PASS has brought in the “Indiana Jones of Economics” for today’s keynote, Dr. Steven Levitt. He’s the author of books like Freakonomics and Super Freakonomics. Steven starts with a discussion about a long time IRS employee John Szilagyi—discusses first names and putting dependent SSNs on the tax form. At first the idea didn’t go over—but on April 16, 1987, 7 million children vanished off the face of earth. Well, not really—they didn’t exist in the first place, as there was no IRS verification. This made the IRS $2B in additional revenue. The story is here.
Incentives and Behavior
Dr. Levitt discusses that story and leads into discussion about incentives, and how incentives drive human behavior. Discussing the difficulty of aligning goals between workers, shareholders and managers. Dr. Levitt discusses how broken education tenure is—his only has to teach 50 hours at the University of Chicago. He spends at least 10 hours a week, just thinking.
Do What You are Good At
He studies small things, discussing controversy about his theory about abortion reducing crime rates 20 years later. Talking about what makes an economist good—it’s not math, it’s basic understanding of how the economy works. Talks about how he wasn’t great at math—had to take Math 101 at Harvard after scoring the lowest score ever on his high school AP math exam.
He starts talking about research into Drunk Driving—and it’s still really bad. Chances of causing fatal crash 8-10x higher than driving sober. Mentions how walking drunk is much more dangerous than driving drunk—a town in Alaska has banned drunk walking.
Economics of Crack
Discusses economists doing a survey—and lacked common sense. “How does it feel to be poor and black?” Discussing a colleague administering a survey to gang members in Cabrini Green. Talks with gang leader—to begin understanding dynamics of gang behavior. It’s discussed here in Sudhir’s book. Discussing looking at gangs financial records. Discusses how gangs are organized very much like a franchised business. Top gang members made 500k/yr. Most drug dealers still live with their mom’s because, being a street level drug deal is a bad deal. It’s 7x more dangerous to sell crack in Chicago, than to be in a war zone
Businesses and Data
Dr. Levitt discusses how his forays into business consulting were abject failures. He starts discussing how poorly most enterprises do with data. Talking about surveying a large company on their hiring practices. Offers data analysis of all hiring, retention and performance data for this enterprise. Negative correlation with testing and employee performance. Businesses have organized themselves in a way to minimize feedback. Talking about the benefits of experimenting with data. Discusses how scared organizations can be of using data. Was fired from biggest client after telling them the truth about their data. Finishes with a audience Q&A.