Should We Really Behave Like Economists Say We Do? A New Freakonomics Radio Podcast

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Our latest Freakonomics Radio episode is called “Should We Really Behave Like Economists Say We Do?” (You can subscribe to the podcast at iTunes or elsewhere, get the RSS feed, or listen via the media player above. You can also read the transcript, which includes credits for the music you’ll hear in the episode.)

You have perhaps come across the phrase homo economicus, which describes a model for human behavior as seen through the lens of economics. In this episode, you’ll hear Freakonomics Radio producer Greg Rosalsky embark on a long and tortuous process to live his life like homo economicus. Is this even possible? If so, is it desirable? Even if it’s better for an individual, is it good for society?

In his quest, Rosalsky is guided by the wise and charming Richard Thaler, the University of Chicago economist who has dragged the homo economicus model into the modern era, helping to pioneer the field of behavioral economics. If you spend any time at all in Freakonomics land, you know how much we admire Thaler. He is the co-author (with Cass Sunstein) of the landmark 2008 book Nudge; and Thaler has just published a wonderful new book called Misbehaving: The Making of Behavioral Economics(The fact that you are reading these words on this site means you will almost certainly enjoy Misbehaving; you should go buy it immediately.)

In the podcast, Thaler counsels Rosalsky on how to get a seat on the subway, how to play the dating market, and whether to pay for public goods like free music in the subway. Rosalsky also ponders whether voting is a rational act, receiving advice in this realm from Bryan Caplan, author of The Myth of the Rational Voter (whom you heard from in our “We the Sheeple” episode as well as in “The Economist’s Guide To Parenting“). Rosalsky also draws on the economic wisdom of Katherine Milkman, Mancur Olson, and Gordon Tullock.

I am most curious to hear what you think of Greg Rosalsky’s journey of self-discovery — and whether it made you more, or perhaps less, likely to embrace the bedrock truisms of economics. In any event, he did a fantastic job with this episode and I am sure you love it.


Imzan Akbar

Hi, Guys,

Being homo economicus I just torrent downloaded your when to rob a bank. when its free why pay for it right!
hope you guys dont mind.

nobody special

I could be wrong about this, but I thought that everything in that book was already freely available in the archives here (what's more, without the insightful reader comments).

Jared Brautigam

I was listening to "Should We Really Behave Like Economists Say We Do?," and was thinking about the free rider problem. It was said that if we were all econs, public goods, such as street musicians, would possibly cease to exist. However, wouldn't the econ weigh the long term cost of not paying for public goods and decide the minimum amount to give that will keep the public good going?

Enter your name...

I suspect that homo economicus would determine the minimum amount needed to keep the public good, and then tax everyone else to pay for it, so that his own contribution was as low as possible.

moe

Seems like your take this Homo Economicus is pretty pedestrian. The most natural path I see him or her taking is, moving immediately into the black market. In the black market, you instantly increase your profits by 20 to 50 percent because what you’re doing is illegal. Higher risk, higher return. I also see him enslaving a bunch of people. The best way to make a profit is to find people to work for the lowest possible margin, isn’t it? It worked in ancient Egypt, Greece and Rome and these are the cultures our forefathers worshiped so it makes sense that America appropriates slavery at its inception. Today, technically it’s illegal, but corporations still scour the globe to find people who’ll work for close to nothing to get work done. Until robots can do it and maintain themselves. The best way to make a profit isn’t to actually do the work, it’s to get others to do the work for as little as possible. This is why sex trafficking booms as a business as transportation and communication become cheaper – it’s easy money. Especially if you see the women as disposable. (Homo Economicus’s perspective, not mine.)

In the black market, you don’t pay taxes. There’s no regulation. You pay protection money to local authorities/ politicians, and even the law looks the other way. This is the way the mob operates, correct? Las Vegas anyone? In the black market when someone comes along with a competitive advantage, you kill them. (As opposed to suing the hell out of them over patens, buying them outright or running a smear campaign with your PR team/ pocketed politicians) Then you appropriate their advantage. Homo Economicus seeks true laissez faire capitalist spaces, and can appear to be a very unseeming character from the outside. Then he buys a terrestrial broadcast network and holds anyone at media gunpoint who dares question his tactics (A la Jack Welsh/ Rupert Murdock.) And then he resides in a posh excusive area that keeps the riff raff at bay on the municipal dime, with a few private security guards to boot.

On the upside, Homo Economicus would quickly rise to power and influence in a community / society and life would be pretty peaceful, if everyone stays in line.

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Rich Jeschelnig Jr.

I had an idea that I thought you may find interesting. I have sent it to many sorts of people and have showed it to many people. The reaction is get is typically positive.
I was hoping you would take the time to ponder it. The website i listed has the more detailed idea but I will do a short description here.
Could we make all American (state side)manufactured goods 100% federally tax deductible from personal tax bill and combine that with replacing the mortgage interest deduction with a mortgage principal deduction?
Could it be economically feezable without starving the government of cash?
Thanks in advance for any comment.
Rich Jeschelnig
Rjeschelnig@gmail.com

https://sites.google.com/site/buyamericanmadeact/home?pli=1

MC

The concept of behavioral economics is relatively young in terms of academic disciplines. It will be interesting to see where it goes from here. I could see some interesting combinations of game theory and behavioral economics, combined with the raw computing power we now possess, making some great insights into how society functions and things we can do to improve outcomes.

JacobOrin

Still making my way through this episode but getting frustrated at the "subway seat" part. SELLING is a huge part of how a consumer economy works. I bet dollars to donuts that a smooth operator with a nice pitch could get most people out of their seats for as low as $10. One could imagine any number of potential pitches. Then, when Thaler advises Rosalsky to wear a cane, that's totally the opposite of the whole idea. There's probably some mix of comfort, pride, etc etc that goes into the perceived "sit utility" but if the guy just said, "I'll pay you the equivalent of a free pizza tonight, say, $15, if you simply let me buy your 'sitting rights' (even calling it that would help commoditize the seat and make it fungible) for this one ride home," that segment would have gone a completely different direction.

JimFive

I thought he should have announced it to the car and tried to get an auction going to give himself the best price for a seat.

SrAlves

The fact that there are many people who are not econs is one of the most compelling reasons for one to be an econ. You get to be a free-rider, i.e. maximize your individual gain, without significantly compromising the community.

Zed

The assertion that terrorists and war would would not exist if everyone behaved in a way that promoted their economic self interest is ridiculous. Making war involves balancing gains of the conflict vs the costs. Can I take enough resources from this other country to compensate for the labor value of the soldiers I sacrifice? From the soldiers point of view, can my family and I gain enough of a part of these resources to balance out risk of my own premature death?
Take the suicide bomber example they used. Religious terrorists often think that they will be granted an eternity of bliss for this act of sacrifice and pain. This is still weighing cost vs benefit.
Really not much would change in this regard. Resources have always been an underlying factor in conflict. People will always weigh the value of these resources against the cost of fighting over them, and in some cases will decide that the resources are more valuable than the pains of war.

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Melanie

Rosalsky,
We live (in the USA) in a Republic not a Democracy, not matter how many times you say so in your segment. BTW Ben Franklin said "a Democracy is two wolves and a lamb deciding what to have for dinner". Need proof? Look up this little thing called the "Pledge of Allegiance".

"and to the Republic for which it stands"

Jeff

Doesn't a mixed strategy cover the voting/free-rider problem? Maybe homo economicus needs a random number generator in their set of inhuman skills.

Dan Palmer

Everything everyone does on purpose is, by its nature, self directed, or, selfish.
Selfishness is the drive behind one's "altruistic" as well as greedy actions - the payoff in the altruism situation often simply is that we feel good about our selves.

No assumption of reciprocity is needed.

Mary

Hi Greg,

Thanks for the awesome podcast! I wanted to share my perspective. Honestly, I was surprised when people said that the way you asked out your girlfriend was unromantic since I got a little choked up when I heard it. From my prospective, you made your intentions towards her clear and allowed her to make an informed decision. I think that conversation took a lot of courage and I applaud you.

Denying that the factors you mentioned are a part of our decision making process implies that they are unacceptable and makes people feel ashamed for having these thoughts. When people don't have these conversations they often feel betrayed because their assumptions don't line up with the other person's reality. Aren't finances one of the top reasons for divorce? Maybe that's because people are too afraid to have these hard conversations. The neurobiology of the the initial infatuated stages of a relationship has been frequently compared to stimulant-induced intoxication so hearing that there are some logical processes at work should be of some comfort.

Lastly, I believe that these types of conversations force us to take responsibility for our choices and lead to a more meaningful existence. People want to be known instead of spending the whole relationship wondering if their partner would still find them acceptable if s/he knew their true values. I also imagine it would also help with grieving if things didn't work out.

Thanks again for putting yourself out there like this! Best of luck in your relationship.

Sincerely,
Mary

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