Incentives Matter: An Interview with Stephen J. Dubner

In 2005, journalist Stephen J. Dubner and economist Steven D. Levitt released Freakonomics, a book about economics that had almost nothing to do with money. Deftly blending pop culture and economics, the book spent months on the New York Times Best Seller list, introduced tens of thousands of people to the notion that economics affected more than just their bank account, and made thinking about economics cool, or at least not as fundamentally geeky as it once was.

Four years and one economic crisis later, Levitt and Dubner have a movie adaptation in the works and a best selling sequel, Superfreakonomics, on store shelves, which New York Times journalist Stephen Dubner was more than happy to discuss.

How did you first start working with your coauthor, University of Chicago economist Steven Levitt?

I was working on a book about behavioral economics — or, more broadly, about the psychology of money when the Times Magazine asked me to profile Levitt. I turned the assignment down initially, since his research had nothing to do with money. Eventually I reconsidered, and I am glad I did.

In a coauthor relationship like you and Prof. Levitt have, what does the writing process look like?

He takes the nouns and adverbs, I take the verbs and adjectives, and we fight over the prepositions. Well, not really. Our collaboration is extremely collaborative, which means we “blue-sky” at length, outline for months, talk through the stories and flow for more months, and then start the actual writing. I do most of the initial writing, much of which is based on Levitt’s original research. But the drafts go back and forth a number of times.

You’ve attracted some fire for the global cooling chapter of your book for offering up geoengineering as one part of a cure for global warming. If you could, briefly sum up what the take on global warming is in Superfreakonomics.

If the world gets a lot hotter in a hurry and the primary aim is to cool it down, then the current plan of carbon mitigation will almost certainly not be effective. It’ll be too little, too late, and too optimistic – in large part because the atmospheric half-life of CO2 is roughly 100 years. So if you’re really concerned with warming, it seems wise to at least consider alternate solutions, a great variety of which fall under the rubric of “geoengineering,” and which many environmentalists find repugnant on many levels. It’s interesting to note, however, that the repugnance barrier on many issues has changed over time. Nuclear power, for instance, is back up for serious consideration even in the U.S., and some of its strongest advocates are former leaders of various environmentalist movements.

In light of the criticism that has been leveled against the book, is there anything that you would change, or would like to clarify?

Very little. Nor is the criticism very surprising, considering our argument that the mainstream movement to stop global warming has taken on the feel of a religion, and in some fundamental ways we have challenged its core beliefs.

You had to be prepared that anything you and Prof. Levitt said about global warming would be controversial with someone. Is there any subject in the book you expected to be more scandalous?

Well, it’s early yet. There are sections on chemotherapy and terrorism and prostitution and other things that haven’t yet drawn as much heat.

You did a lot of research for the new book, I’m sure. What was the most fun research to do, the stuff you really enjoyed learning about?

The research on altruism and lab games was fascinating; so were the details of prostitution, especially the historical stuff. And, though it was hardly fun, it was fascinating to learn about the lack of efficacy of so many forms of chemotherapy.

This is kind of a personal question, but I’m curious in the face of the frequently cited Freakonomics view that voting is, well, sort of pointless – do you vote?

Sometimes. I like to bring my kids to the voting booth to show them how it works. I’ll let them draw their own conclusions as to how worthwhile it is.

If there is a third book, will the title have even more syllables than Superfreakonomics? How far are you willing to take this thing?

We are thinking of calling it The Tipping Point.

What’s something you’d like to look at in a Freakonomics way but haven’t had a chance to yet?

There are a million things. Philanthropy, school violence, religious participation, on and on.

There seems to be a consensus right now that understanding economics is important — do you think this is something that will go away when the economy gets better? Put another way, is thinking about the economics like thinking about our health, in that most of us only do it when it gets bad?

That’s an interesting question. I sense you are right. On the other hand, the writing we do has almost nothing to do with the macroeconomy and all that it entails. Our focus is more small-bore, and more based on incentives and human behavior – which is a pretty active market regardless of macroeconomic cycles.

If people had a better understanding of how the economy works, do you think we could have averted at least some parts of the recent economic catastrophe? I think most people feel like their 401k report may as well be written in Aramaic, and that sort of sensation can’t very well contribute to a healthy, functioning economic system.

The short answer is, “Yes.” But a lot of what led to the crisis has nothing to do with misunderstanding your 401k statements and everything to do with understanding incentives — and how misaligned incentives, which are rampant especially in the real estate/investment banking complex, can lead to disaster. That said, I am a firm believer that the average American is woefully undereducated in basic financial literacy, and I think it’s hugely important to try to fix that.

The Freakonomics books seem to be really popular among folks who aren’t necessarily economists, but a lot of economists have fairly little love lost for you and Prof. Levitt. Why do you think that is?

My sense is that there are a handful of economists who hate what we’re doing but they tend to be noisier than all the rest, kind of like the people who write letters to the editor of their local newspaper. Also, we don’t write our books for an economist audience.

For people who aren’t going to read any book about economics, no matter how entertaining or unconventional it is, what is the one thing in this book that you would want to get across to them?

That incentives matter. And that cheap and simple fixes are vastly underappreciated.

For people like me – interested in economics, but math-dumb – what’s on your recommended reading list?

Tim Harford’s books are quite good, and the Marginal Revolution blog is excellent, every day. There are a lot of economist-writers who, for years and years, have given us great insights into the human condition: Gary Becker, Robert Frank, Steven Landsburg, and a crop of younger writers like Peter Leeson (who has written about the economics of piracy) who carry on the tradition.