Steven Levitt Lecture

at the Steven Levitt lecture,
originally uploaded by FinanceProfessor.

I took a small group to the Steven Levitt(of Freakonomics' fame )Lecture at UB this week. I will give you some highlights soon.

Weird going to an academic lecture (more or less ;) ) in a basketball arena and having the crowd feel like a basketball game.


A few thoughts: overall VERY interesting.

Random comments and notes from the Levitt Lecture in Buffalo.

Before: Seems weird going to an academic lecture in a basketball arena with a few thousand others. Interestestingly a large portion of the audience were high school students which proves something for about economics but I am not sure what. Some possibilities:

1. they have a lower opportunity cost of time than others
2. demand curves slope down and they were offered free tickets.
3. They were told to go by their teachers and thus had more of an incentive

The first speaker was a high-up at UB (I think VP of academic affairs at UB—I THINK) who was good. His best line was: “only by asking the right questions can world make sense.” (or something like that).

The second speaker was Issac Ehrhlich. He spent most of the time introducing Levitt. His best line: “He [Levitt] proved that economics is not the abysmal science it had been known as.”

Levitt then came on. Some of his comments:

• “Incentives are at the heart of what economists do.”
• He then told the story of John S___ an IRS employee who caused 7 million children to disappear. No, he was not a mass murderer but it was his idea to mandate Social Security numbers for children on parents’ tax returns to qualify for deduction. Many had been lying to get the deduction. With this rule change they could not do it anymore. Makes the IRS about $2B per year! One great idea. Unfortunately for him, he worked in government and was not well paid for the idea: he had to fight (and get congressional help) to get a bonus of $25,000.
• His mom was a psychic. His dad was a doctor specializing in “internal gas”. He then told the story of how he chose to get a PHD in Econ and his math difficulties (indeed his story of his first PHD math class was not unlike mine. Only difference is that he overcame his problems ;) )
• His dad told him if he could not compete against smarter competition “in real economics”, choose a niche that others do not want and excel there.
• His favorite story in Freakonomics is that of the drug dealers (See video below).
• Altruism may or may not increase utility, but the research into altruism definitely showed that people care of how they appear to others.
• My favorite story was about his new work on prostitutes. He said that the world’s oldest profession may also be the world’s worst. Big risks, little money etc. He had a prostitute speak to his class. Had to pay her out of own pocket as paying for a prostitute is frowned upon. Among findings: probably more likely to have sex with a police officer than be arrested by one. The type of “service” has changed over time as premarital sex has become more common. Now take the “weird stuff” to prostitutes (Gary Becker thought that up—I might add internet as well—or so I hear!).

Q&A (others Questions were left out)

• Q. On Trickle down economics. (person clearly wanted to hear it did not work)

A. Tough question. Tradeoff between a bigger pie and more equality. Lower taxes do increase economy but also inequality. In the end “we really do not know”.

• Q. How do you come up with some of your metaphors?

A. Having a mom as a psychic who channels dead people and a father who studies intestinal gas really created an atmosphere where anything was ok. This cuts down on his self-censorship.

• Q. On Health Care:

A. Health care is tough. For some reason people expect it for free. Health care not really different. If you want it, you pay for it. Healthcare is a hige share of GNP, but we do get a lot for it….somehow need to encourage innovation. For instance years ago people expected polio to take up large percentage (30%) if healthcare costs. Then vaccine. Polio costs fell. But now it is difficult to keep patents etc, so vaccines are less profitable, so less of an incentive to develop new ones.

Here is an example of what it was like. This was from a few years ago, but VERY VERY similar to what he did. Some of it even in the same words.