Tag Archives: economics

Freakonomics Questions Podcast: Too close to home?

ImageHow to Think Like a Freak.

That’s the title of the new Freakonomics book just out this Monday, May 12, and it is also the name of this week’s Podcast. It’s a good show and a good premise. However, as a scientist (well, biologist – but it counts!), I think that calling this a show /book about economics is incorrect. It’s really a show about science. Or at least the application of scientific method to problems that are often not tackled by traditional scientists, but by their more handsomely paid colleagues, economists. Or by their equally unhandsomely paid colleagues, sociologists and psychologists.

It shouldn’t be something I stop to point out, but it is somehow troubling to me to parse science. It probably means more about me than it does about the actual topic to say this though.

Nevertheless, the current episode is a combination Q&A and book promotion. Which is why I need to point out that sometimes it is hardest for us to look critically at the things that are near to us. This is exactly why we are judged by a jury of our peers – people who may be able to relate to us in some way, but who are also not emotionally involved in the crime.

Several things struck me in this episode that I considered writing about. One was the questioner who asked about the current fetishism of bacon. It turned out that the question was examined just as I thought it should be: one part seriously considering the question and one part reading the assumptions and position of the questioner.

I put that one out of my mind. Then there were two questions that brought up the financial motivations of Levitt and Dubner. The first was about whether it might be worthwhile to have a tiered questioning scheme in which listeners could pay money to give their questions higher priority, i.e. the highest tiered questions were guaranteed to be answered on air, while lower tier questions would only be answered if they met other quality standards.



Levitt and Dubner addressed this question well too, saying that it would undermine the quality of the show to do this, while also raising an interesting question about the pricing of these tiers. Would they be priced only to separate the listeners? Or would this actually be meeting some financial goal of the show’s producers.

In the course of the discussion, Levitt said this:

LEVITT: And our podcast is defined by a relationship in which we give it away, and we don’t really do this for money. I’m not sure why we do it, but I don’t think it’s for money. It can’t be for money. And so, to then change the frame that this is about money.

then, backing this up further, when the question about how they could participate in a fundraiser for NPR if this show was not, in some way, about the money:

But that makes me feel bad, we shouldn’t have taken their money. Why would we take their money, we’re just doing this for fun. It feels horrible to take their money.

A second question comes in also questioning the financial motivations of the show’s hosts:

 from Meredith Summers. “Hello, I wonder if it would be at all possible to quantify in financial terms Steven Levitt’s contribution to the University of Chicago? For example, does his fame bring in more students who hope to work with him and learn from him, and is this contribution commensurate with his salary.

This question was considered in a number of interesting ways. First, Levitt made clear that he was paid very well by the University of Chicago, and had nothing to complain about there. (I’m glad to hear this. It always makes me happy to hear about academics doing well. It’s so often the case that academics are disenfranchised from their knowledgable contributions, that it is comforting to know that this does not happen at the best Universities.)

They also spoke about the difference between the way Universities take ownership of inventions (they do) vs literary contributions (they don’t). I expect that this is probably due to the bargaining power of academics at the time that each of these legal questions came up for discussion and the argument that being a professor may not actually drastically help you to write a book, whereas many inventions require the infrastructure that a University supplies). “It reminds you of alcohol versus marijuana in that if you were starting over from scratch there’s no way these two would be so different,” Dubner comments.



But still, the question remained largely unanswered. “Why do the show?”

I think there are several reasons why they do the show. The first, they cover: because it’s fun, and it’s cool to do things that are creative and fun. I would feel the same way.

But the part of the answer that is a little too close to them to either see, or to admit, is that the podcast / radioshow promotes their books. It’s right there in the ‘About’ section of their website. Blah, blah blah, wrote an article. blah, blah, blah, wrote a book. blah, blah. Book sold well. Podcast, blog, etc. etc. were born. Fun, yes. But it all fits together neatly as something they enjoy doing that brings more people in to buy their books so they can spend more time doing what they enjoy doing.

Like the quote that works so well for some people but not others, “do what you love and the money will follow.”

I may be getting a little dark here, but I’m not sure that always works…

Nevertheless, listen to the podcast, buy their books, you’ll love them. They’re filled with good questions and how they can be answered in a scientifically rigorous way. More power to you guys!

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Posted by on May 14, 2014 in Uncategorized


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Making decisions from limited data


Daniel Kahneman was profiled on NPR’s Science Friday Desktop Diaries segment last week. In this segment Flora Lichtman interviews scientist / researchers and used desktop trinkets to get a personal view of the human being behind the science. Daniel Kahneman, who won the 2002 Nobel Memorial Prize in Economic Sciences for his work in psychiatry including 1974’s Judgment under uncertainty: Heuristics and biases published in Science, which helped establish an understanding of people’s predictable irrationality (sounds like another book I enjoyed) in decision making stemming from the belief that severely limited data can provide predictive power. In his own words, he describes this as, “regressive prediction, that is that people make absurdly, extreme predictions on the basis of very weak evidence. If I tell you about this graduating senior and I call her Julie that she read at age four. And I ask you what’s a GPA? You have an answer. An answer comes to mind. I mean, you know, that’s ridiculous. And somehow, it’s a very narrow range of answers, and it’s that sort of answer that comes to everybody’s minds.”

I was struck by something in that and have been trying to find some data on it for a couple hours. The problem is that I’m not sure how to search for it. What I want to know is, ‘is this really so ridiculous?’ That is, has anyone ever gotten data on this? And if so, do we know that it doesn’t correlate?

Because if it does, maybe we (all humans, apparently) are not so silly for believing this. His assumption only makes sense if he is sure that what we are jumping to a conclusion about it wrong. If it’s right, maybe the connection isn’t so spurious.

Perhaps I am making too much out of a short remark, but it did interest me to know whether or not there has been data collected that could answer this question at all. 

My wife has recommended his book, Thinking Fast and Slow, to me several times. Perhaps I should pick it up. 

Please, if you know of any data about this one question (reading age vs academic success) please forward it to me here and I will take a look at it. Or, better yet, write it up on your own blog and we can link to one another.Image

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Posted by on May 24, 2013 in Uncategorized


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RadioLab – Speed

flash-crash-dow-popupWhile listening to the latest RadioLab, “Speed” story about automating stock trading, I could immediately remember being in the kitchen, listening to NPR and hearing the updates on the crashing Dow. The flash-crash of May 6, 2010. Stock analysts were going bananas describing an unprecedented drop in the markets that was both incredibly steep and incredibly deep.

I wanted nothing more than to put any money we had into a Dow indexed fund – it was painfully obvious that this was just a computer problem and that it should correct soon (I thought perhaps over the next few weeks). Of course it was impossible to get into my ING sharebuilder account (a great saving device that everyone should have – I started mine as a poor graduate student putting just $50-100 a month into my account).

But the thing that really struck me as I listened was how like biological evolution the race for speed in stock trading is. It was mentioned that speed always wins in the market, the faster you are, the earlier you can act on key information and make easy-money trades to take advantage of

even minute swings in the price of stocks. (OK, an aside: I can’t ignore it, how is this investing? So much of this segment uncovered the truth about so much big money on Wall Street… it’s not about investing, it’s about taking advantage of the system and making money on glitches and technicalities. It’s not clear how this supports – or even has anything to do with entrepreneurial endeavors.)

The race for speed was compared to an arms race where warring parties take every opportunity to turn an advantage over their peers. But what about diminishing returns on these

investments? Can there be an end to this sort of arms race? Despite the apparent cost and distraction of focusing on details like the length of wire between your home office and the NYSE, the game is unavoidable. Why? Because it IS a game. And both game theory and evolution by natural selection can inform us about why these battles go on, and why they can’t end.

In game theory, there is the economic /  trust game referred to as the prisoner’s dilemma. Here, I lifted this description of the game from wikipedia:

“Two members of a criminal gang are arrested and imprisoned. Each prisoner is in solitary confinement with no means of speaking to or exchanging messages with the other. The police admit they don’t have enough evidence to convict the pair on the principal charge. They plan to sentence both to a year in prison on a lesser charge. Simultaneously, the police offer each prisoner a Faustian bargain. If he testifies against his partner, he will go free while the partner will get three years in prison on the main charge. Oh, yes, there is a catch … If both prisoners testify against each other, both will be sentenced to two years in jail.”

The game’s outcomes are presented in this grid, making the dilemma clear:

Screen Shot 2013-02-11 at 12.12.04 AM

Biggest payoff: convince others that you will keep your silence with them, then sing like a canary and go free while your friends rot in jail.

In this game trust is nearly impossible, but it is the only way both prisoners can benefit. But who can be trusted? Life would be so much easier if we could, but experience tells us that there will always be cheaters in games of trust and it’s best to bet on deception.

Why does this remind me of biology?


On the left, all trees ‘agree’ to keep to a set height and no one gets shaded out. On the right, one cheater takes advantage of the others’ trust and grows tall.

Because evolution works the same way. Every organism does everything it can to get ahead. Think of trees in the forest. If only the trees could come to a deal: “None of us will grow above ten feet tall. We can all save energy that way and be better off.” After all, the whole benefit in growing tall is to monopolize the sun and shade out your neighbors. But as soon as one tree breaks the bargain, all bets are off and the arms race begins again.

Amazingly, if the arms race is allowed to go on, a situation much like that depicted on the left occurs. The only difference is that all the trees have expended much more energy and they all stand taller, evening out at the point that physics and environmental conditions become limiting.

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Posted by on February 11, 2013 in Education


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