Our latest Freakonomics Radio on Marketplace podcast is called “Lying to Ourselves.” (You can download/subscribe at iTunes, get the RSS feed, listen via the media player above, or read the transcript below.)
The episode was inspired by a recent poll I saw on Yahoo! Finance:
Yes, there is a Laffer Curve out there, somewhere. But how much are we to believe surveys like this one, or this one or this one? Remember all those people who said they’d move to Canada if George W. Bush were re-elected?
The fact is that we’ve come to rely on polls and surveys to tell us how people will behave in the future. Too bad they are almost completely unreliable!
In this episode, you’ll hear from Steve Levitt, who tells us how he’d respond to a big tax hike; Joel Weichsel from the American Automobile Association, which constantly polls people about how their driving behavior will change based on gas prices; and FiveThirtyEight.com‘s Nate Silver (author of the recent The Signal and the Noise: Why So Many Predictions Fail — But Some Don’t), talking about the reliability (or not) of election polls.
Kai RYSSDAL: Time now for a little Freakonomics Radio. It’s that moment every couple of weeks where we talk to Stephen Dubner, the co-author of the books and blog of the same name. It is “the hidden side of everything.” Dubner, it’s good to have you back.
Stephen J. DUBNER: Kai Ryssdal, thank you for having me back. I know we’re all excited about the second Presidential debate last night. Yes?
RYSSDAL: It was a good one, don’t you think? Interesting.
DUBNER: It was. A lot of, I thought, scintillating talk about taxation, in particular.
RYSSDAL: You need to get out more. But OK.
DUBNER: It did get me to thinking, however, about lying. Now, I don’t mean the lying of the sort that each campaign is accusing the other of doing every two seconds. I mean, Kai, lying to ourselves.
RYSSDAL: All right, go ahead. Because I have no idea where you’re going.
DUBNER: All right, let me explain. A couple of weeks ago, I saw a poll on Yahoo! Finance. It said that France’s wealthiest man is talking about leaving the country to avoid high taxes there. “Would you ever leave the U.S.,” it asked, “to avoid high taxation?” About a third of the respondents to this poll said, “no, I would never leave.” But everyone else was willing to entertain the idea. In fact, another third said they would leave the U.S. if taxes were to go higher than even 40 percent, which isn’t really that much of a stretch.
RYSSDAL: All right. So I’m going to show off here. You ready?
DUBNER: I am ready.
RYSSDAL: All right. So this is the Laffer Curve, right? Arthur Laffer, the economist, he said it, in theory, shows the point at which high taxes make people stop trying to work hard and make money.
DUBNER: That is the theory. The Laffer Curve theory is a bit however like a unicorn –we don’t really know where that cutoff point is.
RYSSDAL: Come on. Unicorns are real.
DUBNER: Sometimes. They may be in California where you live -- I think more real than in some places. I did ask my economist co-author Steve Levitt what he would do if, for instance, he had to pay, let’s say, 50 percent in taxes.
Steven D. LEVITT: "I wouldn’t leave the U.S. But I definitely would work less hard. Maybe not at 50 percent, but at 70 or 80 percent I would spend a lot more time playing golf and a lot less time trying to make money. That’s for sure.”
RYSSDAL: Oh, please! First of all, the man has what – four or five children? How you gonna feed four or five kids, making less money?
DUBNER: So you don’t believe him.
RYSSDAL: Well, here’s what I think: I think he’s an economist and he sees this theory and so he’s talking to the theory.
DUBNER: I wouldn’t say you’re wrong there, but let me also say this: we lie to ourselves all the time. We’re constantly trying to predict how we’re going to behave in the future when something happens. A tax hike. A price change. A Presidential election. And we’re almost always wrong. Take something as simple as driving. The American Automobile Association is constantly surveying drivers. They’ll say something like, “if gas prices stay as high as they are now, or go up, will you drive less?” And people always say, “oh, absolutely!” And then you look at the data and they do not drive less. Here’s Joel Weichsel with AAA:
Joel WEICHSEL: “I think there may be people who lie to themselves, or imagine that they’re doing something that they’re not. But I think there are also people who maybe forget about things that they’ve done.
RYSSDAL: “Forget?” He’s being very polite and saying “we’re lying to ourselves.” That’s what he’s saying.
DUBNER: It’s a synonym. But I will say this: I don’t believe it’s necessarily intentional. One problem with any survey is that the power of suggestion comes into play.
RYSSDAL: All right, but let’s get it back to the debate here, Dubner and the idea of polling and people lying to themselves. I mean, do political polls change behavior, do you think?
DUBNER: Quite possibly and we’re also getting a lot of answers that don’t reflect reality. Think about it, what every poll relies on is one stranger telling the truth to another stranger about the future. So there are many ways in which that answer can go wrong. Nate Silver runs the blog FiveThirtyEight.com. He takes all of these different political polls and analyzes them and weights them depending on how good a poll they are. He says it can be hard even to figure out whether a given person will vote at all.
Nate SILVER: “You can ask Americans and say, ‘are you going to vote?’ But people lie about that, just like they lie about always washing their hands or using condoms or never running a red light or anything else.”
RYSSDAL: I don’t even know what to make of this. Is hope then lost for being able to do this kind of stuff?
DUBNER: I wouldn’t say hope is quite lost, but I will say this: the cardinal rule should be “don’t listen to what people say, watch what they do.” So the next time you hear a friend of yours say, “oh man, if that guy gets elected President, I am out of here. I am moving to Canada!” You go and check back in a year or so. I promise you the odds are pretty good he hasn’t budged an inch.
RYSSDAL: Stephen Dubner – he’ll be back in a couple of weeks. Freakonomics.com is the web site. We’ll see you, man, if you’re still in the country.
DUBNER: Thanks, Kai.