Steve Levitt is my Freakonomics friend and co-author. He’s an economist at the University of Chicago. One of the most unusual things about Levitt is that he doesn’t really care what anybody else thinks about his ideas … for better or worse:
Steven LEVITT: The easiest way to differentiate an economist from almost anyone else in society is to test them with repugnant ideas. Because economists are pretty much immune to repugnance.
LEVITT: It’s fun, your life will love you more if you go do it, it makes you feel like a proud American. But never should anyone delude themselves into thinking that the vote they cast will ever decide an election.
LEVITT: Mostly I’m just lazy. You know, I could be investing in the kids or I could be, you know, indulging my own, you know, hobbies.
Stephen DUBNER: Let’s just watch TV instead.
LEVITT I’m not one of those people who really hates fat people. I know there are people who hate fat people, but I don’t really mind fat people.
DUBNER: So what will Levitt say in this week’s installment of Freak-quently Asked Questions?
LEVITT: I never know what you’re going to put on the radio.
* * *
Every now and again, Steve Levitt and I ask you to send us some question and then we try to answer them in this podcast. It’s called FREAK-quently Asked Questions.
DUBNER: Hey, so Levitt you ready to go?
LEVITT: Absolutely. For sure.
DUBNER: Do you have a cold beverage?
LEVITT: I have a warm one. That will do for me though.
DUBNER: All right, let’s start with this. Uh, Levitt, here’s a question from someone named Matt Hayashi. “I’m curious to know what solutions would emerge if we took a poor performing junior high classroom, perhaps one classified as hopeless and from the inner of some city, and put four cameras shooting from each corner and streamed the video over the internet. Would the students get a better education? Would performance improve? Would the students grow up and contribute positively to society? This could be fundamentally good for the country by addressing the problems with public education of children.” I’m fascinated by this idea. I can’t imagine how many lawyers you’d have to talk to before you could get even one camera in the room. But I’m curious to know. It brings up some notions that we talked about before. For instance, the power of scrutiny, and not only on the kids in the classroom, but the teachers too. So I’m curious to know what you think about this idea and what might happen?
LEVITT: I’ll tell you it’s a different idea. I like it because there are so many ideas about what to do about public education, and this is not one that I’ve heard before. And I think scrutiny can affect people’s behavior. Now, just playing devil’s advocate, I’d say that if you were to put four streaming cameras into, let’s just say you start with one inner city school but then say it works out pretty well, so now you have it in a 1,000 or 100,000 inner city classrooms, the problem is no one’s going to watch. I mean, what could be more boring than watching someone get taught eighth grade civics or something like that. So I’m not sure there actually would be any scrutiny.
DUBNER: Well it might just be like the surveillance camera at the Seven Eleven. You only watch when something drastic happens. Let’s not assume that it needs a real audience, but if somebody totally blows up or does something amazing then there’s the possibility that people can can see it.
LEVITT: Absolutely. There’s this idea of deterring something or encouraging people, but I just think that the occasional blowups which occur are not what is fundamentally getting in the way of the students learning. What the reader suggests is somehow it’s going to transform the daily activities in the room. And my hunch is that you could start, when you first start, we know from what people call the Hawthorne Effect that when you start watching people they behave differently. But I think over time if you knew that nobody was actually watching you and that the video was rolling but nobody ever looked at it, I mean…Think about the parallel that we have, which is reality TV. So people get on these reality TV shows, and I’m sure for the first hour or two that the camera is on them they act very stale and serious and stuff. And then you can tell by the…Very quickly they act in outrageous ways that you say to yourself how could they act that way knowing it’s on TV. And I think you just get used to stuff. So even though these people know what they’re doing is being put on national TV, they very quickly just act the way they normally act in front of the camera. And I think that’s what would probably happen if you put a camera on one of these inner-city classrooms.
DUBNER: Yeah, O.K., I mean, look, who am I to disagree with you, or challenge that, but I also just am curious, one thing that happens in a classroom is the dynamic between the students and the teacher, and the students and themselves and so on. And I’m just curious to think how that dynamic might be altered just be knowing that it’s not just them in the classroom, and that theoretically, I don’t know, maybe it’s the teacher who’s much more affected. Maybe it’s the teacher who knows that video can be accessed by his or her superiors at any point down the road, or peers. So look, at the very least it would be fun experiment to try, wouldn’t it, with a camera in a classroom to see what the feeling is?
LEVITT: Oh absolutely. I’m all in favor of any kind of experiment like that. It could be good. In some sense it has been done, it just hasn’t been done in this setting. A lot of daycare and nursery schools have streaming video of the classrooms I think because parents of that age are more nervous about how their kids might be treated or how their kids might react. So you could actually before running this experiment, it might be interesting to look and see whether anything changed in terms of teacher behavior in that other setting. I mean, we didn’t talk about it before, but maybe the one group that would possibly watch would be parents. I mean I would watch my 13-year-olds and see what they were doing in class and read them the riot act if they weren’t paying attention, or complain if their teachers…So maybe that’s actually the one audience that could be useful. I certainly believe that the more you get parents involved in schools the better. There’s tons of evidence that we’ve talked about that having good parents is at least as important as having good schools. And so I like the idea. I like the idea.
DUBNER: Okay Levitt, here’s the next one: Joseph Fogan writes, “As resident of the Buffalo, New York area, I recently saw and read an article about a local drug trafficker. As a result, I was wondering what the hidden costs of the war on drugs may be? I was wondering if team Freakonomics has ever done a study, report on this, or if they’d be interested? I think it poses a lot of interesting legal and moral questions.” So Levitt, we’ve talked and even I guess written about in the past, drugs is a big topic. Why don’t you start? When you think of drug legalization, how do you start to frame that argument in your head?
LEVITT: So I have thought a lot about the war on drugs. And it’s a great question to philosophize on I think, because…most people approach it from a more moral or philosophical point of view, of should drugs be legal? The libertarian perspective says maybe drugs should just be legal, maybe people should be able to do whatever they want. That’s what Milton Friedman thought. Other people think it’s immoral, there’s something wrong with drugs. But you know, that’s not the Freakonomics way. The Freakonomics way is to actually look at the data. And I do have a paper with Roland Fryer and a former student of mine, Paul Heaton, and Kevin Murphy. And we set out to look at the crack epidemic and the costs of the crack epidemic from a purely practical perspective. How bad was it? Do the places that had a lot of crack, did really bad things happen there, and why? And it was really interesting; it was really one of the most surprising results. Because almost all of the big costs that we saw had to do not with the consumption of crack itself. Consumption of crack had some negative effects, but they weren’t great. The really big social costs had to do with the prohibition of the legality of crack. And so it was the case that the greatest costs we saw were the violence related to the fighting for property rights, and the imprisonment of people. And it was interesting because it doesn’t say that legalization is necessarily a good thing. That’s a big jump to have. But it says that in a regime where drugs are highly illegal, hard drugs like cocaine, in the U.S., the real costs that we feel then are the costs of the prohibition, not the costs of the use, because the prohibition is reasonably effective at lowering the use. Now what would happen if we got rid of the prohibition and let anybody and everybody use crack cocaine? I think that wouldn’t be a great outcome either.
DUBNER: And you say that, and you say that because the nature of crack is destructive, more so than say marijuana, or no?
LEVITT: Absolutely. So crack cocaine is a really devilish drug because it gives you such an intense high for such a short period of time that your desire is just to get high over and over and over. It’s highly addictive, and it’s really hard to function when you’re a crack addict. But what it makes me think is that this experimentation we’re doing now with policy towards drugs like marijuana, and potentially it would be expanded over time is a good idea. Because I think when it comes to marijuana, the social costs of the prohibition of marijuana are just really low. Very few people in the United States are being killed over marijuana. The gangs are not making their money off marijuana. Marijuana in some very real sense is too cheap. It’s too easy to grow yourself and so it isn’t the source of all of the ills that come with prohibition. And so, so the gains of legalizing marijuana for society are much smaller than the gains would be to legalizing cocaine if you could control how the outcome came.
DUBNER: So let me ask you this, whenever I hear a police department or some organization representing law enforcement talk against legalizing marijuana, the skeptic in me says oh well that’s because prosecuting and pursuing marijuana is a big part of police work and if it were decriminalized then the police would get unfunded. Is that a ridiculous thought to have?
LEVITT: No, I like the…We always think about incentives, and certainly if one of the incentives that a police department has is to be busy. We know there are a lot more police officers in places with a lot more crime. So if there was no crime to deal with there wouldn’t be many police officers. I mean, if you think about firefighters, talk about putting yourself out of a job, there aren’t any fires anymore. I don’t know what firefighters do all day. They’ve been pretty good I think at figuring out how to do things other than go put out fires. But, you know, you could imagine that if all the crime went away, the police would end up looking a lot more like firefighters than they would like police officers. And we just wouldn’t need that many of them around. So I think that’s sensible. But I also think that it’s deeper than that in that there is a mindset among the police which is that the law says that marijuana is illegal and it’s my job to uphold the law. And therefore marijuana is terrible.
DUBNER: And Levitt let me just ask you one more thing before we move on about marijuana in particular. So Gallup polls, which are pretty consistent over time show that about 40 years ago, 12 percent of Americans favored marijuana legalization. And that number is up to 58 now. So almost five times as many. What do you think that represents? Anything dramatic? Or are we just seeing one of those gradual lines shifting that happens in society and nothing more than that?
LEVITT: I think it’s a reaction to the fact that marijuana just hasn’t proven to be that damaging, that a lot of people smoke marijuana, it doesn’t ruin their lives, and they go on to be regular folks who no longer smoke marijuana. It’s just, a lot of it comes down to how much weight you put on the utility of the user. Right, if you really think that the people who are smoking a lot of dope are having a lot of fun with it, then probably you tip the calculus toward let them smoke it. Otherwise, if you think that’s the wrong kind of fun, you shouldn’t count that, then you think it shouldn’t be legal. But in a lot of ways I think it comes down to that simple issue.
DUBNER: And and Levitt just for the record, when’s the last time you smoked dope?
LEVITT: Oh, man it’s been a long time. I think it’s been…I think it’s been…It’s been at least probably close to 20 years.
DUBNER: If marijuana were totally and entirely decriminalized in Illinois and you could go to a nice little deli right outside the U. of C. there and buy some, would you do it tomorrow, or the next week?
LEVITT: I would occasionally smoke, but it wouldn’t be a way of life I don’t think.
DUBNER: Would you like to say, try to play golf while stoned? Would that be a thrill for you?
LEVITT: No, not at all. I take my golf pure.
Coming up on Freakonomics Radio: not one but two listeners have ideas to help out the United States Postal Service. And: what to do when a company is dying:
LEVITT: Death is a part of human existence, and maybe death is a part of a company’s existence the same way. And we should celebrate it and hasten it rather than spend all our time prolonging the last few years of life.
* * *
Welcome back to FREAK-quently Asked Questions where Steve Levitt and I do our best to sort out what’s on your mind. Let’s get back to it.
DUBNER: Okay, question from René Verbeek, he writes, “When I send a letter from New York to Fairbanks, Alaska, the money I spend on this service is as high as sending the same letter from New York to Boston. You’d expect that the post office would ask more money from services to and from rural areas and less for services to and from urban areas.” Or I would add just for further way that from closer away. You pay 46 cents these days for a first-class stamp anywhere. And he asks, “Why is it that postal services have these flat rates and not a price proportional to the cost of the actual provided service?” I think that’s a great question Levitt. Any obvious answer to that other than evolution and randomness?
LEVITT: Well I think it’s complicated, right? The problem is that when you’re sending something that on average only costs 46 cents to try to customize whether it should be 41 cents, or 61 cents is really costly, because how are you going to figure out how to do it. And I think even just historically the idea of the stamp and the value of the stamp makes it more complicated.
DUBNER: But when you say it would be complicated, I mean, look there are transit services that do that. So New York doesn’t. New York if I buy a subway, one pass on a subway train it’s the same amount whether it’s a short ride or a long ride. A lot of cities however, you pay different for different zones. So let’s say it’s not one price for New York to Boston for a stamp, another price from New York to Charlotte and on and on and on, but let’s say there are zones, three zones, five zones, would that really be so complicated, and I guess what I’m really asking is would the U.S.P.S. not be in such bad shape if they’d actually been properly pricing their service all along?
LEVITT: I mean, that’s a good question, you’re really talking like an economist today, Dubner, what’s gotten into you?
DUBNER: I didn’t know you’d show up, so…
LEVITT: you’re really coming of age. I mean, I think it’s not clear. I mean, the real problem the postal service has is that the point of a letter has gotten a lot less important over time because there are much better substitutes than ever existed before. And you start with faxes and then you go to electronic mail, and then you go to texting. And it wouldn’t be at all surprising if you just took a bunch of business students and did a case study and said if your business was to deliver letters, what would happen if a lot better stuff came around. I think for sure the telephone wasn’t great, the telegraph, none of this stuff was good for the postal service. So I don’t know if I want to pin the financial difficulties of the postal service on that. It’s just a bulky way of trying to do business.
LEVITT: But that aside, I think…When I think about business and how to do things, I think experimentation is always a good idea. This is a great case where you might say try an experiment. Try an experiment where for one city of the United States, the postal service does divide the costs into these five different divisions like you said, or make it per mile, or whether it’s urban or rural. And I think you could begin to understand how people react to it.
DUBNER: Let me run this past you. Another listener named Nathan Conroy writes to say that “Every day when I open my mailbox,” he writes, “I’m continually puzzled at the concept of the failing U.S. Post Office at a time when we receive a hideous amount of junk mail every single day, how can the company behind the delivery of this madness be on the brink of fiscal collapse again and again and again?” So he goes on to say that, you know, as we’ve discussed, email and other technological advances have been slowly killing the Post Office. He writes, “My question is this, when faced with such a vicious predator,” meaning mostly email, “why didn’t the U.S.P.S. jump on the electronic highway?” And he proposes a digital world in which you might receive a “U.S.P.S. certified email from you bank, employer children’s school. This certified email would let you know that the sender is legitimate, that no viruses will be attached and that you are not being fished. How do you know this? It’s simple. Prior to sending the email, the sender would have to 1. Verify identity, 2. Provide credentials, and most importantly 3., pay ten cents, 25 cents, 50 cents.” So that’s an interesting idea. I’m curious what you think of that as an idea that the U.S.P.S. might should have embraced. But more broadly, you know, you wrote a blog post a few years back about “Good to Great,” the companies that were featured in that book “Good to Great” by Jim Collins, and how the companies that went from good to great often ended up going to crap years after the book came out. And I just wanted to ask you generally about how hard it is for a company, whether it’s the U.S.P.S., or General Electric, or General Motors to survive and thrive over time, and whether companies, especially big companies are inherently maybe bad at changing with the times?
LEVITT: Yeah, I think for sure big companies are bad at making massive changes, I think for two reasons. One is that I think companies that are successful end up falling under the illusion of thinking that they are good at everything and that because they’re good at everything why should they have to change? And so I think that really hurts companies that have success even if they’re good at. I think most companies that make a ton of money often make it because they’re a little bit lucky, they have one good idea, they’re really good at one particular thing. Like Walmart is fantastic at logistics and no one’s ever been able to catch up to them and that’s a huge advantage. I mean, that doesn’t mean that Walmart’s great at figuring out what products to put in the stores, maybe they’re great at that too. But…the Post Office of all possible companies to try to make radical changes, a radical change that completely reinvents what they do, it’s just I think impossible because, I mean, you and I have talked a lot with businesses over the last ten years, and more or less I think most people in the business, if they truly tell you what they want, is they want to do the same thing today that they did yesterday. And they don’t want to have to rethink everything. And they don’t want to bet the entire future of the company on some crazy, new fangled email thing that nobody has back in 1997 when they would have had to have started thinking about this.
LEVITT: I think our reader’s point is a really interesting one. It’s a really innovative and creative idea, and I think it’s the kind of thing that could really work. Now, will that ever be the Post Office’s big business? Probably not. Should the Post Office be thinking about creative ways to use their brand name to try to be expanding into other things? I think for sure. I mean, certainly after Federal Express came in you saw the Post Office change what they were willing to do to try and do crazy things to get your package there in one day, just the way Federal Express will do that. And that was not something they offered before and they reacted to it. But that’s easier to react to I think then the email things. But, I’ve talked to a couple entrepreneurs who are out there trying to do what our reader suggests which is to create different classes of email, perhaps some of which cost and which carry different levels of importance and significance. And I think that’s great. It’s exactly what you want to do when there’s a service out there that’s completely free, and which is absolutely and totally abused because of it, is to create a close substitute that actually costs money and then to potentially get what we economists call separating equilibrium, where the people who are willing to pay five cents to reach out and touch you with an email can signal to you that they really are willing to pay to talk to you. Whereas the Nigerian scammers are not willing to pay five cents per person and so they would be separate.
DUBNER: But it’s kind of, I don’t know, painful a little bit to watch big, older companies that used to be phenomenally successful try to change. But from the outside it’s obvious that they’re going to fail. I guess I’m thinking right now the line of big old department stores, Sears and J.C. Penny. I don’t know, one or two of them may kind of lumber into the next, you know, economic cycle, but it seems like they’re all more like dinosaurs that are lumbering off to the graveyard and it’s just going to take a long time for them to finally lay down their heads and die. So, I mean, that’s the way capitalism works, and we love a lot of things about it, the dynamism, and the creative destruction, and all that. But is there some better model to think about if you are that big company or one of the thousands of employees of that big company who kind of sees that its obsolescence is around the corner, but can’t run from it?
LEVITT: I think that’s the magic of a business leader, right? So when you’re one of these companies, you’re faced with a challenge to either die the slow death that you’re talking about or to radically reinvent yourself and turn yourself into something great. And people try. I mean, J.C. Penney did some radical experiments with pricing. That didn’t work very well. But Apple, look Apple was terrible for a while. People thought Apple was going to die, it reinvented itself. IBM is an amazing success story for reinvention, going from making old, big computers that nobody wants anymore to…
DUBNER: Running a services business, yeah.
LEVITT: …being a consulting firm, yeah. I mean, yeah, so I think there are examples of great successes but it’s hard and it takes someone with vision, and it takes people in the organization willing to change. And I think a lot of times it’s just easier to start from scratch because you fight so much inertia. You know, I do a little bit of business consulting now, and the inertia in these big firms is just amazing how hard it is to turn those big old boats. And then every once in a while we work with a smaller, newer firm and everything just happens quickly. And it may just be, I mean death is a part of human existence, and maybe death is a part of a company’s existence the same way. We should celebrate it and hasten it rather than spend all our time prolonging the last few years of life. Just like we do with humans it should be a reallocation of resources toward generation rather than, you know, maintenance.
DUBNER: Hey, Levitt, let me ask you this: A reader, listener names Ryan Harris writes “Why don’t people wear hats anymore? Movies and TV tell us that leaving the house without a hat in the previous centuries would be like leaving without a cell phone today. What happened? Ryan Harris.” Levitt, Do you have any thoughts?
LEVITT: Yeah. I would say that we should flip the question on its head and we should ask why the hell did people ever wear hats?
DUBNER: Well I think we do know a little bit about that. Head covering has gone hand in hand with religious observance for millennia, right? But then there was the whole thing about class and all throughout Europe the hats had a signal of a different class. And how you doffed your hat when someone more senior came in contact. So you know, the hat was all kinds of religious and class signaling. So there were a lot of reasons. Is it maybe that just as we’ve become, I mean, our culture has become much less religious. Do you think that’s contributed to less hat wearing?
LEVITT: Oh, you know, these are hard. These are questions way above my pay grade. But I mean…
DUBNER: Above or below.
LEVITT: Above. I mean, to figure out big social phenomena are hard. Fashion’s changed immeasurably, and I think of a hat as being mostly about fashion. But that’s a good question. We got a lot of good questions from the readers today.
DUBNER: Levitt, what would it take, how much would I have to pay you to wear, let’s say a fedora for a solid week?
LEVITT: A lot. I mean, I don’t even wear. I’m one of the only golfers that does not wear a hat.
DUBNER: I’ve never seen you wear any kind of hat.
LEVITT: I only wear- I wear hats in the winter to stay warm, but yeah, I just don’t wear hats.
DUBNER: Alright, good job Levitt, you did great.
LEVITT: Yeah, it was kind of…I thought I would be better. I thought I had my A game, but I didn’t really deliver.
DUBNER: No you delivered, you did great, that was good. O.K., thanks a bunch, talk to you soon. Bye bye.
LEVITT: O.K., bye.
That’s it for this edition of FREAK-quently Asked Questions. If you keep sending in your questions – to radio-at-freakonomics-dot-com — we will keep answering them. On next week’s show — we revisit a favorite episode which looks at how your behavior changes when you put on a mask.
Felix BARRETT: A middle-aged lady came and apologized to me afterwards and said, I’m so sorry I put the mask on. I found myself being very rude. I found myself getting too close to the performers. I even touched one at one point. I’m so sorry.
We go behind the scenes of “Sleep No More,” a fantastically interesting piece of immersive theater:
MAN: I got a little rude with people. I was kind of like get the hell out of the way, man.
WOMAN: I would not have usually blindly gone into dark corridors because I am usually scared of everything.
We also hear from the man who created the infamous Stanford Prison Experiment:
SPE: Prisoner 819 did a bad thing. Prisoner 819 did a bad thing…
That’s next time, on Freakonomics Radio.