Latest / The Capitalism and Freedom in the Twenty-First Century Podcast / Steven D. Levitt (Freakonomics co-author and U Chicago Econ Prof) on His Career and Decision to Retire From Academic Economics

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Steven D. Levitt (Freakonomics co-author and U Chicago Econ Prof) on His Career and Decision to Retire From Academic Economics · The Capitalism and Freedom in the Twenty-First Century Podcast

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• 1:01
  >> Speaker 1: Welcome to the New Books Network.
• 1:05
  >> Jon Hartley: This is the Capitalism and Freedom in the 21st Century podcast,
• 1:08
  where we talk about economics, markets, and public policy.
• 1:11
  I'm John Hartley, your host.
• 1:12
  Today, my guest is Steve Levitt,
• 1:13
  who is the William B Ogden Distinguished Service Professor of Economics at
• 1:17
  the University of Chicago.
• 1:18
  As well as the co-author, with Stephen Dubner,
• 1:20
  of the bestselling book Freakonomics, all of its sequels, and
• 1:23
  co-founder of the Freakonomics Radio Network.
• 1:25
  Steve is known for being one of the early popularizers of applied microeconomics and
• 1:29
  causal identification with natural experiments during the 1990s and 2000s,
• 1:33
  which won him the John Bates Clark Medal in 2003.
• 1:36
  Steve recently told me that he has actually decided to retire from academia,
• 1:40
  is going emeritus at the young age of 57, which I'm going to ask him all about.
• 1:44
  Welcome, Steve, thanks so much for joining us.
• 1:46
  >> Steve Levitt: My pleasure, Jon, good to be here.
• 1:48
  >> Jon Hartley: Steve, I wanna start with your background.
• 1:49
  You were born in Boston, you went to Harvard undergrad,
• 1:52
  spent two years consulting.
• 1:54
  And then you did your PhD in economics at MIT in the mid-1990s at a time
• 1:59
  when applied economics was just taking off.
• 2:02
  Tell us, how did you first get into economics?
• 2:05
  >> Steve Levitt: Okay, I'm gonna answer that, but first I wanna say one thing.
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  Cuz I don't know how well your listeners know you, but
• 2:11
  we met when you were an undergrad.
• 2:12
  And I taught for 25 years, and you were one of two or
• 2:16
  three of the best undergrads I have ever run into.
• 2:20
  And I tried to hire you, [LAUGH] but lost out.
• 2:22
  Was it the Goldman Sachs, is that who I lost out to?
• 2:25
  >> Jon Hartley: That's right.
• 2:27
  >> Steve Levitt: And we've stayed in touch.
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  And I would say that what you've been doing in economics is remarkable.
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  You've produced more good economic thinking prior to getting a PhD than
• 2:38
  anyone I've ever known.
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  So I just want to give you a hats off.
• 2:41
  I've really enjoyed watching you break all the rules along the way.
• 2:46
  [CROSSTALK] Tip to you.
• 2:49
  >> Jon Hartley: I'm gonna have to use that for a tenure committee in the future.
• 2:53
  >> Steve Levitt: [LAUGH]. >> Jon Hartley: I'm glad that we
• 2:54
  have that recorded.
• 2:55
  >> Steve Levitt: Yeah, I don't think my opinion counts for
• 2:57
  much with tenure committees these days.
• 2:59
  But let me tell you how I did get into economics.
• 3:01
  It was not in a thoughtful and well organized way.
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  I was the worst kind of undergraduate student.
• 3:09
  I only tried to take easy courses.
• 3:12
  I just tried to get good grades.
• 3:13
  I didn't care all about anything intellectual, but
• 3:16
  I did already believe in markets, even though I had no economic training.
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  And I went to Harvard, and my view was, if 1,000 people are taking a class,
• 3:24
  that must be a good class and an easy class.
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  And so I took all the 1,000 person classes at Harvard.
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  And first and foremost among those was EC 10, Economics 10, the introductory course.
• 3:34
  And I took it only because 1,000 people were taking it.
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  And I remember not too long into the class, maybe five or
• 3:40
  six lectures in the class, and we were doing comparative advantage.
• 3:45
  And as the teacher went through it, I thought, what a joke.
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  How could they be teaching this?
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  Everyone knows, everyone understands comparative advantage,
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  it's the most obvious thing in the world, five year old know that.
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  And as I walked out of class, my best friend, who was also in the class with me,
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  said, my God, that was the most confusing lecture I've ever heard in my life.
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  And I said, what are you talking about?
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  He said, cuz that make no sense to me, what is he even talking about?
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  And that was the first inkling I had that [LAUGH] Maybe I thought like an economist.
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  And honestly, I only did economics because it came naturally to me.
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  And I never liked it, per se.
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  I never had this sense that economics was powerful.
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  It's just the only thing I was good at.
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  And so I just backed into it.
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  And I never had any intent.
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  So I majored in economics, but I never had any intention of going further.
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  I wanted to go into business.
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  I went to consulting, and I found consulting very painful for
• 4:39
  me personally, given my makeup.
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  I didn't like being bossed around by people I didn't necessarily
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  respect too much.
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  This was a firm which, even though it was a good firm,
• 4:49
  seemed to not know the difference between correlation and causality.
• 4:52
  And I found that kind of offensive that we were selling for
• 4:54
  hundreds of thousands of dollars advice that made zero sense to our clients.
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  And so after two years, completely uninformed, I applied to PhD programs,
• 5:03
  cuz I couldn't think of what else to do.
• 5:05
  And I had no mathematical training,
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  I had not taken anything more than high school calculus.
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  The one math class I took at Harvard was called Math 1A.
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  It was the high school math class that they only gave to students who had
• 5:20
  done incredibly poorly in high school math, which I was one of them.
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  And it was a shock [LAUGH] When I arrived at MIT completely unprepared.
• 5:29
  And I didn't deserve to succeed in our profession, I got really, really lucky.
• 5:35
  I worked hard, too, but I was in the right place at the right time.
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  It was a time at MIT when people put a lot of value on the clever approaches to
• 5:44
  trying to untangle causal effects, or plausibly causal effects.
• 5:48
  And it turned out that was roughly the only thing I was good at.
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  And I managed to stumble into it and was lucky to build a career in that dimension.
• 5:56
  >> Jon Hartley: Amazing, and it was Marty Feldstein who was teaching you EC 10?
• 6:00
  >> Steve Levitt: Yeah, he was in charge of EC 10, but it was a guy named Neil.
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  Boy, can I remember, I can't remember Neil's last name,
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  who actually was teaching us the lessons day by day.
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  But, yeah, it's interesting, looking back on EC 10 ten,
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  what a great course that was.
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  Because it was a mix of grad students really teaching you in a very sensible way
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  the introduction to economics.
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  And then lectures by the most preeminent economists in the world, many of them from
• 6:25
  Harvard, where you got a taste of whatever they were thinking about.
• 6:29
  And it really is a wonderful design for a course.
• 6:32
  And I remember sitting in that class, it was in Sanders Theatre, this big,
• 6:37
  ornate hall that they have on campus, thinking, wow, wouldn't it be awesome if
• 6:41
  one day I could be up on stage and I'd be the one giving the lecture?
• 6:45
  [LAUGH] I never did get invited, so I never did actually go back and
• 6:48
  teach a lecture in EC 10.
• 6:50
  >> Jon Hartley: That's amazing, well, it really just speaks to, I think,
• 6:53
  how powerful that first class economics can be.
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  And even people that don't go on to earning a PhD in economics or
• 6:59
  the profession, just how impactful one class can be on so many people.
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  Think about, all over the years, how many people have taken EC 10,
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  whether it was with Marty Feldstein or with Greg Mankiw, or
• 7:12
  now with Jason Furman and others who are teaching with him.
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  It's amazing, you just think about all those scores of people who have come
• 7:20
  through Harvard and have taken it.
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  I'm curious in terms of your committee and your influences at MIT.
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  I believe Josh Angrist was on your committee, obviously,
• 7:30
  another central figure in the credibility revolution.
• 7:33
  I know you also are very fond of Bob Solow, who recently passed, and
• 7:38
  sort of influenced you, or sort of informed your taste on macroeconomics.
• 7:43
  I'm curious, what was your experience at MIT like?
• 7:46
  >> Steve Levitt: So Jim Poterba was the really big influence on me at MIT.
• 7:50
  Jim is just an incredible advisor, common sense,
• 7:55
  giving, thoughtful, always investin any students?
• 8:00
  I had a strange, I have to say, I had a strange PhD experience.
• 8:05
  I had come from consulting, so I was really glad to be in the PhD program.
• 8:09
  Most people come and they're in the PhD program and
• 8:12
  they think, this is awful compared to undergrad, and they mope around.
• 8:17
  I thought, so it was awful compared to undergrad, but compared to consulting,
• 8:20
  [LAUGH] I felt like I died and gone to heaven.
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  So I loved being there, but I was completely unprepared.
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  I didn't know what was going on.
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  Everything was swirling around me.
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  In my college, colleagues were just so phenomenal.
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  Honestly, I had been used to being the smartest kid.
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  I had always been the smartest kid or close to the smartest kid.
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  But then I got to MIT and I realized, my God, these people are incredible.
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  Not just what they know, but how they think.
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  So I knew from day one I was the odd man out.
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  I mean, I'm not even exaggerating when I say that there was a group of people in
• 8:56
  the in crowd, Austin Goolsby.
• 8:57
  My good friend Austin Goolsby was one of the in crowd.
• 9:00
  And Austin told me that maybe a month into our first year at MIT, the in crowd sat
• 9:05
  down and they made the list of the five people most likely to fail out.
• 9:10
  And I was on that list of five.
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  And there's only one person of the in crowd who thought I was actually might not
• 9:15
  be as bad as everyone else thought.
• 9:17
  And so I was really in a strange place, and
• 9:19
  I couldn't really do the classwork a lot of time, so I didn't worry about it.
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  I just looked around and I said, to succeed in this profession,
• 9:26
  you have to write papers.
• 9:27
  And so instead of spending my time on classes,
• 9:29
  I really spent my time writing papers.
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  I started writing papers right away.
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  And so by the end of my second year,
• 9:36
  I probably had written four or five academic papers.
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  I got a paper into the Journal of Political Economy in my second
• 9:47
  year of my grad program.
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  And I was just doing something different.
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  All I did, really, was go to seminars,
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  try to learn as much as possible, do my own research.
• 9:58
  Yeah, I didn't teach at all, I wasn't a research assistant for anyone.
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  I just did my own thing.
• 10:04
  >> Jon Hartley: Are you like an NSF fellow or something like that?
• 10:06
  >> Steve Levitt: I actually got an NSF fellow my second year.
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  I wasn't informed enough to have applied the first year, so
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  I got it my second year.
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  So I really had nothing to worry about, that covered all my teaching.
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  So I was just there and I had money cause I'd done consulting.
• 10:18
  So I was just churning out research and loving every second of it.
• 10:24
  And then it was super turbo who said, in my third year, hey,
• 10:28
  why don't you apply to the society fellows at Harvard?
• 10:32
  Which was something I'd never heard of, and Bob Solow had been part of it.
• 10:36
  And so that's what got me introduced finally,
• 10:38
  the courage to go talk to Bob Solow, who I've been following around campus for
• 10:42
  the preceding two and a half years.
• 10:43
  And so I applied to that and
• 10:45
  incredibly got that fellowship in the middle of my third year.
• 10:50
  And so then I didn't really have a committee.
• 10:54
  The only person I had I've ever talked to really, was much, was Jim Paterba, and
• 10:58
  then another guy who was a political economist, Jim Snyder,
• 11:02
  who was over in Sloan.
• 11:03
  And so my committee, I don't even think Josh was on my committee.
• 11:08
  I think John Gruber was actually the third one on my committee.
• 11:10
  I hardly talked to Josh at all, I was afraid of Josh.
• 11:13
  I was afraid of everybody,
• 11:14
  pretty much [LAUGH] I hardly talked to anyone while I was there.
• 11:17
  Yeah, so I left there in three years,
• 11:20
  really just having used it as a time to write my own papers and
• 11:24
  to scratch along as best I could in classes without getting kicked out.
• 11:28
  So you went on the market in your third year?
• 11:30
  Well, I didn't really go on the market.
• 11:31
  Yeah, so I left MIT after three years,
• 11:34
  but I got this fellowship at the Saudi Fellows, which lasted for three years.
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  So I didn't go and look for a job.
• 11:40
  So I didn't look for a job until six years were done.
• 11:44
  And by then I had just published so many papers.
• 11:49
  I really had a great run in the beginning of my career.
• 11:52
  >> Jon Hartley: It wasn't even in this very early stage,
• 11:54
  maybe when you were still a PhD student.
• 11:57
  I don't know if this was your JPE paper, but
• 11:59
  I remember you telling the story about how Rahm Emanuel called you up,
• 12:02
  I think asking you about the details of some paper that you'd written.
• 12:06
  This was as a grad student, and
• 12:08
  you're sort of speaking to the power of research and how anyone's able to.
• 12:13
  You don't have to be a professor or
• 12:15
  have one whole ton of amazing prizes to do great research.
• 12:19
  That's very policy relevant.
• 12:21
  Was it Rahm Emanuel who was calling you up when you were a grad student or.
• 12:24
  >> Steve Levitt: Yeah, so you have put two stories together.
• 12:29
  But I wrote a paper on the effect of police on crime.
• 12:32
  And I found, unlike other people before me, that looked like more police reduced
• 12:36
  crime, perhaps not surprising, but it was very surprising to the criminologists.
• 12:41
  And Alan Krueger I think, was somehow involved.
• 12:45
  And I think, if I remember correctly, and I might be confusing my stories,
• 12:50
  I think Alan Krueger put together a binder of papers for Bill Clinton every week.
• 12:55
  And Alan said that Bill was an amazing thinker, and
• 12:58
  he would really look at these papers.
• 13:01
  And he said, in particular, because they're trying to get this crime Bill
• 13:05
  passed that would add 100,000 police officers.
• 13:07
  Bill Clinton had gone over my paper, and
• 13:10
  he said you could see all the notes in the margin and had lots of questions.
• 13:14
  And then Janet Reno apparently carried my paper around in her briefcase,
• 13:18
  dozens of copies, and
• 13:19
  gave it to anyone she could because she was trying to influence the senators and
• 13:23
  the representatives to vote in behalf of the Bill Clinton's crime bill.
• 13:28
  And I tell you, I got completely the wrong idea.
• 13:30
  I had this idea that, like you said, the power of research, and
• 13:34
  anyone can do it and you do good research, and people recognize and affects policy.
• 13:38
  I mean, I was so confused.
• 13:40
  It took me years and years to understand that.
• 13:43
  Number one, usually nobody cares at all about your research.
• 13:46
  No matter how much you love it, it never gets any attention.
• 13:48
  Number two, the quality of my research had nothing to do with it being passed around.
• 13:53
  It was being passed around Washington because it was the only paper that
• 13:56
  supported the position that they had already chosen.
• 13:59
  The policy was chosen first, and then they went for papers.
• 14:02
  And I'm sure they were disappointed that the only piece, the only article
• 14:06
  they could find, that it all supported them, was by some grad student.
• 14:10
  But they took what they could.
• 14:11
  And what I read, the real lesson I learned over time, is that I don't actually
• 14:16
  think that my research or even my writing, more popular writing,
• 14:20
  has ever really fundamentally changed the way any politician thought about anything.
• 14:26
  And that it's just I've come to a different conclusion.
• 14:30
  It was incredibly hard to influence any policy or
• 14:34
  anyone's beliefs by doing research.
• 14:37
  Now, then Rahm Emanuel called me up after this had all transpired,
• 14:40
  trying to get me to come and work for him.
• 14:43
  But unfortunately for Ram, by that time, had a little bit of common sense.
• 14:47
  And so I asked around, hey, what's it like to work for Rahm Emanuel?
• 14:50
  People said, well, if you love being screamed at and
• 14:52
  working 24 hours a day, it's a really good job.
• 14:55
  And I didn't like to be screamed at, and [LAUGH] I didn't really wanna work 24
• 15:00
  hours a day so I politely declined Rahm Emanuel's offer.
• 15:05
  >> Jon Hartley: What a great set of a few stories.
• 15:07
  I'm just curious getting back to credibility revolution here.
• 15:11
  You were a central figure in the credibility revolution, the rise of
• 15:15
  applied micro, good identification, possibly exogenous identification.
• 15:20
  You did a lot of famous early work in applied micro of crime that
• 15:23
  we've talked a little bit about that earned you the John basis Clark medal.
• 15:27
  I'm curious what has changed since those early days in your mind.
• 15:32
  Better data, better methods, more rigor and care when it comes to econometrics and
• 15:38
  possibly exogenous variation after you won the prize?
• 15:42
  Like did that have a serious sort of impact on on your career and
• 15:46
  getting speaking invites and so forth?
• 15:49
  I'm curious like what's changed since those early days of the credibility
• 15:54
  revolution sort of 20,30 years later?
• 15:56
  >> Steve Levitt: So let me just be clear.
• 15:58
  I think I'm really a footnote to the credibility revolution.
• 16:03
  It was the generation before me, Angrist and Krueger and Imbens and
• 16:07
  maybe people like Heckman, I'm not sure who'd you include.
• 16:12
  But I- >> Jon Hartley: Orley Ashenfelter maybe.
• 16:15
  >> Steve Levitt: Yeah, I really felt like a follow-on to it.
• 16:18
  Those guys had set out some methods for thinking about the world,
• 16:23
  and I was just interested in questions and trying to answer them,
• 16:27
  and I was using their tools.
• 16:29
  And I was really mostly asking different questions.
• 16:32
  And economists ask a lot of times about settings where markets weren't applicable,
• 16:38
  like crime, in education, various places.
• 16:41
  And so honestly, I never felt very much like a real economist.
• 16:46
  I certainly didn't feel like I was leading any kind of a charge.
• 16:53
  I was never a leader, I really just enjoyed the act of doing research and
• 16:58
  just did as much as I could.
• 17:00
  I worked hard, I was productive because I loved it, but I wasn't.
• 17:05
  I wasn't a visionary in any way, shape, or form.
• 17:09
  Now, I think what changed, so at the time, the computing was hard.
• 17:15
  I was still getting started when, if you wanted to work on the census,
• 17:19
  you had to get this old magnetic tape and spin the thing.
• 17:23
  I mean, it's crazy what you had to do to- >> Jon Hartley: But
• 17:27
  you're past the age of punch cards at that point?
• 17:29
  >> Steve Levitt: Yeah, no, only as a child did I use punch cards.
• 17:32
  But really, I'll tell you,
• 17:35
  what always happens in academics is a new approach, a new set of ideas come in.
• 17:40
  And what you're calling the credibility revolution, the idea that you'd go out and
• 17:45
  get data and look for natural experimental variations, or something that mimics
• 17:50
  randomized experiment but one in which you as a researcher didn't actually do any
• 17:55
  experimentation, didn't actually control the randomization.
• 17:58
  And it was fresh and it was new, and so if you were out there
• 18:03
  as a young scholar doing that and doing it in original ways,
• 18:08
  there was a huge market for that kind of a student.
• 18:12
  And so a lot of the best people, maybe that's an exaggeration, a lot of people,
• 18:17
  a lot of students were doing it.
• 18:19
  I'm not sure it ever really attracted the best students because it was not complex,
• 18:24
  it wasn't that hard, technically.
• 18:26
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• 18:56
  >> Jon Hartley: Right, and at that time, these great macroeconomists and
• 19:00
  great theory people dominated a lot of these departments still.
• 19:04
  And at that time, and I'm sure the mid-90s, applied micro or
• 19:09
  just applied econ people were sort of in the minority at that point.
• 19:13
  And now, 20, 30 years later, I think it's totally flipped,
• 19:17
  those people are on the strong majority.
• 19:19
  But I'm sure deciding to go embark on a career in applied micro was something
• 19:25
  of a brave thing at that time, in part because you're answering smaller questions
• 19:30
  rather than larger ones, which is fascinating in terms of just the history.
• 19:35
  >> Steve Levitt: Yeah, yeah, I think more in terms of status rather than numbers.
• 19:40
  So at that time, it's a different bicycle, but at MIT,
• 19:45
  the highest status people were probably the theorists
• 19:49
  because we had Jean Tirole and Fudenberg and Oliver Hart.
• 19:54
  We just had incredible theorists there, and so
• 19:56
  the best students wanted to be theorists, okay?
• 19:58
  And if you weren't quite good enough to be a theorist, then you probably wanted to
• 20:01
  be a macroeconomist because we had great macroeconomists.
• 20:04
  And it trickled down, and honestly, the people who were doing what I was doing,
• 20:08
  we were at the bottom of the totem pole status-wise.
• 20:11
  Now, just to be clear, I started out thinking, well,
• 20:13
  I'll try to be a theorist because that's what the high status people are doing.
• 20:17
  [LAUGH] And I pretty much failed.
• 20:19
  I failed at that.
• 20:20
  And then I said, well, the next best thing is doing macro.
• 20:23
  And I completely failed at that too.
• 20:25
  So it wasn't that I said, hey, I'm going to be an applied micro person.
• 20:29
  It was that I ran out of options and that's what was left.
• 20:31
  And it turned out that that's what I was good at.
• 20:34
  But what happened over time was, because it was fresh and new,
• 20:38
  if you just did it competently, you could get a good job.
• 20:41
  But the cycle that happens within academics is as something becomes routine,
• 20:47
  right, so it's really not hard.
• 20:50
  There's a formula for writing almost any academic paper, and
• 20:53
  there's a very simple formula for writing a good natural experiment paper,
• 20:58
  the kind of papers that I was writing as a grad student.
• 21:01
  And once the profession understands the formula and that's formulaic,
• 21:05
  then the problem is you can't get a job.
• 21:07
  You can't get a good job doing that anymore.
• 21:09
  Because when you're on the job market, when you're a young academic,
• 21:14
  you have to convince the faculty who are hiring you.
• 21:18
  Somehow the idea is that technique,
• 21:20
  knowing how to do hard things, technical skills is really valuable,
• 21:25
  or that you know the formula for writing some difficult kinda paper.
• 21:29
  But as soon as it's easy, as soon as anybody could write a natural experiment
• 21:33
  paper, then you couldn't get a job writing natural experiment papers.
• 21:36
  You could still get them published, but.
• 21:38
  So it very quickly, and that's why I say I was in the right place at the right time,
• 21:42
  very quickly, a matter of three or four years after I came out of grad school,
• 21:46
  people were being discouraged from writing those kinda papers because you
• 21:50
  couldn't get good jobs doing it.
• 21:52
  So there was this thought that you should do what had kind of become more structural
• 21:55
  work, right?
• 21:56
  So think more applied theory, so a mix of empirical work and applied theory.
• 22:02
  And eventually two things happened over time.
• 22:05
  So three things happened, first, the technology changed.
• 22:08
  So, as you said, data and computing, that all changed radically and
• 22:13
  led it to be both easier to write these kinds of papers, but also opened up to do
• 22:18
  them much more interesting questions than maybe you could have in the first place.
• 22:24
  The second thing that happened was the true experimental revolution.
• 22:29
  So my colleague John List and others, actually, incredibly late in the game,
• 22:34
  brought experimental economics, where you actually did randomizations,
• 22:38
  into the mainstream.
• 22:39
  And that also, I think, really dampened people's enthusiasm for
• 22:45
  the kind of more idiosyncratic work that I was doing.
• 22:50
  And the third thing was that really, I think the outside options for
• 22:55
  applied economists got much better.
• 22:58
  So people who were sensible, who were applied, suddenly business was really
• 23:02
  interested in their skills, and a lot of those people exited.
• 23:06
  And what was left behind were the more technical, theory driven folks.
• 23:10
  And I think that's really warped our profession away from
• 23:15
  the simple causal idea-driven estimates of things towards
• 23:20
  a much more demanding view of what an academic paper should offer.
• 23:26
  And all those things, honestly really worked against my importance and
• 23:31
  my interest in what was going on in academic economics.
• 23:35
  Now, let me answer.
• 23:37
  You had a couple questions.
• 23:38
  Let me answer another one, which is winning the Clark medal was amazing for
• 23:43
  me because it opened so many doors.
• 23:45
  And in particular, it led to me writing the book Freakonomics.
• 23:49
  And it was stunning to everyone, including me, that that book took off and
• 23:53
  was a bestseller, I sold a bunch of copies.
• 23:56
  And the doors just opened to so many things and within academics, what I
• 24:02
  realized is that my comparative advantage had become getting access to data.
• 24:08
  Once I had written Freakonomics,
• 24:10
  [LAUGH] I could send a signed copy of the book to just about anybody, and
• 24:13
  they'd sit down with me and they'd talk to me, and often they would give me data.
• 24:17
  And so really I changed my research.
• 24:21
  And much of my later research, if you trace my history, goes from being a about
• 24:26
  super clever identification, trying to answer questions by natural experiments,
• 24:31
  to just putting my hands on interesting data that other people couldn't get,
• 24:36
  and trying, often in straightforward ways, to answer questions that I could do.
• 24:42
  And I was actually one of the smartest things I ever did in economics was to
• 24:46
  understand that that was my comparative advantage and to really work at that.
• 24:50
  But the other thing I did discover after I wrote for economics and
• 24:54
  I had these opportunities, was how much fun the real world [LAUGH] Could be if you
• 24:58
  were allowed to do interesting things, and if you had a certain amount of prestige,
• 25:03
  and people would invite you to participate in solving real problems.
• 25:07
  And so for me, that really sadly, I mean, I loved academics when I was doing it
• 25:11
  actively, but it really was part of the death knell for my interest in academics
• 25:15
  is that as much as I loved writing papers, I loved doing other things more.
• 25:20
  And so I started allocating my time differently.
• 25:22
  >> Jon Hartley: That's fascinating, so when you win the John Bates Clark Medal,
• 25:26
  I know there's an AEA committee.
• 25:29
  Is it kind of like the Nobel Prize where they call you super early in the morning
• 25:33
  and they tell you that, or is it just an email?
• 25:38
  I'm curious how did the Freakonomics book deal happen after you won the Clark Medal?
• 25:44
  You sort of wanted to go out and popularize the sort of applied micro
• 25:48
  approach to everything and sort of explain how valuable this sort of approach was?
• 25:54
  Or like, did it sort of come together through unintended means?
• 25:58
  >> Steve Levitt: So on the Clark Medal, it definitely wasn't early in the morning,
• 26:02
  cuz I think they met in US time instead of European time, and so
• 26:06
  I wasn't really privy to what was going on.
• 26:08
  But I just know that I was sitting in my office, I was visiting Stanford that year,
• 26:13
  and I got a call from Avina Stixit, who would never call me in a million years,
• 26:17
  hasn't called [LAUGH] Me before since.
• 26:20
  And he was calling to tell me that I'd won the Clark Medal,
• 26:24
  and then nothing else really happens.
• 26:26
  A bunch of people write you an email, but nothing follows.
• 26:29
  But the only thing that did happen was that the New York Times magazine wanted to
• 26:34
  write a piece on me, and
• 26:36
  Steven Dubner ended up being the reporter who was put on it.
• 26:40
  And then he wrote a piece about me, which created.
• 26:45
  He hates it when I say this, but created this persona about me that was so
• 26:49
  far from the truth, but thought it was delicious and exciting to people.
• 26:53
  Me, as this Indiana Jones of economics,
• 26:56
  who you just posit a question and I stare off into space a little bit.
• 27:01
  I type at my computer and I deliver the answer.
• 27:03
  So it couldn't have been further from the truth.
• 27:04
  But people loved the profile of me cuz he painted the things that were
• 27:09
  weird about me, but he really made me heroic in my weirdness.
• 27:13
  And so then the publishers were interested in me doing a book,
• 27:18
  but I categorically said no.
• 27:20
  And eventually, Stephen Dubner's agent called me up and said, hey,
• 27:24
  why don't you write a book with Stephen Dubner?
• 27:28
  And I said, number one, I have no interest in writing a popular book.
• 27:32
  Number two,
• 27:33
  I'm sure Dubner doesn't want to write a book with me because we honestly didn't
• 27:37
  get along that well when he came out to interview me the first time.
• 27:41
  But we agreed to talk and we shared.
• 27:44
  We had a real commonality,
• 27:46
  which is that neither of us really wanted to write this book.
• 27:49
  Neither of us thought anybody would read a book if we did write it.
• 27:52
  But we both were kinda prostitutes in some sense.
• 27:57
  And so for the right amount of money, we were willing to write this book.
• 28:00
  And interestingly, the right amount of money turned out to be similar for
• 28:04
  both of us.
• 28:04
  And so, much to our surprise, we got offered,
• 28:07
  I don't know, three times that amount of money to write the book.
• 28:12
  And then the only thing that stood in the way of us writing the book is we had to
• 28:15
  figure out how to divide the profit, you know the payments.
• 28:18
  And Dubner, I don't remember the exact numbers, but Dubner came to me and
• 28:21
  he said, hey, I know it's uncomfortable to talk about this, but
• 28:24
  we need to decide to split.
• 28:25
  And he said, I was thinking 60 40.
• 28:29
  And I said, I was actually thinking two thirds, one third.
• 28:33
  And he said, I'm just not willing to write this book for one third.
• 28:36
  And I said, no, no, I was thinking two thirds for you and one third for me.
• 28:40
  And he said, I was thinking 60% for you and 40% for me.
• 28:44
  So it's the easiest negotiation ever, we settled on 50/50.
• 28:46
  We both felt like we got a lot of surplus, and
• 28:49
  we've had a great relationship ever since.
• 28:51
  So we definitely did not enter this with some idea that we were on a mission to
• 28:56
  better the world.
• 28:57
  I mean, we really thought, no one's gonna read this book.
• 29:01
  The only question we had was the immorality of taking all this money from
• 29:04
  the publisher for a book that no one was gonna read.
• 29:07
  And it shocked everyone.
• 29:09
  I mean, from top to bottom, it shocked everyone that this book took off.
• 29:12
  >> Jon Hartley: Well, it's amazing how successful it's been 20 years on and
• 29:17
  still going strong.
• 29:19
  Let me get back to your intellectual transformation at
• 29:24
  UChicago in the Department of Economics.
• 29:28
  I remember in another interview that you did with Kevin Murphy a few years ago.
• 29:33
  You described that when you first joined the UChicago Economics Department from
• 29:38
  being a student at MIT and Harvard, that you hoped to change the UChicago
• 29:42
  department and make it more into sort of the MIT Harvard mold at first.
• 29:46
  And UChicago, being sort of the famous free market Chicago school stronghold,
• 29:52
  famously being at odds with MIT and Harvard,
• 29:55
  the famous Keynesian stronghold in Cambridge.
• 29:58
  But you said that you since become very much more part of the Chicago tradition.
• 30:03
  I think you cited Gary Becker as being one who influenced you greatly in this regard.
• 30:08
  And I remember some stories you had about going the quadrangle
• 30:12
  club with Austin Goolsbee and Gary Becker,
• 30:15
  and how Gary would sort of always know the right answer to how to model things.
• 30:20
  I'm curious, how would you describe your own intellectual transformation since
• 30:23
  you first walked in the door at UChicago as an assistant professor up until now?
• 30:27
  >> Steve Levitt: So I cannot imagine I was arrogant enough to believe that I was
• 30:32
  going to change Chicago.
• 30:34
  So that's not my recollection.
• 30:36
  What I remember, of course,
• 30:37
  you can't really believe what people say they remember.
• 30:40
  What I remember was that I was going to Chicago for two or
• 30:44
  three years because I wanted to get to know the enemy.
• 30:49
  I didn't wanna change them.
• 30:52
  I just wanted to see how they thought so I could respond better to them.
• 30:56
  And what attracted me to Chicago, be honest,
• 30:59
  is the only time I had been on campus to give a seminar.
• 31:04
  It was a free-for-all, and it was crazy and chaotic,
• 31:09
  really unlike any seminar I've given before or since.
• 31:14
  But I was really stunned, I'll tell you just,
• 31:16
  I won't tell you the details of what happened.
• 31:19
  But at the end, Sam Peltzman, who was not a young man,
• 31:23
  he must have been probably in his sixties by then.
• 31:27
  As everyone was walking out of the seminar, he put his arm around one
• 31:32
  of the other older faculty at Chicago, and I could hear with the earshot of me.
• 31:39
  He says, we haven't taken someone apart like that since George Stigler was here.
• 31:43
  And that was the kind of chaos that reigned at Chicago in those days.
• 31:48
  And I was attracted to it.
• 31:49
  And I really wanted to go.
• 31:50
  And people asked me different questions than I'd ever heard before, and
• 31:54
  I liked that.
• 31:55
  So I showed up at Chicago.
• 31:56
  Let me say, before I went there, everyone thought I was crazy to go to Chicago, so
• 32:01
  one of my mentors at Harvard was Andre Schleifer, who himself was from Chicago.
• 32:06
  And when I told Andre that I was going to the Department of Economics of Chicago,
• 32:10
  he said something like, if you do that, I will never talk to you again.
• 32:15
  I said, why not?
• 32:16
  He said, because it shows that you are so
• 32:18
  fucking stupid that you're not worth talking to,
• 32:21
  only a moron would go to the University of Chicago department of Economics.
• 32:25
  But I went, and my goal was to be there a couple of years, and
• 32:29
  I would learn price there.
• 32:31
  I really wanted to learn price there.
• 32:33
  And what was interesting is two things.
• 32:35
  First, I just absolutely got converted to the power of Chicago thinking,
• 32:41
  as I heard people like Gary Becker and Kevin Murphy and
• 32:45
  everyone talking, it just made sense to me.
• 32:49
  It was a different version of the world,
• 32:51
  there's a more serious economic application than really.
• 32:54
  I wasn't an economist at MIT,
• 32:56
  I was a data scientist who was messing around with data, and I loved it.
• 33:00
  Now, what's funny, I'm not good at Chicago price theory, I never really learned it.
• 33:04
  There's nobody, if you talk to people like Kevin Murphy or
• 33:07
  if Gary Becker were alive and he said, hey, is Levitt any good at price there?
• 33:11
  They say, no, no, he's not, but he appreciates it, and
• 33:14
  that's the important thing, and he asks the right questions and he lets us, and
• 33:19
  we help him with it, so no one will confuse me for being good at it.
• 33:22
  But I liked it, and if you look at my research, once I got to Chicago,
• 33:27
  I began writing completely different kinds of papers, and
• 33:32
  it was very influential, and I never left.
• 33:35
  I thought about leaving from time to time, but it really, for me,
• 33:39
  became an incredible intellectual home where I always felt challenged.
• 33:44
  Where I always had this optimism that someday I was
• 33:47
  really gonna get good at price theory.
• 33:49
  But it's [LAUGH] Hard, it turns out that price theory is actually hard to learn,
• 33:55
  and some people seem to get it naturally, and I wasn't one of those people.
• 34:01
  >> Jon Hartley: It's amazing, just the department, and
• 34:04
  I think a lot of people may not realize this, just one.
• 34:07
  How difficult it has been to get tenure,
• 34:10
  or how difficult it was to get tenure in Chicago at that time.
• 34:14
  I think my sense is that they would only tenure people who they felt would be,
• 34:19
  future Nobel Prize winners, and that sort of influenced their hiring.
• 34:24
  So I think really speaks to what they saw in you, and
• 34:28
  it's just amazing to think, too.
• 34:31
  I remember stories about, I think it was Milton Friedman and
• 34:35
  George Stigler trying to hire Schleifer when they did hire him to see Chicago.
• 34:40
  They sort of famously had this photo of them on some sidewalks saying,
• 34:44
  why don't you come join us on the sidewalk?
• 34:47
  And it's amazing just how much the department has changed since then.
• 34:52
  And I feel like with the passing of many great Chicago economists, Friedman,
• 34:57
  Becker, Lucas Stigler, there are far fewer Chicago school
• 35:00
  associated economists now at UChicago than there were a decade ago.
• 35:05
  But there are some like yourself, John List,
• 35:08
  Ken Murphy, Casey Mulligan, Robert Topel and
• 35:11
  others who I think still care about the Chicago tradition in different ways.
• 35:16
  In your mind, is there a future for
• 35:19
  Chicago price theory in the Chicago school?
• 35:21
  My sense of, I guess,
• 35:23
  how Chicago price theory is different from just standard micro first year grab micro.
• 35:29
  Is that there's less care about utility functions and we just go straight to
• 35:34
  demand and supply curves and really are careful in thinking about them.
• 35:39
  And you're still at Chicago the first-year grad micro
• 35:42
  sequence is still called Chicago Price theory and it's still taught differently.
• 35:46
  I'm curious, what do you think about the future of the Chicago tradition,
• 35:52
  the Chicago school, do you think it's in decline or
• 35:57
  do you see it having a long-lived future?
• 36:01
  I know there are other people that I haven't listed
• 36:03
  that they care deeply about it, some who are at Chicago and many who are not,
• 36:07
  there's a big diaspora as well now.
• 36:09
  >> Steve Levitt: So let me divide into two.
• 36:10
  So, I don't know, you know a lot more about macro than I do, but my sense is
• 36:14
  that, so we go back to 70s, there's a real gap between how Chicago thought about
• 36:18
  macro and how Chicago thought about macro compared to the rest of the world.
• 36:22
  And interestingly, the Chicago view essentially won in macro, and
• 36:26
  our students placed well and influenced, and I think everywhere now around.
• 36:31
  >> Jon Hartley: Still placed very well in macro.
• 36:33
  >> Steve Levitt: Yeah, yeah, sort of everywhere, every macro department feels
• 36:38
  a lot like heavily influenced by Chicago, and I think for better, for
• 36:43
  worse, that has been a success story for the Chicago way of thinking.
• 36:48
  It's just really the opposite, I think for Chicago micro,
• 36:53
  we have not had very many students who've gone out and been influential,
• 36:59
  maybe Ed Glaser being a clear counterexample to that.
• 37:04
  And I think in the marketplace for ideas, I gotta say that Chicago price
• 37:09
  theory really has lost and it hasn't caught people's imagination, and
• 37:13
  I remember I was on a call with Milton Friedman long after he left.
• 37:18
  He left Chicago in 1978, but this must have been 20 something
• 37:23
  years later where he was, he was very upset that Chicago price theory
• 37:27
  was not doing well, that it wasn't being appreciated.
• 37:32
  And I remember Casey Mulligan saying, hey, Milton,
• 37:34
  I thought you believed in markets, let's just face it.
• 37:37
  Price theory is losing in the market for ideas, and Milton Friedman got so
• 37:40
  upset about that he believed in markets until it applied to Chicago price theory,
• 37:44
  where he thought that it was the right way.
• 37:46
  So markets shouldn't have any bearing on it.
• 37:48
  But I think that's just the truth, that the people who you think of
• 37:53
  as being the logical heirs to Chicago price theory, the two that come to
• 37:58
  mind really are Ed Glaser and Jesse Shapiro, they're not a Chicago.
• 38:02
  When Kevin Murphy retiring, there just isn't anybody around now,
• 38:08
  really, other than Casey Mulligan, who could really keep the torch going.
• 38:15
  And the movement in terms of textbooks and what people are taught is just so
• 38:20
  away from what I think of Chicago Price three, which is not as mathematical.
• 38:26
  It's more about how you take the simple tools, the very old tools,
• 38:31
  you know, tools that go back to people like Marshall and how you use them.
• 38:36
  It's really the skill that I see in Chicago price theorist,
• 38:40
  the one that I don't have, is how do you look at a problem and
• 38:43
  understand it through the lens of the right tool?
• 38:46
  And it's not complicated, it's usually very simple, once you can see it,
• 38:50
  it's usually not much more than intermediate micro is what gets applied.
• 38:54
  And it's more artistic, and
• 38:56
  I really feel like our field has moved towards technicality,
• 39:01
  harder proofs, more mathematical, and I don't see any going back,
• 39:06
  I think it is essentially lost to posterity at this point.
• 39:11
  >> Jon Hartley: Yeah, and I think a bit of a shame in the sense that it really
• 39:16
  emphasized economic intuition and
• 39:18
  really that sort of taking that being front and center above all else.
• 39:24
  But I mean, at the same rate,
• 39:26
  you see all these great feats of these mathematical economists,
• 39:29
  you think Paul Milgrom and his auction theory, and they've informed FCC auctions.
• 39:34
  So I do understand the sort of counter argument around mathematics and
• 39:41
  rigor, and at Stanford, it's sort of the home of economic theory.
• 39:47
  I see that a lot, and I get where they come from on that, but
• 39:52
  it is a bit of a shame that the Chicago price theory,
• 39:56
  has been diminished in the way that it has.
• 39:59
  But I know Casey Mulligan's Chicago Prize Theory book is coming out in a second
• 40:03
  edition soon.
• 40:04
  So would never write things off completely, but agreed.
• 40:10
  It certainly seems like it's in a bit of a diminished state.
• 40:13
  I wanna turn now to just like the applied micro-legacy at Chicago.
• 40:20
  You are great friends with John List, and
• 40:23
  I think we'll both agreed that list is in line for a Nobel Prize in Economics.
• 40:27
  You and John at Chicago really brought applied micro to a department which even
• 40:31
  now continues to be one of the more structural departments like Yale,
• 40:35
  Northwestern and Stanford, rather than one of the more, I'd say,
• 40:39
  applied micro departments like MIT, Harvard, and Berkeley.
• 40:42
  Paint with a very broad brush here.
• 40:44
  But you and John have been very unafraid when it comes to going into the real
• 40:48
  world, trying to run field experiments, whether it's working with Uber, Johnson's,
• 40:53
  working with Lyft and
• 40:54
  Walmart, you trying to get people to make life decisions based on a coin flip.
• 40:58
  You guys started doing this all at a time when it was probably frowned upon in
• 41:03
  academia in the 2000s.
• 41:04
  Curious, what in your mind has been the greatest contributions and
• 41:08
  legacy of team applied micro at Chicago thus far?
• 41:11
  >> Steve Levitt: So I think John List is amazing.
• 41:14
  He's amazing in two regards.
• 41:16
  First, he came out of nowhere, right?
• 41:19
  He came from the lowest ranked institution around, University of Central Florida.
• 41:25
  And he had a boldness of thinking about the power of experiments.
• 41:31
  It's embarrassing to talk about it now.
• 41:33
  But somehow in my mind, in my training, I just had the idea that you weren't
• 41:38
  allowed to generate your own data, that somehow as an economist,
• 41:42
  you were supposed to take data that were out there and analyze them.
• 41:46
  And then John came along and just started creating his own datasets, and
• 41:51
  they were in silly things about baseball card, buying and
• 41:54
  selling baseball cards, or pins, decorative pins.
• 41:58
  And I remember when I first ran into John's work, thinking, wait,
• 42:02
  you're not allowed to do that.
• 42:03
  And then I thought, wait, wait, of course you are.
• 42:05
  Why did I think you weren't allowed to do that?
• 42:07
  Well, who put that idea in my head that we couldn't be data creators?
• 42:11
  And it was a blindness.
• 42:13
  It was an interesting blindness to a real truth.
• 42:16
  And so bringing John to Chicago, I really worked hard,
• 42:20
  had to fight a lot of resistance to bring him.
• 42:24
  It was one of the best things I ever could have done for Chicago,
• 42:27
  because he's just been a force of nature his entire life.
• 42:31
  And our years,
• 42:32
  maybe we had a seven, ten years where we collaborated on a bunch of papers.
• 42:36
  It's so much fun, so exciting.
• 42:39
  It was interesting for
• 42:40
  me because just like I thought I'd be a Chicago Price theorist,
• 42:44
  I thought I would be good at doing field experiments, and it turned out I wasn't.
• 42:49
  I was never very good at coming up with these great ideas about how to use
• 42:53
  randomization to answer questions.
• 42:56
  John was good at that, and I wasn't.
• 42:58
  So, honestly, I think I give 90% of the credit to John there,
• 43:03
  because John has just been the most forceful.
• 43:06
  John has been unbelievable in the way that he has transformed the way people
• 43:11
  think about the world.
• 43:12
  And along the way, John did a real service to the profession by making people think
• 43:17
  harder about lab experiments, cuz there's real reliance on lab experiments,
• 43:22
  which I think don't turn out to be all that useful in our context.
• 43:26
  And bringing the idea that you can do these randomized experiments.
• 43:30
  Not that John was the first one to do these field experiments, but
• 43:33
  I think he did them in ways that opened people's eyes to the power.
• 43:37
  And so there was a moment there where Michael Greenstone,
• 43:41
  who went away and then came back, Mark Duggan, Roland Fryer.
• 43:46
  There was just a group of us around that were some of my closest friends and
• 43:51
  all awesome economists, and it was so much fun.
• 43:54
  If I look back on my career, those are the years I remember as being the golden years
• 43:59
  where, yeah, I just loved going into work every day, and you never knew what
• 44:04
  you'd be working on the next day, cuz ideas were flying so fast.
• 44:08
  >> Jon Hartley: That's great, and I know you golf a lot with John.
• 44:11
  I mean, John himself is a great golfer, and
• 44:14
  I think is he played at the collegiate level.
• 44:17
  I know you guys were playing so much golf at one point that I think you
• 44:22
  were [LAUGH] almost getting ready for the seniors tour.
• 44:26
  I guess this is maybe an unknown thing, but
• 44:29
  it seems like there's just tons of Chicago faculty members that are super into golf.
• 44:34
  I know Fama and Thaler and many others are, but so much so
• 44:38
  that I think you guys are playing every week at one point, or maybe still are.
• 44:44
  I'm curious, how much was golf, I guess, part of that, I guess,
• 44:47
  culture of going out and taking a break from being in the office, but
• 44:51
  also talking about ideas while you're on the course, obviously, as well?
• 44:54
  >> Steve Levitt: I mean, John and I played a lot of golf.
• 44:59
  And eventually, I would play with Fama many times a week.
• 45:02
  Eugene Fama and I would play, and Richard Thaler would be there sometimes.
• 45:06
  It's unusual where you'd play a threesome and
• 45:09
  you'd be the only one who doesn't have a Nobel Prize who's playing in your group.
• 45:13
  It was just John and I, we were best friends, and
• 45:17
  John was an amazing golfer and I was a wannabe of an amazing golfer.
• 45:23
  I was trying hard to become one.
• 45:25
  And we had a lot of fun with that.
• 45:27
  But I would say our time in the golf course, if you've been around John,
• 45:31
  you know that he's talking about work all day long.
• 45:35
  It's always about your next paper and your next study and how are things going.
• 45:40
  But when I played with Fama and Thaler,
• 45:42
  that was just purely three old guys getting together to play golf.
• 45:46
  That was a very different style of thing, much more like you might think of.
• 45:50
  But, in general,
• 45:51
  I would say the golfing culture was not really important to anything.
• 45:57
  It was just how my friendship with John evolved into something we did.
• 46:02
  But it could have been anything.
• 46:04
  >> Jon Hartley: Well, that's fascinating, and as a lover of golf is why I
• 46:09
  can totally understand how much fun it is to get out there and
• 46:13
  sort of enjoy nature, and a great way to get to know other people very deeply.
• 46:20
  So I think the big sort of news that I'd heard from you recently is
• 46:24
  that you're going emeritus next year.
• 46:27
  You're retiring from academia at the age of maybe 56 or 57.
• 46:32
  I'm curious, why leave so young?
• 46:36
  I guess many, say, Ramsey, Fischer Black, many of them, I guess, died very young.
• 46:43
  Many others left at the top of their game.
• 46:47
  I'm curious, what has changed your, and we've talked about this a little bit, but
• 46:51
  I'm curious, how have your views about academia changed?
• 46:54
  And what has inspired you, I guess,
• 46:57
  to retire from academia at this current stage?
• 47:01
  >> Steve Levitt: I think two different forces are at work here.
• 47:04
  The first one is that maybe between five and ten years ago,
• 47:08
  I worked on three or four projects that I was just incredibly excited about,
• 47:14
  that I felt were some of the best research that I'd ever done.
• 47:19
  Research I did on making decisions where I had people out in the real
• 47:23
  world toss coins and influence what they did.
• 47:27
  I did this study of Hurricane Katrina, which, again, no one cared about it.
• 47:33
  But, well, let me leave that, if you edit, yeah, that's it.
• 47:35
  I did study Hurricane Katrina, where we looked at what the actual effect was on
• 47:39
  people's life outcomes in a quasi-random way.
• 47:41
  Who happened or happened not to be affected by Hurricane Katrina?
• 47:45
  John Donohue and I wrote a paper that was a 20-year follow-up to
• 47:50
  our earlier paper on abortion and crime.
• 47:53
  And it was unlike really any other economics paper I've ever heard of,
• 47:56
  because we made a prediction in our first paper that was published in.
• 48:00
  In 2001 about what would happen over the next 20 years.
• 48:02
  And then we went back to the data 20 years later, and we said,
• 48:05
  did our prediction hold?
• 48:07
  And it was an interesting paper to write,
• 48:08
  because we just simply replicated everything we had done 20 years earlier.
• 48:12
  We really were completely handcuffed by the choices we had made 20 years earlier.
• 48:17
  And it turned out that exactly what we expected to happen, and
• 48:20
  maybe even to a greater degree than we had predicted, had come true in terms
• 48:24
  of abortion seemingly still having an extremely important effect on crime.
• 48:28
  So those were examples of papers I worked on.
• 48:31
  Last one I worked on that I was so excited about was estimating a demand curve for
• 48:37
  Uber, because it makes economists furious when I say it.
• 48:41
  But in some sense, I think it was the first interesting demand curve that
• 48:45
  economists have ever been able to estimate.
• 48:47
  Because to estimate demand curve,
• 48:49
  you have to have price variation along a huge range.
• 48:52
  And we were the first people to have that.
• 48:54
  So these were four papers that I was really excited about, and collectively,
• 48:59
  they had zero impact.
• 49:01
  They didn't publish well, by and large, nobody cared about them.
• 49:04
  And I remember looking at one point at the citations and
• 49:08
  seeing that collectively they had six citations.
• 49:11
  I thought, my God, what am I doing?
• 49:14
  I just spent the last two years of my life, and nobody cares about it.
• 49:18
  And I really think it's true that the way I approached economic problems went out
• 49:22
  of fashion, went out of vogue, and for better, for worse, probably,
• 49:26
  the profession is better for
• 49:27
  having a different set of standards than I was used to meeting up with.
• 49:32
  And that was really discouraging to me.
• 49:35
  And you combine that with the fact that along with Steven Dubner,
• 49:40
  we've got this media franchise where Dubner's podcast,
• 49:44
  Freakonomics Radio, gets a couple million downloads a month.
• 49:49
  If I want to get a message out,
• 49:51
  I can get it to millions of people through a different medium.
• 49:56
  It just didn't make sense to me to keep on puttering around,
• 50:00
  doing all this work, spending years to write papers that no one cared about.
• 50:05
  When I had other ways of getting my ideas out and
• 50:09
  really my interests were elsewhere, I didn't get any thrill.
• 50:13
  Be one thing, if I got a thrill from publishing,
• 50:16
  if I loved the act of publishing, and
• 50:17
  it made me feel great to see my name in some journal, then it would be different.
• 50:21
  But I never cared about that.
• 50:23
  I just liked answering the problems.
• 50:24
  And I realized there were better ways, there were better venues for
• 50:28
  me to answer problems.
• 50:30
  And so really, the question isn't, why am I retiring now?
• 50:33
  The question I should ask myself is why didn't I retire a long time ago?
• 50:36
  It made no sense.
• 50:37
  I've just been, I've thought, I've known for years it's the wrong place for
• 50:42
  me to be.
• 50:42
  And it just took me a long time to figure out how to extricate myself from
• 50:47
  academics and I'm so glad I'm doing.
• 50:50
  It's good for everyone, it doesn't make any sense to.
• 50:53
  It feels to me awful to be in a place where I'm not excited and
• 50:58
  where I'm not contributing materially.
• 51:01
  So for me it feels like a breath of fresh air to be saying,
• 51:05
  hey, I'm not gonna be an academic anymore.
• 51:08
  I'm going to be doing what I really love to do.
• 51:10
  >> Jon Hartley: Well, it's an interesting question I ask this myself a lot too,
• 51:15
  about are we running out of good ideas in academia and
• 51:19
  at least academic economics and finance?
• 51:22
  I'm a little more on the finance side, but I think 50 years ago things
• 51:28
  like the Black Scholes papers were written, Black Scholes and Merton papers.
• 51:34
  And that was an option pricing formula that everyone in Wall street
• 51:38
  around the world eventually used for quite a period of time.
• 51:42
  The price options, what a massive impact that was.
• 51:47
  Or think about the CAPM or think about Paul Milgrom and
• 51:52
  the FCC using their auction theory formulas to auction off spectrum.
• 51:58
  I just think about all these ideas that had so much impact.
• 52:02
  I wonder now, just with so many researchers,
• 52:05
  to what degree there's still low-hanging fruit?
• 52:09
  I think it just gets harder and harder.
• 52:11
  I think at some level to be able to innovate, and so
• 52:15
  the bar just keeps on being higher.
• 52:17
  But at the same rate,
• 52:19
  I wonder too if the marginal impact of an academic is perhaps declining.
• 52:24
  In the same respect Bob Gordon and people like that argue that we're running
• 52:30
  out of ideas and that we've already invented all the great inventions,
• 52:35
  whether it's commercial air travel, AC, automobile, computer, you name it.
• 52:41
  Even things like the iPhone or maybe some ChatGPT, chatbot sorts of
• 52:46
  things are really minor innovations when you think about the long-run.
• 52:51
  >> Steve Levitt: I'm older than you.
• 52:53
  People have always said that.
• 52:54
  People are always saying we've run out of good ideas.
• 52:57
  I don't buy that at all.
• 52:59
  At least when I talk to smart people outside of academics,
• 53:03
  outside of economics, their view is that AI is not minor, AI is enormous.
• 53:09
  And I think within economics, the profession,
• 53:14
  if you can anthropomorphize the profession,
• 53:18
  it has made choices not to focus its attention on things like black scholes.
• 53:25
  It's really right now, I think the profession is very inward looking.
• 53:28
  It's rewarding people who do things that are seen as hard.
• 53:33
  It's really blurring the lines between theory and
• 53:36
  empirics with structural in a way that it's an experiment that I
• 53:40
  personally don't think has worked out very well.
• 53:45
  And so I think that, I mean, the great ideas you're talking about,
• 53:49
  like Black Scholes, are few and far between anyway.
• 53:53
  But the rewards are not there for people who have practical insights,
• 53:57
  are not rewarded greatly in the profession.
• 54:00
  The rewards come to people who make innovations,
• 54:03
  theoretical innovations, right?
• 54:05
  Who come up with new techniques, who do hard stuff that other people can't do.
• 54:09
  So I think in that sense, economics is going to become, my prediction is that
• 54:14
  economics is going to become less and less relevant, more and more inwardly focused.
• 54:20
  And honestly, I wouldn't be that surprised if economics
• 54:24
  ends up going the way of anthropology or sociology.
• 54:28
  Which were prominent and thought to be very promising and
• 54:33
  important disciplines, but have fallen dramatically in their stature
• 54:39
  because they ended up being more arcane and more focused inwardly.
• 54:44
  So I have a really bad feeling about the future of economics, and
• 54:49
  I don't see an easy way to change it.
• 54:52
  >> Jon Hartley: Yeah, it's interesting for sure, and
• 54:55
  I definitely see that structural shift that's going on.
• 55:00
  A lot of people I think are getting back into estimate very complicated models
• 55:05
  rather than simple reduce form ones, and we'll see how that pans out.
• 55:11
  It'll be like a pendulum, and things could come back as well.
• 55:14
  I totally agree with you on the AI optimism point.
• 55:18
  I sort of disagree with Bob Gordon on that.
• 55:21
  It seems to be enormous promise and a lot of very interesting questions that
• 55:27
  I think are propping up, whether it's effects on the labor market or
• 55:32
  effects on really any part of our daily lives.
• 55:36
  >> Steve Levitt: As I think about what I did as an economist, trying to look for
• 55:40
  interesting angles to ask questions, honestly, I think AI,
• 55:44
  if I were young, I think what I would be trying to do would be to figure out how to
• 55:49
  get AI to answer those questions for me.
• 55:52
  I think that the nature of the economist and what the economist does is going to be
• 55:56
  transformed greatly in exactly the way that.
• 55:59
  But the nature of so many jobs are changing, and
• 56:01
  I think almost everyone who does a job has this illusion that AI is never gonna touch
• 56:06
  their job, it's just gonna touch everyone else's job.
• 56:09
  But I really think that the best hope is I look forward for
• 56:13
  economics, the best hope is that AI actually ends up being so
• 56:18
  much better than people at doing the idea generation.
• 56:23
  And the finding of interesting patterns and
• 56:26
  data that could be the key to a real renaissance in empirical economics.
• 56:32
  But we'll see, we'll see how it plays out.
• 56:34
  >> Jon Hartley: Absolutely, we went from the day before ChatGPT 3.5 went public,
• 56:39
  taking a long period of time to write a book or wherever have you abstract.
• 56:45
  Or introduction to an academic paper,
• 56:48
  to a world where you can write a book in a matter of minutes,
• 56:53
  or an introduction in a matter of seconds with the help of a chat bot.
• 56:59
  So I totally agree with you that the productivity and sort of possibilities for
• 57:03
  economists completely changes.
• 57:05
  And I'm sure you must remember what it was like writing empirical papers in the early
• 57:11
  mid 90s, how much that's changed, just with innovations like Stata and so forth.
• 57:17
  This is sort of just the next part of that evolution, and
• 57:22
  I'm sure it just will continue to get more interesting, and
• 57:27
  especially as we can upload data into some of these chat bots.
• 57:33
  So I'm curious, just in talking about the department,
• 57:36
  I feel like this is such a huge shift in your career or
• 57:39
  such a huge announcement that you're retiring from academia.
• 57:44
  I just think about across the years, you've interacted with a lot of colleagues
• 57:49
  at the UChicago Department of Economics and adjacent departments at Chicago.
• 57:54
  I'm curious, there have been so many characters that have come through
• 57:58
  the department over the years and so many great stories.
• 58:00
  It's such a famed department and certainly thinking to the days of
• 58:06
  Friedman Becker, Lucas Sigler has had so much influence.
• 58:11
  I'm curious, in all your travels, who have been some of the most memorable or
• 58:16
  colorful people that you've come across?
• 58:19
  I know Gary Becker was a very big mentor to you, and perhaps one of the people that
• 58:23
  contributes to you staying at Chicago and not going back to Harvard MIT stories.
• 58:28
  I remember Jim Heckman famously saying, you don't do real economics.
• 58:33
  Obviously, he's more part of the world.
• 58:35
  That's one of the nicest things he ever said about me.
• 58:37
  >> Steve Levitt: That was a compliment coming from Jim,
• 58:39
  relative to what he used to say.
• 58:40
  >> Jon Hartley: Well all these Jim Heckman stories I hear there's,
• 58:43
  I remember the times when you and John Lott were both at Chicago coming up with
• 58:48
  some very different ideas about the economics of crime, and
• 58:52
  I heard some of those stories as well.
• 58:54
  I'm curious, across all your years at Chicago,
• 58:57
  what have been some of the more memorable moments for you.
• 59:01
  Whether they're very important sort of career changing moments or
• 59:06
  big sort of epiphany type moments, or
• 59:09
  just the sort of people that you've enjoyed or enjoyed as much as others.
• 59:14
  >> Steve Levitt: Yeah, so on the positive side,
• 59:16
  Gary Becker was an amazing human being, a brilliant economist.
• 59:20
  The time that I got to spend with him and Kevin Murphy, there's no thinker
• 59:26
  on the planet like Kevin Murphy, Kevin is just a phenomenon almost.
• 59:31
  I don't even know how to describe Kevin's insight and his brother.
• 59:35
  I'll tell you one story about Kevin.
• 59:37
  So I was working on a paper with Paul Heaton and Roland Fryer, and
• 59:41
  we were trying.
• 59:43
  So Kevin wasn't doing very much, Kevin never does very much.
• 59:45
  Kevin's just in the background doing his thing, and
• 59:48
  you go tap him on the shoulder when you have a problem.
• 59:51
  So we had a problem, we couldn't figure out how to do one particular thing.
• 59:56
  And so we went and we sat with Kevin, we explained the problem to him, and
• 1:00:00
  Kevin said, I don't know.
• 1:00:01
  I don't know what to do, I don't know how to answer that problem,
• 1:00:03
  I don't know how to solve that.
• 1:00:04
  And I looked up, said, what, kevin?
• 1:00:06
  What are you talking about?
• 1:00:07
  I've never heard you say that before.
• 1:00:08
  How about you just go to the board and let's see what happens?
• 1:00:11
  So Kevin went to the board, and from scratch, it turns out,
• 1:00:17
  ended up deriving principal components analysis from the very basic principles.
• 1:00:25
  And it was interesting cause Paul Heaton, who was a graduate student at the time,
• 1:00:28
  now at Penn, he went back and he looked at and he said, what's so strange is actually
• 1:00:32
  went back in the textbooks, and they don't teach that in the textbooks.
• 1:00:35
  What Kevin just arrived was the initial way that the first people who came up with
• 1:00:39
  principal components, how they derived it.
• 1:00:41
  But he couldn't possibly have ever read that,
• 1:00:44
  he literally just invented it from scratch at the board.
• 1:00:47
  And that was what it was like being around Kevin,
• 1:00:50
  no matter what question you asked him, he could figure it out.
• 1:00:53
  And if he didn't know it, a lot of times he just knew it somehow, but
• 1:00:57
  then he could just figure it out.
• 1:00:59
  And if you're like me and you enjoyed being around genius,
• 1:01:04
  it was just so amazing to spend time with Kevin.
• 1:01:07
  Now on the negative side, my God, some of the bad personality
• 1:01:13
  settings that have inhabited Chicago really, really stand out.
• 1:01:18
  And I gotta be careful, cause John Lott's already sued me in federal court for
• 1:01:22
  things I said about.
• 1:01:23
  Let me not talk about John Lott, cause he is important in the partner.
• 1:01:25
  But Hackman is just such a character.
• 1:01:28
  Amazing economist, an amazing thinker.
• 1:01:30
  I once went to him with another problem I couldn't solve.
• 1:01:34
  And I must have given like three sentence of description when he stopped me.
• 1:01:38
  And he went and he grabbed some old book off his shelf,
• 1:01:41
  it was exactly what I needed.
• 1:01:43
  I don't even know how he could understand from the three sentence I said,
• 1:01:46
  exactly the structure, mathematical structure I needed to solve this problem.
• 1:01:49
  It is an absolute genius, but a nightmare personality.
• 1:01:55
  He eventually decided that he and I were at war for the future of economics,
• 1:02:00
  although I never saw it that way.
• 1:02:02
  And he did crazy things.
• 1:02:04
  I just tell you one crazy thing he did.
• 1:02:06
  At one point, he started a new seminar series.
• 1:02:09
  So in academic departments, to have the labor economic series,
• 1:02:13
  the macroeconomic series, he started a new seminar.
• 1:02:16
  And I'm not even joking, I'm literally telling you the truth.
• 1:02:19
  It was called the Get Out the Sleaze seminar.
• 1:02:24
  And the only thing you needed to be invited to speak was to be critical of me.
• 1:02:29
  So it was an entire semester of some academics, a lot.
• 1:02:34
  Some of them weren't even academic, you didn't have to be an academic.
• 1:02:36
  You just had to not like me and have publicly said, you don't like me.
• 1:02:40
  And he invited guest after guest, whose only agenda was to destroy me,
• 1:02:46
  to come on campus to present their work.
• 1:02:49
  And then I think finally, the department chair, at the end of the semester,
• 1:02:53
  it was really awkward for the grad students.
• 1:02:55
  Because the grad students, [LAUGH] We're being asked to organize this, and we're
• 1:02:59
  frightened of what Heckman's response would be if they didn't follow through.
• 1:03:04
  But I think they felt awkward being around me when they were doing this.
• 1:03:07
  And then we have these important exams that people take at Chicago.
• 1:03:13
  And Hackman would routinely put a question on the exam, which was my work, and
• 1:03:17
  asking the students to say what was terrible about my work.
• 1:03:20
  And that's what you needed to get to progress on, and your PhD was said.
• 1:03:28
  It didn't bother me that much cause I didn't take it that seriously.
• 1:03:31
  But the the extremes that he would go to to try to make life difficult,
• 1:03:37
  not just for me, but for others, really it's stunning.
• 1:03:42
  In a business world, you just couldn't get away with that.
• 1:03:48
  But in academics, there's enough freedom that people can just
• 1:03:52
  do really anti social things and so still get away with it.
• 1:03:57
  And we all hoped that when he won the Nobel prize, He would relax, but
• 1:04:00
  it was just the opposite.
• 1:04:01
  He said, God, it's so bad.
• 1:04:04
  He would be kinda friendly with me, too, on and off.
• 1:04:07
  He'd say, it's so awful,
• 1:04:08
  now they have the Nobel Prize, everybody thinks I'm washed up.
• 1:04:10
  I have to work three times harder,
• 1:04:12
  to prove to them, that I'm just as good as ever.
• 1:04:14
  He really had an unusual person.
• 1:04:16
  He has a really unusual personality.
• 1:04:18
  >> Jon Hartley: Yeah, he's, I feel he's one of those rare economists who gets more
• 1:04:23
  productive after winning the Nobel Prize, like, him and Tom Sargent,
• 1:04:27
  I feel, are still in the most productive years of their lives.
• 1:04:31
  And I feel they should maybe bring back the, there was this award that the AEA
• 1:04:35
  used to give out many years ago, and they actually.
• 1:04:38
  They brought it out at the same time as the Clark medal used to be called
• 1:04:42
  the Friends Walker Medal, and very famous economist long ago.
• 1:04:46
  But the idea was,
• 1:04:47
  this would be Nobel of Nobel, or, best of Nobel kind of economists.
• 1:04:52
  And it was only given out every five years.
• 1:04:54
  And I think, Alan Hansen and a bunch of very famous people won it.
• 1:04:57
  But I wonder if you introduced some sort of a, best of Nobel or
• 1:05:03
  even sort of higher prize, whether you could possibly incentivize more,
• 1:05:10
  Jim Heckman, Tom Sargent like productivity.
• 1:05:14
  But, I mean, they're already doing it, so my hats off to them.
• 1:05:18
  But amazing just too, I guess Jim Heckman's also, I guess,
• 1:05:22
  much more on the structural side of things.
• 1:05:25
  And I think there was really no.
• 1:05:27
  You think about the history of Chicago and where most of the early applied micro
• 1:05:32
  revolution kind of happened, or credibility revolution sort of happened.
• 1:05:37
  It was largely, at Princeton and then MIT and Harvard, for the most part.
• 1:05:42
  And it really wasn't, I think, until you showed up, that there were really any
• 1:05:46
  people doing simple diff and diff or plausibly exogenous type work, and that,
• 1:05:50
  in general, people were still pretty structural at that point.
• 1:05:54
  I'm sure, when you first walked in the door as a young scholar, there were,
• 1:05:59
  I'm sure, many naysayers at that point, not just Jim Heckman.
• 1:06:03
  Was it a bit difficult to.
• 1:06:04
  >> Steve Levitt: Tell you another story.
• 1:06:05
  So, Ed Prescott, who was mostly not in Chicago, but he did visit Chicago,
• 1:06:09
  at least once if not twice.
• 1:06:10
  I remember Prescott, who is a macroeconomist, extremely sophisticated.
• 1:06:16
  Lucas style.
• 1:06:16
  >> Jon Hartley: Even more so, all about theory.
• 1:06:19
  Theory first, if the data doesn't match the theory, then the data is wrong.
• 1:06:24
  [LAUGH] not the theory.
• 1:06:25
  >> Steve Levitt: So, Prescott, he was kind of.
• 1:06:27
  I was afraid of Prescott, I'm afraid of a lot of people.
• 1:06:28
  I was afraid of Prescott.
• 1:06:30
  But one day, I happened to find myself sitting with him.
• 1:06:33
  And Prescott said, I really like you.
• 1:06:37
  I really like you as an economist.
• 1:06:38
  And I said, what?
• 1:06:39
  Why?
• 1:06:39
  He said, cuz you have enough sense, to not mess with theory, right?
• 1:06:44
  You're no good at anything theoretical, so you just stick to point estimates, right?
• 1:06:50
  And I need point estimates, right?
• 1:06:52
  People who do what I do, we need point estimates to calibrate a mouth.
• 1:06:56
  What I hate, is I hate people like you, who think you're good at theory, and then
• 1:07:00
  you get everything confused, but you don't have that problem, you're bad at theory.
• 1:07:05
  [LAUGH] He's right.
• 1:07:06
  I mean, it was a really, it was an insightful statement.
• 1:07:11
  Now, most of the Minnesota, macro people, hated me, despised me.
• 1:07:15
  And he was one of the rare people who didn't mind me.
• 1:07:19
  But, it's funny, everybody, everyone in Chicago was always kind to me.
• 1:07:25
  And Lars Henrisksen and I, a long time,
• 1:07:28
  did a whole bunch of the providing of social goods within the department.
• 1:07:33
  I worked really closely with Lars on so many things.
• 1:07:36
  And intellectually, we couldn't be further apart.
• 1:07:38
  I couldn't understand anything in Lars's papers, and
• 1:07:41
  Lars wouldn't have liked what I was doing.
• 1:07:44
  There was a void, and there's nobody who's really doing much in the department.
• 1:07:47
  And so, Lars and I would get together, and try to make it a better place.
• 1:07:51
  So I have to say, it was an incredibly welcoming department.
• 1:07:54
  And people were really.
• 1:07:56
  It was okay, to do your thing.
• 1:07:58
  And I think the idea was as long as you were the best at what you were doing, or
• 1:08:02
  perceived as being good at what you're doing, it was okay.
• 1:08:05
  And there was a sense of this market and marketplace of ideas.
• 1:08:09
  And Nancy Stokey would say to me, look, I don't understand what you're working on,
• 1:08:14
  but people seem to like it, and that's important.
• 1:08:17
  And that was, I think, a lot of what happened at Chicago, that allowed.
• 1:08:23
  And I think the other thing that really worked at Chicago, is I look back is,
• 1:08:27
  that when it came to new hires, we looked at what they were doing.
• 1:08:31
  And everybody, even it was far from their field, tried to understand it, and
• 1:08:35
  we tried to come to our own decisions.
• 1:08:37
  And sometimes that was disastrous, and sometimes it worked well, but
• 1:08:41
  it meant that we weren't just following the crowd.
• 1:08:44
  And we weren't Harvard or MIT or Stanford.
• 1:08:46
  Those were always places, I think,
• 1:08:48
  that were more attractive to mainstream economists.
• 1:08:50
  So we had to make bets on weird people and
• 1:08:52
  odd people that wouldn't necessarily be attractive to those places.
• 1:08:56
  And John list be a great example, right?
• 1:08:58
  John List with the University of Maryland ag econ department when we found him,
• 1:09:03
  and those were the kinda hires, and the thinking that made Chicago different.
• 1:09:08
  Now, honestly, I'd say, Chicago is almost exactly like the other departments.
• 1:09:13
  You'd be hard pressed, I think, if you blinded everything and you took Stanford,
• 1:09:17
  Chicago, Princeton, MIT, Harvard, it would be hard to find a real
• 1:09:21
  individuality that's so different at Chicago than anywhere else.
• 1:09:25
  >> Jon Hartley: Well, some people would say that Chicago, true,
• 1:09:28
  hardcore Chicago type people, or Chicago, Minnesota people.
• 1:09:32
  Might say, Chicago's kind of gone soft,
• 1:09:35
  since maybe the 90s or the days that you started there in the sense that at
• 1:09:40
  that time I think they were failing out half the students.
• 1:09:44
  And I think that's changed a lot now, as far as I understand it.
• 1:09:48
  I guess the upside of that, obviously,
• 1:09:51
  it's getting thrown out of economics PhD program, is a pretty terrifying thing.
• 1:09:56
  But I've heard stories from people who said, well, it allowed more people to get
• 1:10:01
  accepted and people who otherwise wouldn't have been able to go.
• 1:10:05
  If it was kind of thing where, they took much fewer students but
• 1:10:08
  didn't fill anybody out.
• 1:10:10
  They gave those people an opportunity and allowed the department to take risks on
• 1:10:15
  students who were maybe not getting in elsewhere.
• 1:10:18
  But we're able to get in there, and we're able to really sort of show their master
• 1:10:22
  in those first couple of years of their Econ PhD program.
• 1:10:26
  And I'm sure there's many stories.
• 1:10:28
  How in your mind has the culture sort of shifted?
• 1:10:30
  Obviously, there's the seminar format, which famously,
• 1:10:34
  I think people tend to tear things to shreds.
• 1:10:37
  Some seminars, the money seminar, I think, was started by Friedman, very famous.
• 1:10:42
  Have you sort of noticed that change or had a hand in some of that?
• 1:10:47
  >> Steve Levitt: I don't know if I've had a hand in it.
• 1:10:49
  I haven't really done very much to change it, but it has changed and for better and
• 1:10:53
  for worse.
• 1:10:54
  But I really, I do think it was,
• 1:10:57
  it wasn't really an equilibrium where Chicago was to be,
• 1:11:01
  to try to be an elite department made up of iconoclasts.
• 1:11:06
  It's just a hard thing to replicate and maintain.
• 1:11:11
  And I'll be totally honest, the environment in Chicago was toxic.
• 1:11:15
  It was back in the day, it was mean spirited.
• 1:11:19
  There was, by virtue of everybody being an iconoclast,
• 1:11:22
  there was a lot of bad personalities, and especially for the grad students.
• 1:11:27
  I really don't, I'm totally with you that a virtue of letting in a lot of people and
• 1:11:32
  then flunking them out,
• 1:11:34
  is that some people who wouldn't have had a chance got a chance.
• 1:11:39
  But the toxicity of the environment, and I compare it to when I went to MIT.
• 1:11:44
  At MIT, they brought you in as a PhD student, and they made you think,
• 1:11:48
  they made you believe you were the future of the discipline, and
• 1:11:52
  they treated you like you mattered.
• 1:11:55
  And you practiced, you acted like you mattered,
• 1:11:57
  you acted like you were gonna be a future economist.
• 1:12:00
  Really, we beat the stuffing out of our grad students so
• 1:12:04
  badly that most of them left the program shells of their former self.
• 1:12:09
  So, honestly, I think what might be ideal would be if we had a kindler,
• 1:12:14
  gentler Chicago that still had a little bit more of the iconocost flavor.
• 1:12:20
  But I'm just not sure it's possible,
• 1:12:22
  I'm not sure that we could have accomplished both.
• 1:12:24
  But I definitely think that we've moved in the direction of saving people's
• 1:12:30
  mental health, their sanity, from the chaos that was reigning when I got there.
• 1:12:35
  Which is why Andre Schleifer said, don't go there.
• 1:12:38
  Because it was crazy.
• 1:12:40
  It was completely out of control and maybe that was good for scholarship, but
• 1:12:44
  it was destructive as well.
• 1:12:46
  >> Jon Hartley: Yeah, I recall there was some phrase about using pressure to
• 1:12:51
  make diamonds out of coal or something like that.
• 1:12:55
  I agree with I totally agree how destructive and
• 1:12:58
  terrible that can sort of be on just from a human and compassion sort of standpoint.
• 1:13:04
  I remember taking your economics of crime class at Chicago, which was great in
• 1:13:09
  the sense that it wasn't really just a class about economics of crime.
• 1:13:13
  But was really just an intro to applied micro and everything you needed to know,
• 1:13:17
  and certainly had influence on me and sort of my appreciation for
• 1:13:21
  plausibly exogenous identification.
• 1:13:23
  And even though I'm sort of more of a finance macro person, I remember
• 1:13:28
  in that class, you took the whole class to this gun range at Deb's gun range in.
• 1:13:33
  I think it was Gary, Indiana.
• 1:13:35
  I'm curious what was the goal in your mind with that trip?
• 1:13:38
  And I know, I think every other year,
• 1:13:39
  I think you'd bring a prostitute into class or something like that.
• 1:13:43
  And it's amazing to me in the sense that I don't know if the idea was to
• 1:13:47
  expose what's primarily a progressive student body to something that most would.
• 1:13:52
  Would never do, to this day,
• 1:13:53
  I think that's one of the few times I've ever shot a gun to.
• 1:13:57
  I'm curious, what was your thinking about that class and
• 1:14:00
  the other classes that you taught at Chicago?
• 1:14:03
  Clearly, I think, different from the rest of the pack in terms of
• 1:14:07
  the experiences that students would take from that class.
• 1:14:10
  And I think many people also getting to know you sort of got plugged into your
• 1:14:14
  network.
• 1:14:15
  I got an internship with the Dallas Cowboys out of that,
• 1:14:18
  out of getting to know you through that class.
• 1:14:20
  And I'm sure manother people, students who've come to work with you over
• 1:14:25
  the years, got to know you through that class.
• 1:14:27
  What, in your mind, when it came to teaching at Chicago,
• 1:14:31
  how did you want to do things differently and was.
• 1:14:34
  I guess, intentional that you wanted to sort of partly recruit out of that
• 1:14:39
  class to your various endeavors.
• 1:14:41
  Whether it's been your work with Uber or your work at TGG or your academic work or
• 1:14:47
  other projects that you've had, academic or otherwise, in the real world.
• 1:14:52
  I'm curious, what was your approach to teaching?
• 1:14:54
  >> Steve Levitt: So there aren't really any incentives to teach?
• 1:14:56
  Well, no one really cares how you teach.
• 1:14:58
  But what I quickly learned is that it's a lot more fun to teach
• 1:15:02
  a good course than to teach a bad course.
• 1:15:05
  And part of what makes a class good is if you actually have fun.
• 1:15:09
  And so I put a real premium on trying to make
• 1:15:14
  integrate learning with fun and storytelling and
• 1:15:19
  doing things that would be enjoyable for the kids.
• 1:15:25
  And so the gun range, I think, was a great example because almost nobody who was in
• 1:15:29
  the class would have ever shot a gun.
• 1:15:32
  They thought guns were the worst things ever.
• 1:15:34
  They thought anyone who liked guns must be a complete lunatic and
• 1:15:39
  so it was not only fun gave a chance for us all to have dinner together and
• 1:15:46
  sit in some greasy spoon restaurant and Gary.
• 1:15:50
  But I've heard a number of students say that that was one of the most
• 1:15:54
  transformative things they did in Chicago,
• 1:15:57
  because it made them see someone else's perspective.
• 1:16:00
  It made them see why people like guns and feel the power of guns.
• 1:16:06
  And so when I would bring a call, girlfriend of mine into class and
• 1:16:09
  she would lecture, people would tell me it was the best lecture they'd seen in their
• 1:16:14
  four years at the UFC.
• 1:16:16
  And so I wouldn't say I tried that hard around the edges.
• 1:16:20
  I just tried to be the tiniest bit creative and
• 1:16:23
  to give students experiences and not just lecture to them.
• 1:16:28
  I think we do a horrendous job in higher education,
• 1:16:32
  especially at research institutes, of giving students the kind
• 1:16:37
  of experiences that will transform them into being big thinkers or good citizens.
• 1:16:43
  Whatever we want them to be.
• 1:16:45
  So that in my own little way, I tried to create something that would be memorable.
• 1:16:50
  Because what I found is that when I'd been there at U of C for five years and
• 1:16:54
  the first class I taught came back for
• 1:16:55
  the five year union, I talked with a bunch of students.
• 1:16:58
  They couldn't remember anything from my course.
• 1:17:01
  They could remember nothing.
• 1:17:02
  I remember one student came up to me and said, when I asked what they remembered,
• 1:17:05
  they couldn't remember how to do Lagrangians.
• 1:17:07
  They couldn't anything.
• 1:17:08
  But the one said,
• 1:17:09
  I do remember one time you forgot to pick up your daughter from daycare and
• 1:17:13
  your wife was so mad at you, that was what they remembered about my class.
• 1:17:17
  And when I heard that, I realized, well, I'm teaching the wrong kind of class.
• 1:17:21
  I got to teach a class that has more stories and
• 1:17:24
  less Lagrangians if I want to have impact on people's lives.
• 1:17:29
  >> Jon Hartley: That's fascinating, you're pretty bearish on academia.
• 1:17:33
  We've sort of established that, maybe some hope with AI and some other things.
• 1:17:36
  I'm curious, just on higher education as a whole,
• 1:17:39
  would you describe yourself as being bearish and not very optimistic,
• 1:17:43
  or that it's sort of in need of a deep technological transformation?
• 1:17:47
  >> Steve Levitt: Well, that's a hard question, and
• 1:17:50
  I couldn't pretend to really know the answers.
• 1:17:54
  I don't think we're doing a very good job right now in creating thinkers.
• 1:18:01
  The whole system is really rigged towards memorization and towards tactical or
• 1:18:07
  strategic manipulation of the students to get good grades and
• 1:18:11
  not really about asking big questions about learning.
• 1:18:15
  So I think what we're doing is deeply flawed.
• 1:18:19
  Do I have a really great alternative to it?
• 1:18:21
  No, not really.
• 1:18:23
  I think I'd like to see alternatives to the typical four year college, I think so.
• 1:18:29
  So I think that I would like to see something more like a college GED,
• 1:18:32
  which right now, what is college really?
• 1:18:35
  For many people, college is about the consumption value.
• 1:18:38
  It's about going and having fun and meeting people and it's not about so
• 1:18:43
  much what you learn.
• 1:18:44
  It's about the sickening value.
• 1:18:46
  Look, I'd rather, I'd rather free that up.
• 1:18:47
  So the people who can't afford to spend $60,000 a year to go to a place like
• 1:18:52
  the UFC.
• 1:18:52
  Let them show that they know everything that a student who goes there knows just
• 1:18:57
  by taking a test that proves it.
• 1:18:59
  Now, there are a lot of difficulties around that, but I would like to see that.
• 1:19:02
  But I think hard, these are hard issues.
• 1:19:06
  And one thing we know is that education is extremely resistant to change.
• 1:19:11
  If you look at the Dow Jones components from 1929 or 1915,
• 1:19:15
  you won't even recognize the names of the companies back then.
• 1:19:19
  They don't exist, they're not important.
• 1:19:21
  But if you look at the top 20 universities in the country in 1920,
• 1:19:25
  it's pretty much the same set of schools you have now.
• 1:19:28
  So I don't know.
• 1:19:30
  Those are great questions.
• 1:19:32
  I think that if we were starting from scratch,
• 1:19:35
  we would never create a system like we have.
• 1:19:38
  But at the same time, look,
• 1:19:39
  do people come from other countries to attend schools in the US?
• 1:19:42
  Absolutely, very few people in the US go outside of the country to
• 1:19:46
  attend other places.
• 1:19:47
  We're doing something right in higher end.
• 1:19:49
  I just think that the possibilities are much, much greater.
• 1:19:53
  >> Jon Hartley: Makes sense, absolutely,
• 1:19:54
  it'll be interesting to see how higher education is transformed by AI.
• 1:19:59
  If at all I mean, I guess it's so resistant to change, but
• 1:20:02
  I guess it's been a bit adaptive in the sense that computers are pretty
• 1:20:06
  well integrated as well, and so forth.
• 1:20:08
  I'm curious, just last question here, really, about Freakonomics,
• 1:20:12
  your future and your retirement from academia and what you hope to do.
• 1:20:16
  Freakonomics is such a central part of popularizing the applied micro
• 1:20:21
  approach to questions in the 2000s.
• 1:20:24
  And since then you've got a whole freakonomics radio empire that
• 1:20:28
  continues on 20 years later, going strong.
• 1:20:31
  You've got this wonderful podcast, people who I mostly admire,
• 1:20:35
  one-on-one interviews that you're doing, what are the things that you're
• 1:20:40
  getting most excited about today and enjoying doing most now?
• 1:20:44
  >> Steve Levitt: I spent 30 years just trying to come up with ideas,
• 1:20:47
  trying to really, it's all I did is I was trying to generate ideas and test them,
• 1:20:52
  and it was to the exclusion of everything else.
• 1:20:55
  I really was very narrow, very focused internally.
• 1:20:58
  One thing I really enjoy now is with my podcast is that I'm not
• 1:21:03
  a creator of ideas, I'm more a curator of ideas.
• 1:21:07
  I find awesome people and I get to read what they do and learn about them.
• 1:21:12
  And it's been fun for
• 1:21:13
  me to go from being a producer of knowledge to a consumer of knowledge.
• 1:21:17
  It's really just been enjoyable.
• 1:21:19
  So, for me it's just been great consumption value associated with that.
• 1:21:23
  And I think it's a good balance.
• 1:21:25
  I think it's, I don't know what the future holds for me, but it's definitely been
• 1:21:30
  useful for me to spend some time learning what other people are doing,
• 1:21:34
  rather than focusing on just trying to create things myself.
• 1:21:38
  The other thing I'm working on is I have a center at Chicago,
• 1:21:40
  it's called the risk center, and it's very practical.
• 1:21:43
  We're just trying to go out and help solve social problems.
• 1:21:47
  Taking a view of a mix of academics, a startup mentality,
• 1:21:52
  and a kind of NGO mentality.
• 1:21:54
  Try to take the best of those three different kinds of entities together to
• 1:21:58
  tackle problems.
• 1:22:00
  And we've got a great group of people,
• 1:22:01
  and I wouldn't say we've been that successful yet.
• 1:22:04
  We've had a few wins, mostly we've had losses.
• 1:22:08
  But it's fun,
• 1:22:09
  it's practical, it's about how do you actually get things implemented?
• 1:22:13
  And for me it's a nice antidote to the academic process, where for me, the fun
• 1:22:18
  part of academics was always the idea, get a sense of whether it works or not.
• 1:22:23
  And then 95% of your time is dotting the I's and crossing the t's and
• 1:22:27
  trying to convince referees that, well, you've got.
• 1:22:31
  What I like about the real world is that that ratio is really tilted away.
• 1:22:35
  So that implementation is hard, don't get me wrong, but
• 1:22:39
  all of that time perfecting and
• 1:22:41
  disproving any other possible competing hypothesis, that was never fun for me.
• 1:22:47
  So it's fun to go out, try and patch together the best halfway solution you can
• 1:22:51
  do, and then see if you can get it to work.
• 1:22:53
  So that's really what I spend most of my time doing now.
• 1:22:57
  >> Jon Hartley: Well, that's fascinating,
• 1:22:59
  I know you had a project in the pandemic that was being championed
• 1:23:02
  by the risk center that was all about helping people negotiate their rent.
• 1:23:07
  There's a huge problem in the pandemic, that people were having issues
• 1:23:11
  renegotiating their leases and rent and negotiating to get more favorable terms.
• 1:23:16
  And I remember you sort of worked with some lawyers to just put out some broad
• 1:23:21
  public good sort of documents that people could use.
• 1:23:24
  And my guess is that that's one of your risk success stories.
• 1:23:29
  >> Steve Levitt: No failure, nobody.
• 1:23:30
  >> Jon Hartley: No failure?
• 1:23:31
  >> Steve Levitt: So, we put together a template that was really designed to help
• 1:23:34
  commercial real estate,
• 1:23:36
  to lessen the cost of renegotiation in commercial real estate.
• 1:23:40
  By having a template, you could use that didn't require sophistication, that just
• 1:23:44
  required a landlord and a tenant agreeing to really a one dimensional term about,
• 1:23:48
  [COUGH] Two dimensions, really, how much will you cut the rent in the short run and
• 1:23:53
  how much of that will have to be paid back in the future?
• 1:23:56
  But nobody cared.
• 1:23:57
  I mean, that is the problem that we put it out there and we couldn't get.
• 1:24:01
  I'm not sure anybody actually negotiated a contract using that template.
• 1:24:05
  So, yeah, that's hard.
• 1:24:07
  It's like academics.
• 1:24:08
  It's hard to get people's attention and hard to make things happen.
• 1:24:12
  But I will say it was fun.
• 1:24:15
  It was fun sitting down with the lawyers.
• 1:24:16
  It was fun sitting down with the commercial real estate people,
• 1:24:19
  learning about the problem, trying to come up with a solution.
• 1:24:22
  And had it worked, it might have been amazing.
• 1:24:25
  It might have really done a lot of good for a lot of people.
• 1:24:29
  It didn't, but that's okay.
• 1:24:30
  We learned something from it, and it didn't take more than three,
• 1:24:34
  four days of our time to really do it.
• 1:24:36
  So, although it wasn't a success, it certainly wasn't our worst failure either.
• 1:24:40
  >> Jon Hartley: Well, it's amazing, and I hope there's some more golf in that your
• 1:24:44
  academic retirement as well, in that future.
• 1:24:47
  Steve, it's been a real honor to have you on both as a student of yours,
• 1:24:52
  having taken your class at Chicago and keeping in touch with you over the years.
• 1:24:57
  It's been a real honor to really just talk about your career in full and
• 1:25:01
  what you're still doing now.
• 1:25:03
  I think you've been obviously a transformative part of the University of
• 1:25:06
  Chicago Department of Economics.
• 1:25:08
  So, I really appreciate you coming on.
• 1:25:10
  Been a real honor to be able to interview you here.
• 1:25:13
  >> Steve Levitt: Well, thanks, I'm the past, and hopefully you're the future.
• 1:25:15
  So I'll be watching with interest to see where your career goes.
• 1:25:19
  >> Jon Hartley: Thanks so much, Steve.
• 1:25:21
  Today my guest was Steve Levitt, who is the William B Ogden Distinguished Service
• 1:25:25
  professor of economics at the University of Chicago.
• 1:25:28
  As well as the co-author of the bestselling Freakonomics,
• 1:25:32
  all of its sequels, and co-founder of the Freakonomics Radio Network.
• 1:25:36
  This is the capitalism and freedom of the 21st century
• 1:25:38
  podcast where we talk about economics, markets and public policy.
• 1:25:42
  I'm John Hartley, your host.
• 1:25:43
  Thanks so much for joining us.
• 1:25:44
  [MUSIC]