Twenty Years of Freakonomics (with Stephen Dubner)

Stephen Dubner: Thank you, Russ. Very happy to be here.

Stephen Dubner: Yeah. I mean, to jump to the end, it’s been a remarkable experience. I had worked at The New York Times for several years as an editor. Now, I was off on my own as a writer. This was going to be my third book; and my editor at the time, his name was Hugo Lindgren, asked me to write this profile–this guy, Steve Levitt, at Chicago. I knew Levitt’s name only because he had written, by that point, a famous paper with John Donahue, a legal scholar, about the relationship between the legalization of abortion in the United States and the crime rate, arguing that crime ultimately fell, in some large part, because of the legalization of abortion, which led to fewer unwanted children. So this is a big theory and idea that Freakonomics has become known for, because we included it in that book.

I actually turned down the assignment a couple of times because Levitt was not the–I called Levitt, I chatted with him a bit, and I told him, ‘I’m working on this book about the psychology of money.’ And, he says, ‘Oh, God, I know nothing about that. Nothing.’ He said, ‘I don’t know anything about money. I don’t know anything about behavioral economics,’ which was true at the time. Levitt–I think he probably knew Thaler, but they’d never done really much together.

But then, I was going to be in Chicago for something else, a totally different reason–to give a talk on a different book I’d written. And I thought, ‘Let me read some more of Levitt’s papers just to see what he’s all about.’ And I started to read them. I’m like, ‘Oh, my gosh. This guy is so interesting.’ What I was really struck by was that he approached his lane within econ–a kind of applied microeconomist–in a way and with a passion and with a sense of adventure and fun that I tried to approach my lane within nonfiction writing.

He did what he wanted to do. He didn’t follow the crowd. I thought he was a real creative thinker. And so, I went out, and I spent–he tells a story. I think he’s exaggerating a little bit. He said that I asked him for an hour or two for an interview, which–I don’t know–maybe I did in the beginning, but I ended up staying for several days. And that is true. And I remember calling my wife from the hotel after the first day I spent with Levitt, and I said, ‘I have no idea if anyone is going to care at all about this article that I’m writing on this guy, but I am just having such a good time. He’s got an interesting brain. I ask a question that I think I sort of know where he’s going to go with it, then he goes somewhere totally different.’

And also, for me, this was a big deal. I liked economics. I liked economists. I’d read a lot of economics by this point, but as an amateur, as a journalist. I’d also read a lot of psychology, and sociology, and anthropology. That doesn’t make me an anthropologist or a sociologist, and I certainly wasn’t anything like an economist. But Levitt, from day one, really became a teacher for me. The way that he explained a concept, the way you take that concept into a certain data set, the way you try to identify the incentives that might be at play, the way you then look to the data to either support or do not support or refute the reality of those incentives–it was like getting a master class.

After the article came out, there was a lot of interest from a variety of publishers for a book of some kind. People were calling Levitt, asking him to write a book, and he would tell them, ‘Have you ever read my academic papers? You do not want me writing a book.’ People were calling me to write a book because I’m the writer, and I said, ‘Well, I don’t want to write a book about a guy that I just wrote an article about, as interesting as he is, and I’ve got this other book I’m going on.’ Actually, Levitt called me and said–we weren’t buddies at all. We weren’t antagonistic at all, but I was a journalist; he was a subject. But then, he called and said, ‘These people are asking me to write a book. I don’t know what to do.’ I said, ‘Well, if you want to write a book, you need to get an agent to field the requests and figure out who is good, who is bad, what they want, what you want to do.’

He said, ‘Well, do you know an agent?’ I said, ‘Yeah, I have the best agent in the world: Suzanne Gluck with William Morris.’ He said, ‘Well, can you connect me?’ So, I connected them. They talked, they liked each other. And then Suzanne–I mean, the reason I like this story is it shows how many of the things that we think we know–how they got to be that way–didn’t get to be the way we think. If Suzanne Gluck hadn’t had that call, there would have been no Freakonomics, because she said, ‘Why don’t the two of you do this together?’ And I thought, ‘Well, that’s crazy,’ because he was a subject I was writing about as a journalist. But, there was no conflict of interest. It wasn’t like I wrote about him hoping to get a book. Levitt thought, ‘Well, I don’t really know if I like Dubner that much. He’s kind of a pain in the neck. He’s a journalist asking all these questions.’

But then, we started to just talk and hang out, and it was a blast.

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

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

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

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

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

Stephen Dubner: Hmm. Yeah.

Stephen Dubner: Yeah. So, first of all, I very much appreciate your saying that. I obviously agree. I think when anything becomes popular, there’s a legitimate movement almost always to challenge it, whether this is a political movement, a pop culture thing, whatever. That’s just, I think, the nature of humankind almost–especially if it’s coming from within your realm.

The reason the book is written the way it is, is, I believe, because of something I mentioned earlier, which is that Levitt and I were coming from two different traditions where we both really valued open thinking, research, facts, fact-checking, etc., etc.

One of the things about your field–about academic economics–that I really loved when I first started reading econ papers was that, unlike research papers in the other social sciences–psychology, certainly, sociology, anthropology, etc.–they’re all a little bit different. Every discipline has its idiom and its traditions. But, the econ papers, especially the ones written for the better journals, had often a template that I found really attractive, which is: Here is the thesis or argument that this paper is about to make. I’m going to describe the data, the methodology, the challenges, the findings, etc. But, before I tell you why I’m pretty sure that the evidence I’m offering in favor of my thesis is the most compelling set of evidence that would confirm this thesis, let me try to come up with some other possible explanations.

This is what economists do much more often than the other social scientists, in my experience at least. I’m not going to say that I’m 100% authoritative on that, because I’m not a historian of academia, but that’s the way I see things, having read a lot of papers in all these realms.

To me, it feels a little bit more like some of the hard sciences. It’s why I often really enjoy speaking with physicists the same way that I enjoy speaking with economists, because some economists–just like some physicists–are really good at looking at a complex dynamic system, a lot of inputs and a bunch of outputs, and figuring out what the heck is causing what. And that can be a very difficult thing to do, especially in modern society.

Stephen Dubner: That’s right.

Stephen Dubner: Yeah. I think there are a couple of reasons for that. One is: I love journalism, but I think journalism is highly flawed. You know, I was at The New York Times for a bunch of years. There were a lot of great journalists there. There were a bunch of not-great journalists there as well. I had an incredibly instructive period there because my job was–I was an editor at the Sunday Magazine, which meant that I would assign articles to writers, some of whom weren’t Times employees, many of whom were freelancers. Sometimes an assignment that had been assigned elsewhere would come across my desk, and I would be the editor of that, and then I would work with that piece and that writer to get it publishable.

Some of the biggest names in journalism, I would get their raw manuscripts, and I’m like–not that this isn’t very good–although there was a lot of that–it was that this is not very well-reasoned.

I always thought that, to be a good journalist, you need to be at least pretty good at three major areas: research or reporting–you’ve got to find information, material, data, whatever it is.

Then there’s the thinking. That means being a good critical thinker. This dramatic event happened once. How anomalous is it? Well, let’s give it a sense of magnitude. Let’s give it a time series, etc., etc. So, there’s that ability to critically think.

And then, there’s the writing. Very few people, in my experience, are really good at all three of those, and the ones that are are pretty well known for success. But, I think that there’s a lot of journalism that is committed with good intention that is missing at least one of those three.

But, I had a lot of other advantages here. I had a colleague–a co-writer–who was really good at teaching me the nuances to make with these arguments. So for instance, I don’t know how long the section is in the book. It’s probably only, I don’t know, half a page, one page–you might remember–but we decided to–as we’re explaining, I think we’re explaining the degree to which the different things that parents do affect the outcome of their children. And at one point, we’re discussing a bunch of factors having to do with the number of books in the home, visits to cultural institutions, etc., etc., etc. We’re trying to describe how you can persuade yourself that these measurements are accurate, or at least useful. And so, Levitt kept saying, ‘Well, you know–.’ I’d say to him, ‘How do you do that?’ He’d say, ‘Well, we use a regression analysis.’ ‘Okay, what’s a regression analysis?’

And so, Levitt then–I remember having this conversation with him on the phone because he was in Chicago, I was in New York. We talked for hours and hours and hours of him describing exactly how an economist like him or you would use regression analysis to take a set of data–like this set of data that he had, which I think, in this case, was from the National Childhood Learning–NCLS?–

Stephen Dubner: ELCS. What does that stand for?

Stephen Dubner: Yeah, so that’s what I’m saying. Levitt and I would just–it was as if I was a relatively bright, maybe high school sophomore who liked the idea of economics but had never studied it formally. And Levitt, during the course of the book, we basically had an econ masterclass that was built around not just me learning the concepts, but built around using those concepts to explain, to write, to use good rhetoric, to flesh out the research that he had done, and do it in a way that would persuade the listener that what we’re describing is probably mostly accurate, while, as you said, trying to caveat it as much as we can. And also showing our homework as often as we can. [More to come, 20:23]

Levitt wrote a paper called something like–it was something about the overall crime drop in the United States that happened in the 1980s and 1990s, and his paper was called something like “Four Factors that Influenced the Crime Drop and Seven that Did Not,” or something like that.

Stephen Dubner: In the book, we then go through the four and the seven, or whatever the number was; and we explain why it is that, while one might like to believe that, for instance, capital punishment is a huge deterrent against future criminals, the way that capital punishment has historically been carried out in this country, it doesn’t act as a deterrent at all, and the data for that were pretty clear. So, yeah, show the homework, communicate clearly, be extremely transparent and honest with the reader. Those were really the hallmarks of how we were trying to write this book.

Stephen Dubner: I mean, it’s been the experience of a lifetime. I thought of myself as a writer and as a journalist from the time I was old enough to walk. Literally, we had a family newspaper. I was the youngest of eight kids, so it was very hard to get a piece in the family newspaper. My dad was a newspaper man. My mom was actually a better writer than my dad, but she was a full-time mom with eight kids, and she was kind of a farm woman, pioneer hero. My mother was absolutely amazing, a total role model for me.

My dad died when I was a kid, so my mom was the strength of that family. Writing was just a big part of what I did and how I thought of myself. And then started a high school newspaper, wrote for the college newspaper, etc.

Then I got waylaid a little bit. I did music. I’d also always done music, and my first career really was playing in music. I got in a band. We were bad at first. We got better, we kept going, we got a record deal. Moved to New York, and then I decided that I did not want that life after all. We were on the rock star path, and I decided that was not a healthy pursuit for me.

Then I got back into writing, went to grad school for writing. What Freakonomics Radio has been for me is simply a way to, as a writer, have my own project every week where there’s an idea, there’s research, there’s finding the right voices to discuss the research; then there’s interviewing, often, several people. This is all done with the help of a lot of producers that we have on the show. Not a lot, but a small team of great producers that we have on the show.

We interview usually three, four, five people per episode. Then we have a lot of tape; then we take that tape and treat it the way that an economist would treat a big data set. You have to figure out what’s most valuable, what’s most representative, what’s most interesting, etc. Then you put together a script and write narration around it. It’s basically like writing a big magazine piece, or maybe a book chapter, every week.

And it’s exhausting. I wouldn’t recommend it to anyone. You have to be totally bonkers–and bonkers for it–to do it; but I am bonkers for it. I love the learning. I love the community. I love speaking with people who’ve dedicated years of their lives to research and thinking about these, often arcane, but interesting areas.

And then, I love our community of listeners. Every time we do any kind of call-out for information–for instance, we put out a call-out recently. We’re working on an episode about what’s called the doctor shortage–the physician shortage in the United States. Which is a really complicated topic, much more than you’d think. We just put out a call-out. We’d already interviewed a few people. We just wanted a little bit more tape. We wanted to hear from physicians themselves, whatever their experiences were–on the front end, on the back end, medical school, whatever. And we just got, in the last couple of days, this flood of emails–probably, I don’t know, 100, 200 emails–from the most interesting, passionate, well-intentioned people who are so thoughtful about things that go well beyond their daily life of practice.

That is a community that we have built over the years by being credible, by being curious, by being not a jerk. I think just not being a jerk will get you far in journalism, because I think a lot of people you interview, their view of journalism is that someone here is out to get me, out to prove me wrong.

I ask a lot of questions of people, like, ‘I don’t understand how you come to this conclusion. Can you share with me your evidence?’ And, if they give me the evidence and the evidence seems to me to not be very substantial, I’ll say, ‘That evidence doesn’t seem very substantial. How do you know that your finding is right versus what could be another explanation?’ I feel that people who are smart and honest are really good at answering those questions. And, if they’re not, then they’re usually either not that smart or not that honest; or, they’re selling something. A lot of people are selling things. I’m not much of–I don’t go for that, so I try to avoid that.

Stephen Dubner: Well, even worse, though, we asked–I shouldn’t say worse. Better. We asked for voice memos, so it’s emails with voice, so it’s a lot of material to sort through.

Stephen Dubner: Oh. Yeah. I think a lot of things. They’re probably not binary changes. It’s not like I used to believe in Santa Claus, and now I didn’t. Unfortunately, there aren’t that many binary switches. I wish there were. It would make life simpler.

I’ve come to really, really, really think hard about what the best form of–not just government, but the best form of an economy is. I think we’ve all done a lot of thinking on that in the last 10, 12, 15 years. I think we’re at a real–I know the phrase ‘inflection point’ is overused, and I think it means almost nothing to anybody anymore. But, it feels like we’re at a point where enough people are now questioning what the right kind of an economic/political system is, for a lot of people to feel that we’re on really shaky ground.

The first, I would say, five to eight years of my fellowship with Steve Levitt and the other economists around the University of Chicago, it was very easy to subscribe to a certain form of late-period Milton Friedman, Free to Choose ideology, about which I still think there’s a great, great, great deal of value. I would also argue that I think Milton Friedman is quite widely misquoted, misunderstood by his opponents.

But, I think the levels of inequality–it’s not just the levels of inequality. It’s the way in which wealth is being created in the U.S. economy in particular, that is so heightened and so siloed off from the way that the rest of the people who participate in the economy is going. I think that’s a topic that needs a lot of examination, a lot of sunlight.

We’ve done quite a few episodes over the years, and we’ll continue to do, on one avenue of that idea, which is the role of private equity. And when you look at private equity firms–which are made up of people, often very nice people; and I know many of these people, I’m friends with them–and they’re taking in money from investors–who are also very often nice people, well-intentioned people, many of them institutional investors who represent universities, hospitals, and pension funds, all of whom are well-intentioned, all of whom believe in all the good things that a good society has–I do feel that when that amount of money gets rolled up and starts to be applied to all sorts of businesses that, in the past, were smaller scale.

So we’re seeing private equity rolling up. We’ve done episodes on pet care, pet healthcare. You see the roll-ups in pawn shops, car washes, all sorts of human health services–dentists, and doctor’s offices–and so on, and so on. The evidence from people like–I want to say Josh Lerner, who I want to say is MIT [Massachusetts Institute of Technology], but maybe Harvard, maybe MIT–

Stephen Dubner: Yeah. So, the evidence from Josh is kind of mixed on the outcomes for both customers of these firms, employees of these firms. For shareholders, it tends to be good. But, a lot of the more-reported and anecdotal evidence is much worse for customers and employees.

I would say, as a consumer myself, my experience is that when you’re dealing with a firm that you’ve dealt with for a long time, and all of a sudden they start sending 20 emails instead of one, and none of the 20 makes sense, and they’ve all got a legal disclaimer that long at the end that has nothing to do with everything, and you can’t actually figure out what they’re asking you to do; and they’re asking you to do something that they used to do–they’re asking you now to do your own paperwork and applications and security. Take care of your own security hygiene, and so on. This is what it looks like when firms that used to be run pretty well but were more mom-and-pop, are now being ramped up and run by a more distant corporate being.

So, I think we’ve all had that experience. And that is just a shard of the mountain of, I think, the direction that the economy has been heading in, because scale really matters to investors.

So, I think there are a lot of potential downsides of that. I think there are also potential upsides, too. My private-equity investor friends will tell me that they often come into these sectors or firms that no one else wants, and then they turn them ’round and make them better for consumers and employees. And, I know that is true in some cases. But I’ve really–that’s been a big awakening for me.

Stephen Dubner: I agree. I agree. This is a topic that I found myself exploring over and over and over again on Freakonomics Radio, for the very reasons that you said. I think it’s wildly naive for anyone to be a kind of economic anarchist these days while enjoying things like air conditioning and mobile transportation and mobile technology. I think most people understand how hypocritical that is–to say, ‘No, no, no, I don’t like finance, capitalism, etc.’ while most of the tools that I’m using to try to assail it were created by entrepreneurs, inventors, funders, etc., etc. So, let me declare that as a foundation.

It’s why I find–this is going to sound like an oxymoron, perhaps–but I seek out what I would consider representative edge cases. So, what I mean by that is: after I’d done a few pieces about what private equity investment will typically do in a sector like pet healthcare–we did, I think, a two-part series on that where we talked to all different sorts of people from the industry, on all sides of it, and users, and so on. And, by having good, deep conversations with people in their area of expertise, you learn a lot of interesting stuff.

So, for instance, I learned that one of the big reasons that pet veterinary shops, let’s say–whether it’s a surgery shop or a general pet care shop–why they’re so, let’s say, susceptible to a private equity takeover is because they were usually founded by one or two or maybe three vets–whatever–20, 30, 40 years ago. They built a practice; it’s a successful practice. They put their entire lives into it, and now they sure would like to retire and get the benefit. They’d like to sell the business, and the business is worth a lot. They’ve got a reputation, they’ve got clientele, they’ve got institutional knowledge, and so on. So, who do they sell to? Well, what typically would happen in most businesses in the past is the next generation of owner would come from the firm.

So, who are the vets who are now, let’s say, between–and becoming a vet, it’s a very complicated, long, and expensive process. As it should be. Medicine is complicated. And so, you’re dealing with veterinarians who may be between, let’s say, early 30s and late 40s. Well, guess what? They don’t have the money to buy the practice because the world has gotten more expensive to live in. Veterinary school has gotten much more expensive, and a lot of them are still working off their vet school debt.

So, what do you do? Who is the next buyer? Well, the next buyer in that case–the best eligible buyer–is going to be, let’s say, a private equity investor who comes in and says, ‘I like what you do. I like the people you’ve got lined up to take over next. I’m going to give you this price to take over, and now we’re going to modernize things.’

So, in theory, you can see why that happens the way it does, and how it could go well, or how it could go poorly. Many of the wonderful and terrible things that have happened in the world are the result of one or two people who make decisions, and those people either make good decisions or bad decisions, or they’re either good people or bad people.

I don’t mean to make the quadrant that direct. But, Hitler was ultimately a pretty bad guy who was really good at doing bad stuff, but it took a lot to accomplish that. That wasn’t going to happen on its own. Similarly, people who build great things–it takes an unbelievable amount of will, investment, and so on. I would never discount how difficult and expensive it is and how unlikely it is to build any great success, whether it’s within capitalism, academia, and so on. So, I always take that as a given.

When I talk about seeking out a representative edge case, I think of someone like a guy named Pete Stavros at KKR [Kohlberg, Kravis, Roberts, & Co.]. So, after we’d done a couple of episodes on the upsides and mostly downsides of private equity-funded consolidation in the pet healthcare industry, we did a follow-up of sorts where I talked to Pete Stavros, who is a senior partner, senior executive, whatever, at KKR–one of the big private equity firms, one of the biggest, one of the first–who has made it his mission to, within the realm of KKR operations, come up with a plan that would reward the employees of the firms that KKR buys.

So, KKR will buy a firm from the private owners. They will try to improve the operations of that firm. They might try to cut costs. They might try to increase revenues. But, in the meantime, they would give the existing–and maybe even future–employees of that firm a piece of the pie. Which is to say that when KKR would ultimately sell that operation–because private equity firms don’t hang on to these firms for too long; that’s not their model–then those employees would cash out.

So, they become, in essence, an employee-owned firm–to a small degree. The vast majority of it is owned by the corporate, the big investors. But, that, to me, is a way of thinking about this kind of issue, this kind of problem–if you want to call it that–of hyper-intensive, hyper-leveraged, hyper-successful capitalism, understanding that you need to also integrate the human scale–the human scale in this case being: How are you going to treat the people who do the work?

This is, Russ, where I felt like economics as a discipline really needed to level up in the last 30 years, and I think did, and partly through the work of the behavioralists. Now, I know that a lot of economists–a lot of old-school economists, a lot of macroeconomists, certainly–might discount a lot of the work of the behavioralists. And, if we talk about the behavioralists as a camp, generally, we could start with Danny Kahneman and Amos Tversky, who, of course, were not economists but were psychologists. And then Richard Thaler, and others who were psychologists, who began to create this blend that we now think of generally as Behavioral Economics. When I started reading economics papers, I was often a little surprised at how little the humans that economists describe in their models represented any of the humans that I knew.

And, this is now a very familiar argument–that Homo economicus was a kind of, you know, cardboard figure. Now, a very useful figure.

But, I do think that it’s easy, when you’re in the realm of macroeconomics or high-level finance–because the issues you’re dealing with are complicated, difficult, the numbers are big, the data sets are big, you’ve got a lot of leverage–I do think it’s easy to kind of forget about who is on the other end of things. And who is on the other end of things are individual people–employees, consumers, citizens, etc.

I mean, this goes back to why I love Adam Smith. You know, I don’t read Adam Smith to know, you know, what’s the best way to optimize the supply chain for that pin factory in Kirkcaldy, Scotland. I read Adam Smith because–the same way, I think, that I love your book on Adam Smith, too–because he’s thinking about: When you’re facing a change of this magnitude–in that case a period of the Industrial Revolution, where the way we made things was changing drastically and, therefore, import-export was changing drastically–when we make these massive societal changes, how does that affect people? How does that affect the person that goes to work in that pin factory? Now that that person–let’s say it’s the husband in a family–has that job, what does that do to the rest of his family? Is it more income? Is he going to have more kids, fewer kids? Are they going to get more education, less education?

Those are amazingly interesting questions to me. Economists happen to be pretty good at addressing–and often answering–those questions. And, we are in a time now where there are more questions like that than at any time in my life. And so, I think there’s no scarcity of further questions for economists to ask.

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

Stephen Dubner: Yeah. I appreciate your saying that. I do see it that way.

When I quit playing music–which I thought was going to be my life and career forever–and so it was a little bit of a shock when, all of a sudden, it wasn’t. I’d done it for about five years.

So, I was in my mid-20s by the time I quit–and there were three things that I thought I would want to be. Well, kind of four. One was a writer, which I’d always been. So, that was kind of always my main goal. But, the others were a financial advisor–I really liked the idea of helping people figure out how to manage money for themselves and their families because this has been an interest of mine for a long time. I grew up with very little money in an area with very little high-end employment: like, no high-end employment where I grew up as a kid in the country. The best jobs–the richest guys in town were one doctor and one plumber.

And then, the next jobs that everybody encouraged you to go after were construction–highway construction–because it was a state job, good wage. And the best job was to be the flag person on the highway road crew because you didn’t actually have to do any digging. That was the employment model, okay?

So, I had a big adjustment, let’s say, to figure out how to make your way in the world and how to build a career, and so on. By the time I quit playing music, I’d been through college. What I was thinking about were financial advisor, like I mentioned; psychologist–which, again, I would have loved. I love psychology. I love reading psychology. But then I realized I’m much too–I don’t want to help people solve their problems all day. I’m too selfish. I wanted to solve my own problems, and so on.

And then, the other thing I really wanted to be was some kind of teacher.

And, when I went to grad school then, I went to–I got an MFA [Master of Fine Arts] in fiction writing at Columbia University. I would have done nonfiction, but their nonfiction program at the time was very small. Now it’s much, much, much bigger. And, I also got to teach at Columbia, a course–a wonderful course. It was essentially freshman comp. It was called Logic and Rhetoric, and it had been designed by a great Shakespeare scholar. And, I loved teaching it.

And, I realized I wasn’t going to be a very good teacher either, because I was a little bit too selfish about my own writing. I would much rather do my own writing than worry about other students’ writing, and so on.

But, I’ve always had the desire, at least, to be a good guy, to be a good person, to contribute, and so on. And so, even though it may sound crazy in 2025, whenever we are, to think of journalism as a kind of–I’m not trying to hold myself up as any kind of standard-bearer here, but I do believe that the role of the journalist is not just to comfort the afflicted and afflict the comfortable–which is one mantra from The New York Times–and I get it. It’s also to explain the way the world works. It’s not for me to tell you how I think it should work, but it’s really just to describe it. Because it can be complicated.

And so, really all I do is try to seek out people who know a lot, interview them; but then, in the presentation of the show, in the writing of the script, yes, then I’m kind of stepping into the slightly professorial role, or maybe the TA [Teaching Assistant] or the grad student who is teaching the class because the professor is not around.

Stephen Dubner: I think the difference between good journalism and bad journalism is very simple. One is storytelling without data. And, the problem with that is it can take the anomaly and make it seem normal–which news does all–that is literally the definition of news. So, those of us who consume news and complain, like, ‘Oh my gosh, it’s so sensationalistic. If it bleeds, it leads.’ Blah, blah, blah. This has been the complaint since the beginning of news. Dog bites man. Who cares? Man bites dog. Page A1.

So, I get that. The problem is, storytelling needs to have–and I learned this from over the years. I mean, Gary Becker, you mentioned earlier. The discrimination work he did was amazing. But a lot of the work Gary Becker did, when I was reading it earlier–just really learning economics–within the story, you need to include time. Time is really important. If a level of something changes from x to 10x, I need to know if that was in a year or a hundred years. That’s very, very meaningful. I need to know the magnitude of the change. I need to know how representative or how anomalous it is. I need to know what were the incentives that may have changed to produce a different kind of behavior. Was this behavior changed because of vibes in the society? Was it a change because of a new tax law? Was it changed because a bunch of people from one place moved to another place and they brought with them different cultural norms, and so on?

So, yes, storytelling is great; but it’s got to have some rigor, and–and this is what we tried to do with Freakonomics–you’ve got to show your homework. If I want to tell you a story, and I want you to believe it’s true, I need to give you evidence. Simple as that.

Stephen Dubner: It is, but I like it.

Stephen Dubner: Maybe this means I’m ruder than you, but I actually like that question a lot, and I don’t even find it inappropriate.

Stephen Dubner: Yeah, I think it’s a very good question.

I ask more layperson versions of that to a lot of people, like, ‘What is your best evidence?’ I usually start by asking, ‘When you first started thinking about this problem or question, or whatever it is, what did you want to know?’ Okay, that’s where I like to start.

Then I say, ‘Well, where do you go for the data for that?’ Because presumably, if it’s a good question, there have been other people who thought of it, maybe, but couldn’t find the data. So, where’s the data from, and how good are the data, and so on–how reliable are they? And then, I like to ask them, ‘What were you expecting to find when you first started to work with the data? What surprised you? What’s your degree of confidence in your ultimate finding?’ And then, I learn–Richard Feynman is really someone I admire a great deal. He asked wonderful questions, often extremely annoying to the people that were being asked the questions. And he had some other things that made him–I find him remarkable; other people found him annoying for other reasons, including the fact that he didn’t want to accept anybody else’s logic for how they got to a finding. He wanted to do it himself.

It reminds me a little bit of–if you’re a golfer, Ben Hogan and others like to talk about how you got to dig your swing out of the dirt. You need to find your swing. You can listen to people, and there might be some universal truths, but every body is a little bit different, every mind is a little bit different, and so on.

And Feynman was like that. When he wanted to accept something as truth, he had to work it out for himself. So, he would often challenge people. But, Feynman would ask a lot of questions that I really like. One of my favorites is, ‘In a given system,’–whether, if we’re talking about physics, it’s one kind of system, but if we’re talking about economics, it’s another–‘In a given system, tell me something that is particularly scarce and something that is particularly abundant.’ And then you get into why.

And so, that’s where it’s easy to make fun of economics as just a social science, and I do feel it’s different from the other social sciences–especially when you see all the garbage and fraud that’s been associated with especially a lot of psychology over the past bunch of years. And, that’s very painful for the good guys in that realm–the good people in that realm, I should say. And, for me, too, because I’ve known a lot of these people, and we’ve done some episodes on the academic fraud, and it’s very, very, very troubling because I’ve really revered and looked up to a lot of academics over the years, and some of them turned out to be much less than honorable.

But, I do feel that the scientific method, even as practiced in the social sciences, is a phenomenally good method. You have to really try hard with the practice. You have to be very, very specific. You have to be very intentional. You have to be very persistent. And then, you have to find people that are trustworthy and ask them hard questions. And, if you don’t think they’re trustworthy, forget it.

Stephen Dubner: Yeah. I have so little patience for people who say things like that, especially because, if you have ever been involved in making or doing anything and you know how it is made or done, and someone says, ‘Well, no, that is not the way it is made or done.’ This is a little bit of the problem of what social media helps with is, what would you call it? The unempirical denial. Right?

Stephen Dubner: It is very easy to do.

Stephen Dubner: There you go. There you go.

So, the bagel man–let’s see–his name is Paul Feldman. Although I think when we first wrote about him, if I recall correctly, he did not want to be identified at first, but ultimately we did.

My chronology is a little bit off here. I think he first wrote to Levitt after I had written this magazine article about Levitt in The New York Times Magazine. I think that is how he first made contact. And, he said to Levitt, ‘I am an economist.’ I think he used to work in agricultural economics, maybe at the Department of Agriculture in D.C. [Washington, D.C.] He was in the D.C. area. I do’nt remember the details now. Anyway, long story short, he had either maybe semi-retired and started this door-to-door bagel and donut delivery service for offices in the D.C. area. And, he had a lot of data.

So, Levitt was interested. Levitt told me about it. I was interested. I went down to D.C. and met Paul in, I guess it was in his garage, maybe suburban Maryland or Virginia. This was 21 or 22 years ago, so I do not have the details at the top of my head, but I remember meeting him at maybe four in the morning in his garage with his vehicle. Then I think we drove to a regular retail bagel shop, and he picked up his order for the day, knowing what he would need.

And, he had a system where he would go to maybe between 10 and 20 offices per day, and he had different ones on different days, and he would leave them a set amount that he had calculated based on what he thought the demand would be.

And, it was an honor-box system. That was really the key. That was what made it a little bit interesting, is you could then determine how, quote, “honorable” people were, and so on. So, there were years and years of data.

Stephen Dubner: Simple as that. Yeah.

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

Stephen Dubner: Yeah, can’t work; even though millions of people from past centuries would tell you, of course it can work because that is the way it used to work in a lot of places. I remember somebody–it was either maybe Thaler or Tom Gilovich, somebody who taught or teaches at Cornell–talked about a famous farm stand at Cornell in Ithaca. So, of course we know that this can work.

But, yeah, he would say–let’s say I am going to a particular office. This happens to be a defense contractor, or a marketing firm, or the American Diabetes Association. I know how many people have access to this coffee lounge on the third floor, and I am going to say: 50 bagels for them every Tuesday, whatever. And then, when he would come back, if every bagel was a dollar, he is hoping to have $46 and four bagels, or some version thereof.

So, from that, the general finding was that people are pretty honorable. There were a number of findings within that. You are going to have better memory of this than I do, but I think smaller firms probably were a little bit higher-paying than others.

The one controversial finding from that was that, in one of the few offices where he left bagels in different types of floors–an executive floor and a lower-down floor–the executive pay rate was lower. From which some people might have concluded that, ‘You see? The people at the top, they cheat. They are dishonest.’ Another explanation could be: If you are an executive, you are kind of accustomed to stuff being put out for you. And so, the idea that there is a bagel on your floor, you are not really thinking about, ‘There is an honor box; and, a dollar,’ and so on. So, these are deeply inconclusive channels by which to make a big deal out of.

But, we made a little deal out of it by writing about the fact that–and then there were other affiliate associations or associations with–we looked at payments after holidays. We seemed to see a pretty big spike after 9-11, if I recall, which would seem to indicate–

Stephen Dubner: improvement. Improvement, yeah, which would seem to indicate that people felt a renewed sense of honor, duty, honesty, whatever, and so on.

But, anyway, that was meant to be an extremely narrow little story of the way that incentives can and do work. And, I would say the chief incentive there being: if you want something nice like this guy is providing, then you need to be honorable about it.

Now, the unwritten rule was that if the payment rate dropped below–I do not know, whatever it was, 80%, 70%–no more bagels for you. He would stop delivering to you. So, it was not as though it was a wide-open, never-ending trust system. It was a little commerce system in which an economist used what you might call social trust as an incentive to make his business work.

Stephen Dubner: Although you have to weigh that against the lack of having an employee collect the money, which is obviously a big cost savings.

Stephen Dubner: Sorry to interrupt–

Stephen Dubner: I just want to say one thing in defense of even this small data set and why I think it was useful. In a lot of other social science–you know, I remember when I started writing in this general area, before I met Levitt, I remember a psychologist–I think he was a psychologist, maybe a sociologist–I was talking to. I am not going to name him because it does not make him sound so great. He was working on this series of global experiments built around the Dictator Game and the Ultimatum Game, which are these famous experiments where you say, ‘I am going to give you $3; then you can choose to give $1 or $3 of those dollars to someone else.’

And, this guy was telling me that when he was running this experiment somewhere in a distant place–in some relatively low-income distant place–he told me the story that one of the people that he was giving this money to refused to accept any of the money. Zero. And, I said, ‘What do you think that was about?’ And, he told me what it was about. I said, ‘Well, what was it?’ Well, this was a young college professor, and he was wearing jeans with holes in the knees–whether that was thrift or fashion statement, I do not know. And, this elder, the tribal elder, basically said to him, ‘You are trying to give me money, but I see that you cannot even afford pants that don’t have holes in the knees.’ Now–

Stephen Dubner: if that data were just recorded in an experiment and we did not know the reason for that, that would not be very useful data, would it?

Stephen Dubner: Right? So, that is the difference between what I think of as experimental data and field experiments–which John List and other economists have done so much with–is: Real data really matters, and the bagel man–even though it was small, kind of hand-curated data–it was real data, and therefore, it has got some value.

Stephen Dubner: Especially if one of the godfathers of the field is Adam Smith. And, as you wrote in your book, which I really love: We want to feel lovely, and lovely is meaning that we express warm feelings, kind feelings toward other people who deserve it, and that other people express those toward ourselves.

The other big thing I learned–this was something big I learned from a psychologist, from Angela Duckworth, who wrote the book Grit. And, I did a podcast with Angela for a few years. The way she would put it is: the reason that a lot of people will do things or not do things is simply, ‘I do not want to feel like the kind of person–‘

Stephen Dubner: that would do that.’

Stephen Dubner: So, when you read that sentence about what we say an incentive is, it did not sound quite right to me because I think if I were to rewrite that sentence, I might add a word–of an incentive is the ‘mechanism by which,’ okay?

Stephen Dubner: But, that said, I know you think you are disagreeing with me, but I do not think I am disagreeing with you. Because, when you say that no one designs them because that is what the market does–that is what the invisible hand does, and so on: So, someone creates a choice set. Always, right? So, someone sets a price, someone sets a term.

With Paul Feldman–getting back to the bagel guy–he had fixed prices but an option to pay. So, if we had included in that list of people beyond parents, economists, and policymakers, or politicians–whatever we said–if we had included all the people who go into making a market, maybe that would have been more satisfying to you. But, I still think it is people. It is still people who are creating a price system, a mechanism, a context, a choice set, which then gets amended a million times over by the next round of producers and consumers. So, I–

Stephen Dubner: Oh, and by the way, just to finish up on the real estate agents–

Stephen Dubner: It is remarkable how little real estate agents have lost their grip on the high incentive–on the high commission–the relatively–I should not say high commission–the relatively traditional commission of between five and seven percent. It was six for a while; now it is probably five and a half, five and a quarter. And, we did an episode on that recently, too. Even when the NAR, the National Association of Realtors, lost a massive class-action lawsuit and are being really assaulted there, that is essentially a monopoly or a near-monopoly that has done a very good job of maintaining its monopoly power in the face of information coming down the road that you thought would have destroyed information asymmetry–but I do not believe it has. For what it is worth.

Stephen Dubner: Yeah, but a relatively tiny share of American homeowners sell without a realtor.

Stephen Dubner: Either that–well, if we are talking about the thing that they are providing being of great value–if the thing that we are talking about is the ability to price it–I would dispute that vigorously.

Stephen Dubner: I agree. I agree with how you just described it. I would just add onto it that the complex set of interactions are formed, if not knowingly created, by the actions of individuals and small groups.

Stephen Dubner: For instance, when we talk about smoking, for instance, it is easy to look back now from the distance with some horror and say, ‘I can’t believe that really well-credentialed scientists at the best-credentialed universities were willing to do research for the tobacco companies that made smoking sound benign.’

Stephen Dubner: That sounds ridiculous!

Stephen Dubner: How could that happen? Those scientists were responding to a set of financial, and maybe reputational, and maybe intellectual incentives that led them to do that work. We are now starting, I think, to appreciate the same thing about the sugar industry, which was pretty good. The alcohol industry, similarly. So, I am not saying that all the vices are bad. Once you get above zero, I am a big believer in moderation, and so on. But, it’s interesting.

When you talk about the real estate market, your points, I think, are all very well taken. Another market I started thinking about, however, in relationship to it–which is a much harder market to justify, maybe, with economics–is the high-end art market. So, this is a really interesting one to me; we did a series on this. How is it that one piece of work that may be indistinguishable to the lay eye from another one could be worth one-billionth the price? And that is a really phenomenally interesting market to me. And, that is one where the less transparency there is, the better it is for the market, essentially–for the sellers, certainly, and the creators, although the creators often get shut out.

So, look, I think every market is interesting in its own way, and I think many, many markets are different from other, even similar-seeming, markets. So, for instance, talk about monopolies. We are doing an episode right now, a pair of episodes, based on an idea that is absurd and everyone will hate it. But, my thinking is the NFL [National Football League] is a monopoly. It’s a cartel. Phenomenally successful. It is always wanting to expand. They want to get more games per season, which the union has been pretty good at holding out against. Although, they have increased from 12 to 17.

Stephen Dubner: But, I mean, look at it. Baseball plays 162 games a year. Hockey and basketball play 82 games a year. The NFL has 17 regular-season games a year, and yet they make way more money than the rest. So scarcity, obviously, is not hurting them. But the owners would like them to play more games. They are constantly playing overseas games. They would love to expand the League. But that is very hard. It has proven not very successful in the past.

So, what if their expansion were to go down? So, NCAA [National Collegiate Athletic Association] football–top-tier college football–is undergoing a massive change right now because of these big class-action lawsuits. There was Alston, and then there is House. Now, universities are going to be required–I believe required or mandated is the word they used–to pay out at least a certain amount of money, and the athletes get many more rights, essentially.

So, if NCAA football, let’s say at the top level, is becoming professional, well, how about the NFL merge with it and turn it into its kind of farm team? So then, rather than one professional monopoly at the top and all the amateur pyramid below where nobody can legally make anything, what if you have got a system like in the rest of the world, where soccer has multiple tiers?

Well, if you look at the NFL as a market and NCAA as a market, they look very demonstrably similar–observationally equivalent, almost, you might say. Except, the average NFL player–the average NFL contract,I do not know what the average is; I am guessing it is around $6, $7 million a year. Okay? The average NCAA salary is zero.

How did that happen? They are very, very similar markets, very similar competitions. They have leagues, they have fans, they have TV rights. But, in one monopoly market, all the money is going to the organizers, the coaches. You know, there are strength and conditioning trainers for the Alabama football program that get paid more than the president of the University of Alabama.

Stephen Dubner: I see your point. I see your argument now.

I think the way that we wrote about incentives, at least in that bit in the book, can make it sound as though there is someone out there–some individual or institution, or even industry–that has the unilateral power to set prices and/or create incentives, etc. Whereas, you are arguing that once you introduce competition into a system, then competition is the grease in the system that creates better outcomes, at least for consumers.

Stephen Dubner: What was the variance, from low to high?

Stephen Dubner: Yeah. So, the two folks that we wrote about in there–one of them was extremely intellectually gifted and was not just encouraged by his parents but really driven by his parents to excel, to the point where he was advanced through grades earlier on, and ended up going to Harvard, studying math, going to graduate school. Very, very brilliant, but didn’t have the greatest social skills, let’s say. And, felt–

Stephen Dubner: He was. And, he was encouraged to have a high standard of accomplishment. That was considered one of the most important things in that household.

The other guy grew up in a very different household with a very unstable family. He lived with one parent for a while, then the other. The other had a big legal problem; he had done something quite bad, got sent to jail, or maybe even prison. In and out of schools. Part of his extended family was dealing drugs, and so on. And, he somehow ended up at Harvard, too, although as a professor, not as an undergraduate student.

The first guy I described was Ted Kaczynski, the Unabomber, who had every sort of advantage that one could possibly think about, from a mid-century Midwestern family where excellence and social propriety were valued. And yet, something went very, very, very wrong with his life–and with the rest of his family, honestly.

The other guy is a guy named Roland Fryer, who is an economist who is still at Harvard now.

Stephen Dubner: Yeah, I would hope you’d have him at least a couple of times. Roland is a really remarkable character. I also think Roland is just, like, one of the wildest cards in the deck of wild cards, because anyone who tries to predict–Roland happens to be black–if you try to line him up against any kind of ideological doctrine or expectation that you might have, you will soon be first disappointed and then delighted by the breadth and depth of his thinking, I think–

Stephen Dubner: Yeah, yeah.

Stephen Dubner: Yeah. He does that, and he does it on purpose. And he does it with a really good heart, I believe, as well.

So, yeah, this was the way that we wanted to write about the notion that all the things that you think you may be doing right–or wrong–as a parent may be right, or they may be wrong, but, they are one of many factors. This all brings us back to multivariate explanations of complex outcomes. And, if there is anything that is a complex outcome, it is how you, Russ, or I, or Roland Fryer, or Ted Kaczynski–who you become, the person you become. That is a complex outcome.

The one thing I will say–you asked a different question; I am going to apply part of it here–what we would have done differently. I am sure we would have written a very, very, very different book in 2025 versus 2005. But one thing I think we said about parenting that I would amend a little bit is that good parenting probably doesn’t matter nearly as much as good, attentive, loving parents may want. But, I am pretty sure that bad parenting is a pretty big disadvantage. And, it’s painful. When you look around the world and when you see how hard it is for an innocent young person to have their outcomes–their fate, their future–negatively affected by either the family or the environment where they grew up, it’s just heartbreaking.

Stephen Dubner: You don’t have to be an economist, you don’t have to be politically left or right, to believe that everybody should have a chance to prosper, thrive, laugh, make enough money, have whatever kind of family or community they want, etc., etc. And, when you see a lot of people removed from that because of their starting conditions–some people really are starting on third base, and some people are starting in a sandlot.

Stephen Dubner: They are not in the stadium. And so that, I think, is what all of us who use the social sciences and other tools to explore this crazy collage of life–what we are trying to figure out is how can we, on average, raise the tide that lifts all the boats. I think that is all we are trying to do.

Stephen Dubner: Hey, can I say? I think dogs have it figured out. Let’s not forget, I think dogs have some similarities to the modern workforce in 2025. So, all dogs pretty much used to be work dogs. Maybe if you lived in the Pharaoh’s castle or some queen’s castle, you were just a pet, but most dogs were work dogs. Then we invented all these amazing technologies that obviated the need for dogs to work. We turned them into pets. We treat our pets unbelievably well. We often love our pets in ways that are either different, or more intense, or more forgiving, at least, than we love our fellow humans. We spend so much money on our pets. And so, if the future of we humans in the coming AI [artificial intelligence] robot revolution is to be treated by the AIs a little bit like pets are now treated by us, that is not the worst outcome in the world. I am not saying that is a likely outcome; I am saying that wouldn’t be the worst outcome.

Stephen Dubner: I loved it, Russ. Can I just say? We mentioned your Adam Smith book, but I have read a lot of you over the years, and you also have been one of my great teachers in helping me understand why economics is such a valuable way of looking at the world–not just empirically, but philosophically. And sometimes it does take someone with a cold eye to look over the whole ecosystem and say, ‘What is wrong with this picture?’ And economists are very good at doing that. So, I have really benefited a lot from your writing and speaking over the years. So, thank you, Russ.