authors’ different backgrounds and perspectives. Dubner and Levitt both come from traditions that value open-mindedness and critical analysis. Dubner specifically appreciates the approach of academic economics papers, which often present a thesis, methodology, findings, and alternative explanations before drawing conclusions.

Dubner compares the analytical approach of economists to that of physicists, noting that both disciplines excel at understanding complex systems and identifying causal relationships. He highlights the importance of multivariate analysis in economics, which involves considering multiple factors and variables when analyzing data.

In discussing the challenges of translating academic research into accessible public writing, Dubner acknowledges the limitations of journalism. He believes that good journalism requires a combination of research, critical thinking, and writing skills, but recognizes that few people excel at all three areas simultaneously.

Despite these challenges, Dubner credits his collaboration with Levitt for helping him navigate complex economic concepts and arguments. He recalls a specific instance in the book where they discussed using regression analysis to support their arguments about the impact of parental behavior on child outcomes.

Overall, Dubner’s insights shed light on the process of writing “Freakonomics” and the importance of critical thinking in economics and social sciences. By combining rigorous research with accessible writing, Dubner and Levitt have succeeded in bringing economic concepts to a wider audience and challenging conventional wisdom in the process. As Russ Roberts and Stephen Dubner delved into the intricacies of regression analysis and the application of economic concepts, a deeper understanding of the complexities of data analysis and research methodology emerged. The conversation revolved around Levitt’s research on the factors influencing the crime drop in the United States, shedding light on the importance of transparency, honesty, and clear communication in presenting findings to the audience.

Dubner’s journey from a writer and journalist to a podcaster was a testament to his passion for learning and sharing knowledge. Through Freakonomics Radio, he found a platform to explore diverse ideas, conduct in-depth research, and engage with experts in various fields. The process of producing each episode was akin to analyzing a large data set, sifting through information to identify key insights, and crafting a compelling narrative to convey complex ideas to the audience.

The collaborative effort of the production team, along with the input from guests and listeners, enriched the podcasting experience and fostered a sense of community around the show. The recent call-out for information on the physician shortage in the United States highlighted the interactive nature of Freakonomics Radio, where the audience’s contributions played a vital role in shaping the content and adding depth to the discussion.

Dubner’s dedication to his work, despite its demanding nature, reflected his unwavering commitment to the pursuit of knowledge and the desire to engage with diverse perspectives. His enthusiasm for learning, coupled with his ability to communicate complex ideas in an accessible manner, resonated with listeners and fostered a sense of intellectual curiosity and exploration within the community.

In conclusion, the conversation between Roberts and Dubner underscored the transformative power of podcasting as a medium for education, exploration, and community engagement. Through Freakonomics Radio, Dubner had found a unique platform to share his passion for learning, research, and storytelling, enriching the lives of listeners and contributing to a deeper understanding of the world around us. In the fast-paced world of journalism, credibility, curiosity, and kindness go a long way. Stephen Dubner, co-host of the popular podcast Freakonomics Radio, recently shared insights into his approach to interviewing and storytelling. He emphasized the importance of asking probing questions and seeking evidence to uncover the truth behind complex issues.

Dubner recounted receiving a flood of emails from passionate and thoughtful individuals who went beyond their daily routines to engage in meaningful discussions. This engaged community was built on trust, respect, and a genuine curiosity about the world around them.

When it comes to changing his mind about important issues, Dubner admitted that it’s not always a binary switch. Over the years, he has reevaluated his views on the best form of government and economy, especially in light of increasing wealth inequality and the rise of private equity firms.

Private equity firms, which pool money from investors to acquire and consolidate businesses, have come under scrutiny for their impact on customers and employees. Dubner highlighted research that suggests mixed outcomes for all parties involved, with shareholders often benefiting at the expense of others.

As a consumer himself, Dubner shared personal experiences of dealing with corporate entities that prioritize scale and efficiency over personalized service. He noted the frustration of receiving multiple confusing emails with legal disclaimers and requests for self-service tasks that were once handled by the company.

Overall, Dubner’s reflections shed light on the complexities of the modern economy and the challenges posed by increasing corporate consolidation. As journalists and consumers, it is essential to remain vigilant, ask tough questions, and advocate for transparency and accountability in business practices. By fostering a culture of open dialogue and critical thinking, we can strive towards a more equitable and sustainable future for all. Private equity investment is often a controversial topic, with many decrying the role of finance in modern life. However, there are potential upsides to private equity investment that are often overlooked. Private equity investors have the ability to come into sectors or firms that no one else wants and turn them around to make them better for consumers and employees. While this may not always be the case, there are instances where private equity investment has led to positive outcomes.

One example of the potential benefits of private equity investment can be seen in the pet healthcare industry. Veterinary practices, often founded by one or two veterinarians, can be prime targets for private equity takeovers. The original owners may be looking to retire and sell their business, but the next generation of veterinarians within the practice may not have the financial means to buy it. With the rising costs of veterinary school and living expenses, many young veterinarians are still paying off student debt and cannot afford to purchase the practice.

In these cases, private equity investors can step in and offer to buy the practice, providing a way for the original owners to retire and ensuring the continuity of care for the animals and clients. The private equity investors may have the resources to modernize the practice, improve operations, and provide opportunities for growth that may not have been possible otherwise. This can benefit both the employees and the consumers, ultimately leading to a better experience for all involved.

While private equity investment may not always result in positive outcomes, it is important to recognize that there are potential benefits to be gained. By exploring representative edge cases and understanding the complexities of different industries, we can gain a deeper appreciation for the role of finance in modern life. It is essential to have a thoughtful and nuanced understanding of private equity investment, rather than simply demonizing it without considering the potential upsides. Through open dialogue and exploration of different perspectives, we can work towards creating a more informed and balanced view of finance and its impact on our economy and society. ‘ Let’s try to get that down to 15 minutes. And, let’s see if we can increase the number of patients we see in a day. And, let’s see if we can cut costs on the supplies that we use.’ And, what happens is, the employees who were there for the right reasons, who were there because they cared about their patients, they cared about the work they were doing, they cared about the quality of care they were providing, they start to feel demoralized. They start to feel like they’re not valued. And, it creates a toxic work environment.

But, what Pete Stavros is doing at KKR is saying, ‘Let’s not forget about the people who are actually doing the work. Let’s not forget about the employees who have dedicated their lives to this practice. Let’s give them a stake in the success of this business. Let’s give them a piece of the pie when we sell it.’ And, that changes the dynamic completely. It changes the incentives. It changes the culture. It changes the way people feel about coming to work every day. And, I think that’s a really powerful example of how capitalism can work for the benefit of everyone involved, not just the investors at the top.

And, I think that’s where economics as a discipline has really evolved over the years. It’s not just about maximizing profits or optimizing supply chains. It’s about understanding the human element, the human scale, as you mentioned. It’s about recognizing that behind every economic decision, there are real people with real lives, real families, real aspirations. And, I think that’s a perspective that is often missing in traditional economic models.

So, I think the work of behavioral economists like Kahneman, Tversky, and Thaler has been really crucial in bringing that human element back into the discussion. And, I think it’s something that all economists, whether they’re working in macroeconomics or finance, could benefit from considering more deeply. Because at the end of the day, economics is not just about numbers and data. It’s about people and their lives. And, I think that’s a perspective that we can all benefit from embracing. The world of investing and business is a complex and ever-changing landscape. With the rise of hyper-efficiency and the focus on short-term gains, many investors are looking to make quick profits at any cost. While not all investors are bad people, the pressure to make money quickly can lead to decisions that have negative consequences in the long run.

One of the main drivers of this hyper-efficiency is the desire to make money and see quick returns on investment. In many cases, the owners of a business who sell to investors stand to make a significant profit, but often underestimate the personal cost of this decision. They may have to stay on with the company as part of the deal, even though their lifestyles and roles within the company may change drastically.

This change can lead to feelings of pain, dissonance, and regret as individuals navigate the new landscape of their professional lives. The allure of a large sum of money can be hard to resist, but the personal toll it takes on individuals can be significant.

On the other hand, staying in a more traditional, artisanal business model may not always be financially viable. While some individuals may choose to prioritize their craft over financial gain, the reality is that many people choose the more lucrative path in order to secure their financial future.

In this shifting landscape, it is important for the general public to have a better understanding of how the world of business and investing works. Shows like the one being discussed in the conversation provide a valuable platform for educating the public on economic principles and the implications of various business decisions.

The speaker, who has had a varied career path himself, reflects on his own desires to be a financial advisor, psychologist, or teacher. Ultimately, he found a calling in journalism, where he believes that the role of the journalist is not just to comfort the afflicted and afflict the comfortable, but to explain the way the world works and describe it without imposing personal beliefs.

In conclusion, the world of investing and business is a complex and ever-changing landscape, where decisions made in the pursuit of hyper-efficiency and short-term gains can have lasting consequences. It is important for individuals to weigh the personal and professional costs of their decisions, and for the general public to have a better understanding of how the world of business operates. The art of storytelling is a powerful tool that can be used to communicate complex ideas and concepts in a way that is engaging and easy to understand. In the world of journalism, storytelling is essential for capturing the reader’s attention and helping them make sense of the information being presented. However, storytelling without data can lead to misleading narratives and skewed perspectives.

In a conversation between Russ Roberts and Stephen Dubner, the importance of combining storytelling with rigorous evidence is emphasized. Dubner explains that storytelling must include elements such as time, magnitude, and incentives in order to provide a comprehensive understanding of the topic at hand. Without these elements, a story can be incomplete and potentially misleading.

Dubner also highlights the importance of showing your homework when telling a story. In other words, providing evidence to support your claims is crucial for building trust and credibility with the audience. This is a concept that is often lacking in academic circles, where researchers may be hesitant to share the process behind their findings.

Russ Roberts shares a personal anecdote about asking a speaker in a seminar how many regressions they had to run before getting a particular result. While this question may be considered rude in academic circles, it underscores the importance of transparency and accountability in research. Sharing all results, even those that are inconclusive or unsuccessful, can help to paint a more accurate picture of the research process.

Overall, the conversation between Roberts and Dubner highlights the necessity of combining storytelling with data in journalism and research. By presenting a compelling narrative backed by solid evidence, journalists and researchers can create a more complete and trustworthy story for their audience. This approach not only enhances the quality of the work but also builds credibility and fosters a deeper understanding of complex issues. Paul Feldman’s story is an interesting one that sheds light on the importance of incentives in shaping behavior. Feldman, a former economist who worked in agricultural economics at the Department of Agriculture in Washington, D.C., started a door-to-door bagel and donut delivery service for offices in the D.C. area. This venture provided him with a wealth of data that caught the attention of economist Steven Levitt.

When Feldman reached out to Levitt, he presented himself as an economist with a unique business model and a treasure trove of data. Intrigued by the potential insights that could be gleaned from this data, Levitt decided to investigate further. This led to a meeting between Feldman and Levitt, where Feldman shared his data and business practices with Levitt.

What made Feldman’s story particularly intriguing was the way in which he used incentives to drive behavior and maximize profits. Feldman implemented a system where he would deliver bagels and donuts to office buildings and leave them in a common area with a box for payment. Employees were trusted to take what they wanted and leave the corresponding payment in the box.

What surprised both Levitt and Dubner was the honesty of the employees. Despite the lack of oversight or enforcement, the vast majority of employees paid for what they took. This unexpected finding challenged conventional wisdom about human behavior and the role of incentives in shaping it.

The bagel man story serves as a powerful example of how incentives can influence behavior in ways that are not always predictable. It also underscores the importance of data in uncovering these insights. By analyzing the data provided by Feldman, Levitt and Dubner were able to gain valuable insights into human behavior and the impact of incentives on decision-making.

Ultimately, the bagel man story highlights the power of data and the scientific method in uncovering truths about the world around us. It also serves as a reminder of the importance of asking good questions, challenging assumptions, and being open to unexpected findings. Just as Richard Feynman did with his probing questions, the bagel man story encourages us to approach the world with curiosity, skepticism, and a willingness to dig deeper to uncover the truth. Back in the day, around 21 or 22 years ago, a fascinating case study emerged involving a man who ran a bagel delivery business using an honor-box system. This unique system relied on the honesty and integrity of customers to leave payment for the bagels they took, without any cashier or supervision.

The man would wake up around four in the morning, meet in his garage, and head to a local bagel shop to pick up his daily order. He would then visit between 10 and 20 offices per day, leaving a predetermined amount of bagels based on his calculations of demand. Each office had a box next to the bagels with a sign instructing customers to leave a specific amount of money for each bagel they took.

The success of this honor-box system revealed interesting insights about human behavior. Despite skepticism, the majority of customers proved to be honorable and paid for the bagels they took. Smaller firms tended to have higher payment rates, while there was a controversial finding that executive floors had lower payment rates compared to lower-level floors. This raised questions about whether executives were more likely to cheat or simply overlooked the payment system due to their accustomed privileges.

The data also showed spikes in payment rates after significant events like 9/11, suggesting that people felt a renewed sense of duty and honesty during challenging times. The man running the business had a cutoff point for payment rates, discontinuing deliveries to offices that fell below a certain percentage of payments.

Overall, this case study highlighted the power of incentives and social trust in driving business success. By leveraging the honor-box system, the bagel delivery business thrived on the integrity of its customers. It serves as a reminder that honesty and integrity are essential components of a successful business model.