Steven D. Levitt (Freakonomics co-author and U Chicago Econ Prof) on His Career and Decision to Retire From Academic Economics

Episode Transcript
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Welcome to the New Books Network.

>> Jon Hartley (01:05):
This is the Capitalism and Freedom in the 21st Century podcast,
where we talk about economics,markets, and public policy.
I'm John Hartley, your host.
Today, my guest is Steve Levitt,
who is the William B Ogden DistinguishedService Professor of Economics at
the University of Chicago.
As well as the co-author,with Stephen Dubner,
of the bestselling book Freakonomics,all of its sequels, and
co-founder ofthe Freakonomics Radio Network.

(01:25):
Steve is known for being one of the earlypopularizers of applied microeconomics and
causal identification with naturalexperiments during the 1990s and 2000s,
which won himthe John Bates Clark Medal in 2003.
Steve recently told me that he hasactually decided to retire from academia,
is going emeritus at the young age of 57,which I'm going to ask him all about.
Welcome, Steve, thanks somuch for joining us.

>> Steve Levitt (01:46):
My pleasure, Jon, good to be here.

Steve, I wanna start with your background.
You were born in Boston,you went to Harvard undergrad,
spent two years consulting.
And then you did your PhD in economicsat MIT in the mid-1990s at a time
when applied economicswas just taking off.
Tell us,how did you first get into economics?

Okay, I'm gonna answer that, but first I wanna say one thing.
Cuz I don't know how wellyour listeners know you, but
we met when you were an undergrad.
And I taught for 25 years,and you were one of two or
three of the best undergradsI have ever run into.
And I tried to hire you,[LAUGH] but lost out.
Was it the Goldman Sachs,is that who I lost out to?

That's right.

And we've stayed in touch.
And I would say that what you've beendoing in economics is remarkable.
You've produced more good economicthinking prior to getting a PhD than
anyone I've ever known.
So I just want to give you a hats off.
I've really enjoyed watching youbreak all the rules along the way.
[CROSSTALK] Tip to you.

I'm gonna have to use that for a tenure committee in the future.

[LAUGH]. >> Jon Hartley
have that recorded.
Yeah, I don't think my opinion counts for
much with tenure committees these days.
But let me tell you how Idid get into economics.
It was not in a thoughtful andwell organized way.
I was the worst kind ofundergraduate student.
I only tried to take easy courses.
I just tried to get good grades.

(03:13):
I didn't care all aboutanything intellectual, but
I did already believe in markets,even though I had no economic training.
And I went to Harvard, and my view was,if 1,000 people are taking a class,
that must be a good class andan easy class.
And so I took all the 1,000person classes at Harvard.
And first and foremost among those was EC10, Economics 10, the introductory course.

(03:34):
And I took it only because1,000 people were taking it.
And I remember not too longinto the class, maybe five or
six lectures in the class, andwe were doing comparative advantage.
And as the teacher went through it,I thought, what a joke.
How could they be teaching this?
Everyone knows, everyoneunderstands comparative advantage,
it's the most obvious thing in the world,five year old know that.

(03:57):
And as I walked out of class, my bestfriend, who was also in the class with me,
said, my God, that was the most confusinglecture I've ever heard in my life.
And I said, what are you talking about?
He said, cuz that make no sense to me,what is he even talking about?
And that was the first inkling I had that[LAUGH] Maybe I thought like an economist.
And honestly, I only did economicsbecause it came naturally to me.
And I never liked it, per se.

(04:19):
I never had this sense thateconomics was powerful.
It's just the only thing I was good at.
And so I just backed into it.
And I never had any intent.
So I majored in economics, but I neverhad any intention of going further.
I wanted to go into business.
I went to consulting, andI found consulting very painful for

(04:39):
me personally, given my makeup.
I didn't like being bossed aroundby people I didn't necessarily
respect too much.
This was a firm which,even though it was a good firm,
seemed to not know the differencebetween correlation and causality.
And I found that kind ofoffensive that we were selling for
hundreds of thousands of dollars advicethat made zero sense to our clients.
And so after two years, completelyuninformed, I applied to PhD programs,

(05:03):
cuz I couldn't think of what else to do.
And I had no mathematical training,
I had not taken anything morethan high school calculus.
The one math class I took atHarvard was called Math 1A.
It was the high school math class thatthey only gave to students who had
done incredibly poorly in high schoolmath, which I was one of them.

(05:24):
And it was a shock [LAUGH] When Iarrived at MIT completely unprepared.
And I didn't deserve to succeed in ourprofession, I got really, really lucky.
I worked hard, too, but I was inthe right place at the right time.
It was a time at MIT when people put a lotof value on the clever approaches to
trying to untangle causal effects,or plausibly causal effects.

(05:48):
And it turned out that was roughlythe only thing I was good at.
And I managed to stumble into it and waslucky to build a career in that dimension.

Amazing, and it was Marty Feldstein who was teaching you EC 10?

Yeah, he was in charge of EC 10, but it was a guy named Neil.
Boy, can I remember,I can't remember Neil's last name,
who actually was teachingus the lessons day by day.
But, yeah, it's interesting,looking back on EC 10 ten,
what a great course that was.
Because it was a mix of grad studentsreally teaching you in a very sensible way
the introduction to economics.

(06:20):
And then lectures by the most preeminenteconomists in the world, many of them from
Harvard, where you got a taste ofwhatever they were thinking about.
And it really is a wonderful design fora course.
And I remember sitting in that class,it was in Sanders Theatre, this big,
ornate hall that they have on campus,thinking, wow, wouldn't it be awesome if

(06:41):
one day I could be up on stage andI'd be the one giving the lecture?
[LAUGH] I never did get invited, soI never did actually go back and
teach a lecture in EC 10.

That's amazing, well, it really just speaks to, I think,
how powerful that firstclass economics can be.
And even people that don't go onto earning a PhD in economics or
the profession, just how impactfulone class can be on so many people.
Think about, all over the years,how many people have taken EC 10,
whether it was with Marty Feldstein orwith Greg Mankiw, or

(07:12):
now with Jason Furman andothers who are teaching with him.
It's amazing, you just think about allthose scores of people who have come
through Harvard and have taken it.
I'm curious in terms of your committee andyour influences at MIT.
I believe Josh Angrist was onyour committee, obviously,
another central figure inthe credibility revolution.

(07:33):
I know you also are very fond ofBob Solow, who recently passed, and
sort of influenced you, or sort ofinformed your taste on macroeconomics.
I'm curious,what was your experience at MIT like?

So Jim Poterba was the really big influence on me at MIT.
Jim is just an incredible advisor,common sense,
giving, thoughtful,always investin any students?
I had a strange, I have to say,I had a strange PhD experience.
I had come from consulting, so I wasreally glad to be in the PhD program.

(08:09):
Most people come andthey're in the PhD program and
they think, this is awful comparedto undergrad, and they mope around.
I thought, so it was awful compared toundergrad, but compared to consulting,
[LAUGH] I felt like I died andgone to heaven.
So I loved being there, butI was completely unprepared.
I didn't know what was going on.
Everything was swirling around me.

(08:30):
In my college,colleagues were just so phenomenal.
Honestly, I had been usedto being the smartest kid.
I had always been the smartest kid orclose to the smartest kid.
But then I got to MIT and I realized,my God, these people are incredible.
Not just what they know,but how they think.
So I knew from day oneI was the odd man out.

(08:51):
I mean, I'm not even exaggerating when Isay that there was a group of people in
the in crowd, Austin Goolsby.
My good friend Austin Goolsbywas one of the in crowd.
And Austin told me that maybe a month intoour first year at MIT, the in crowd sat
down and they made the list of the fivepeople most likely to fail out.
And I was on that list of five.
And there's only one person of the incrowd who thought I was actually might not

(09:15):
be as bad as everyone else thought.
And soI was really in a strange place, and
I couldn't really do the classwork a lotof time, so I didn't worry about it.
I just looked around and I said,to succeed in this profession,
you have to write papers.
And soinstead of spending my time on classes,
I really spent my time writing papers.
I started writing papers right away.
And so by the end of my second year,

(09:36):
I probably had written four orfive academic papers.
I got a paper into the Journal ofPolitical Economy in my second
year of my grad program.
And I was just doing something different.
All I did, really, was go to seminars,
try to learn as much as possible,do my own research.

(09:58):
Yeah, I didn't teach at all,I wasn't a research assistant for anyone.
I just did my own thing.

Are you like an NSF fellow or something like that?

I actually got an NSF fellow my second year.
I wasn't informed enough tohave applied the first year, so
I got it my second year.
So I really had nothing to worry about,that covered all my teaching.
So I was just there andI had money cause I'd done consulting.
So I was just churning out research andloving every second of it.
And then it was super turbo who said,in my third year, hey,

(10:28):
why don't you apply tothe society fellows at Harvard?
Which was something I'd never heard of,and Bob Solow had been part of it.
And sothat's what got me introduced finally,
the courage to go talk to Bob Solow,who I've been following around campus for
the preceding two and a half years.
And so I applied to that and
incredibly got that fellowshipin the middle of my third year.

(10:50):
And sothen I didn't really have a committee.
The only person I had I've ever talked toreally, was much, was Jim Paterba, and
then another guy who wasa political economist, Jim Snyder,
who was over in Sloan.
And so my committee, I don't eventhink Josh was on my committee.
I think John Gruber was actuallythe third one on my committee.

(11:10):
I hardly talked to Josh at all,I was afraid of Josh.
I was afraid of everybody,
pretty much [LAUGH] I hardly talkedto anyone while I was there.
Yeah, so I left there in three years,
really just having used it asa time to write my own papers and
to scratch along as best I could inclasses without getting kicked out.
So you went on the marketin your third year?
Well, I didn't really go on the market.

(11:31):
Yeah, so I left MIT after three years,
but I got this fellowship at the SaudiFellows, which lasted for three years.
So I didn't go and look for a job.
So I didn't look fora job until six years were done.
And by then I had just published somany papers.
I really had a great run inthe beginning of my career.

It wasn't even in this very early stage,
maybe when you were still a PhD student.
I don't know if this was your JPE paper,but
I remember you telling the storyabout how Rahm Emanuel called you up,
I think asking you about the detailsof some paper that you'd written.
This was as a grad student, and
you're sort of speaking to the powerof research and how anyone's able to.

(12:13):
You don't have to be a professor or
have one whole ton of amazingprizes to do great research.
That's very policy relevant.
Was it Rahm Emanuel who was calling youup when you were a grad student or.

Yeah, so you have put two stories together.
But I wrote a paper onthe effect of police on crime.
And I found, unlike other people beforeme, that looked like more police reduced
crime, perhaps not surprising, but it wasvery surprising to the criminologists.
And Alan Krueger I think,was somehow involved.

(12:45):
And I think, if I remember correctly,and I might be confusing my stories,
I think Alan Krueger put together a binderof papers for Bill Clinton every week.
And Alan said that Bill wasan amazing thinker, and
he would really look at these papers.
And he said, in particular, becausethey're trying to get this crime Bill
passed that would add100,000 police officers.

(13:07):
Bill Clinton had gone over my paper, and
he said you could see all the notes inthe margin and had lots of questions.
And then Janet Reno apparently carriedmy paper around in her briefcase,
dozens of copies, and
gave it to anyone she could because shewas trying to influence the senators and
the representatives to vote in behalfof the Bill Clinton's crime bill.

(13:28):
And I tell you,I got completely the wrong idea.
I had this idea that, like you said,the power of research, and
anyone can do it and you do good research,and people recognize and affects policy.
I mean, I was so confused.
It took me years andyears to understand that.
Number one, usually nobody caresat all about your research.
No matter how much you love it,it never gets any attention.

(13:48):
Number two, the quality of my research hadnothing to do with it being passed around.
It was being passed around Washingtonbecause it was the only paper that
supported the position thatthey had already chosen.
The policy was chosen first,and then they went for papers.
And I'm sure they were disappointedthat the only piece, the only article
they could find, that it all supportedthem, was by some grad student.

(14:10):
But they took what they could.
And what I read, the real lesson I learnedover time, is that I don't actually
think that my research oreven my writing, more popular writing,
has ever really fundamentally changed theway any politician thought about anything.
And that it's just I've cometo a different conclusion.

(14:30):
It was incredibly hard toinfluence any policy or
anyone's beliefs by doing research.
Now, then Rahm Emanuel called meup after this had all transpired,
trying to get me to come and work for him.
But unfortunately for Ram, by that time,had a little bit of common sense.
And so I asked around, hey,what's it like to work for Rahm Emanuel?
People said, well,if you love being screamed at and

(14:52):
working 24 hours a day,it's a really good job.
And I didn't like to be screamed at, and[LAUGH] I didn't really wanna work 24
hours a day soI politely declined Rahm Emanuel's offer.

What a great set of a few stories.
I'm just curious getting backto credibility revolution here.
You were a central figure inthe credibility revolution, the rise of
applied micro, good identification,possibly exogenous identification.
You did a lot of famous early workin applied micro of crime that
we've talked a little bit about thatearned you the John basis Clark medal.

(15:27):
I'm curious what has changed sincethose early days in your mind.
Better data, better methods, more rigorand care when it comes to econometrics and
possibly exogenous variationafter you won the prize?
Like did that have a serious sortof impact on on your career and
getting speaking invites and so forth?

(15:49):
I'm curious like what's changed sincethose early days of the credibility
revolution sort of 20,30 years later?

So let me just be clear.
I think I'm really a footnoteto the credibility revolution.
It was the generation before me,Angrist and Krueger and Imbens and
maybe people like Heckman,I'm not sure who'd you include.
But I->> Jon Hartley: Orley Ashenfelter maybe.
Yeah, I really felt like a follow-on to it.

(16:18):
Those guys had set out some methods forthinking about the world,
and I was just interested in questions andtrying to answer them,
and I was using their tools.
And I was really mostlyasking different questions.
And economists ask a lot of times aboutsettings where markets weren't applicable,

(16:38):
like crime, in education, various places.
And so honestly, I never feltvery much like a real economist.
I certainly didn't feel like Iwas leading any kind of a charge.
I was never a leader, I really justenjoyed the act of doing research and

(16:58):
just did as much as I could.
I worked hard, I was productivebecause I loved it, but I wasn't.
I wasn't a visionary in any way,shape, or form.
Now, I think what changed, soat the time, the computing was hard.
I was still getting started when,if you wanted to work on the census,

(17:19):
you had to get this old magnetic tape andspin the thing.
I mean, it's crazy what you had to do to->> Jon Hartley: But
you're past the age ofpunch cards at that point?
Yeah, no, only as a child did I use punch cards.
But really, I'll tell you,
what always happens in academics is a newapproach, a new set of ideas come in.

(17:40):
And what you're calling the credibilityrevolution, the idea that you'd go out and
get data and look for natural experimentalvariations, or something that mimics
randomized experiment but one in which youas a researcher didn't actually do any
experimentation, didn't actuallycontrol the randomization.
And it was fresh and it was new,and so if you were out there

(18:03):
as a young scholar doing that anddoing it in original ways,
there was a huge market forthat kind of a student.
And so a lot of the best people, maybethat's an exaggeration, a lot of people,
a lot of students were doing it.
I'm not sure it ever really attracted thebest students because it was not complex,

(18:24):
it wasn't that hard, technically.

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Right, and at that time, these great macroeconomists and
great theory people dominateda lot of these departments still.
And at that time, andI'm sure the mid-90s, applied micro or
just applied econ people were sortof in the minority at that point.
And now, 20, 30 years later,I think it's totally flipped,

(19:17):
those people are on the strong majority.
But I'm sure deciding to go embark ona career in applied micro was something
of a brave thing at that time, in partbecause you're answering smaller questions
rather than larger ones, which isfascinating in terms of just the history.

Yeah, yeah, I think more in terms of status rather than numbers.
So at that time,it's a different bicycle, but at MIT,
the highest status peoplewere probably the theorists
because we had Jean Tirole andFudenberg and Oliver Hart.
We just had incredible theorists there,and so

(19:56):
the best students wanted to be theorists,okay?
And if you weren't quite good enough to bea theorist, then you probably wanted to
be a macroeconomist becausewe had great macroeconomists.
And it trickled down, and honestly, thepeople who were doing what I was doing,
we were at the bottom ofthe totem pole status-wise.
Now, just to be clear,I started out thinking, well,
I'll try to be a theorist because that'swhat the high status people are doing.

(20:17):
[LAUGH] And I pretty much failed.
I failed at that.
And then I said, well,the next best thing is doing macro.
And I completely failed at that too.
So it wasn't that I said, hey,I'm going to be an applied micro person.
It was that I ran out of options andthat's what was left.
And it turned out thatthat's what I was good at.
But what happened over time was,because it was fresh and new,

(20:38):
if you just did it competently,you could get a good job.
But the cycle that happens withinacademics is as something becomes routine,
right, so it's really not hard.
There's a formula forwriting almost any academic paper, and
there's a very simple formula forwriting a good natural experiment paper,
the kind of papers that I waswriting as a grad student.

(21:01):
And once the profession understandsthe formula and that's formulaic,
then the problem is you can't get a job.
You can't get a goodjob doing that anymore.
Because when you're on the job market,when you're a young academic,
you have to convincethe faculty who are hiring you.
Somehow the idea is that technique,
knowing how to do hard things,technical skills is really valuable,

(21:25):
or that you know the formula forwriting some difficult kinda paper.
But as soon as it's easy, as soon asanybody could write a natural experiment
paper, then you couldn't get a jobwriting natural experiment papers.
You could still get them published, but.
So it very quickly, and that's why I say Iwas in the right place at the right time,
very quickly, a matter of three or fouryears after I came out of grad school,

(21:46):
people were being discouraged fromwriting those kinda papers because you
couldn't get good jobs doing it.
So there was this thought that you shoulddo what had kind of become more structural
work, right?
So think more applied theory, so a mixof empirical work and applied theory.
And eventually two thingshappened over time.
So three things happened,first, the technology changed.

(22:08):
So, as you said, data and computing,that all changed radically and
led it to be both easier to write thesekinds of papers, but also opened up to do
them much more interesting questions thanmaybe you could have in the first place.
The second thing that happened wasthe true experimental revolution.

(22:29):
So my colleague John List and others,actually, incredibly late in the game,
brought experimental economics,where you actually did randomizations,
into the mainstream.
And that also, I think,really dampened people's enthusiasm for
the kind of more idiosyncraticwork that I was doing.

(22:50):
And the third thing was that really,I think the outside options for
applied economists got much better.
So people who were sensible, who wereapplied, suddenly business was really
interested in their skills, anda lot of those people exited.
And what was left behind were the moretechnical, theory driven folks.
And I think that's reallywarped our profession away from

(23:15):
the simple causal idea-drivenestimates of things towards
a much more demanding view of whatan academic paper should offer.
And all those things, honestly reallyworked against my importance and
my interest in what was goingon in academic economics.

(23:35):
Now, let me answer.
You had a couple questions.
Let me answer another one, which iswinning the Clark medal was amazing for
me because it opened so many doors.
And in particular, it led to mewriting the book Freakonomics.
And it was stunning to everyone,including me, that that book took off and
was a bestseller,I sold a bunch of copies.

(23:56):
And the doors just opened to somany things and within academics, what I
realized is that my comparative advantagehad become getting access to data.
Once I had written Freakonomics,
[LAUGH] I could send a signed copy ofthe book to just about anybody, and
they'd sit down with me and they'd talkto me, and often they would give me data.

(24:17):
And so really I changed my research.
And much of my later research, if youtrace my history, goes from being a about
super clever identification, trying toanswer questions by natural experiments,
to just putting my hands on interestingdata that other people couldn't get,
and trying, often in straightforward ways,to answer questions that I could do.

(24:42):
And I was actually one of the smartestthings I ever did in economics was to
understand that that was my comparativeadvantage and to really work at that.
But the other thing I did discoverafter I wrote for economics and
I had these opportunities, was how muchfun the real world [LAUGH] Could be if you
were allowed to do interesting things, andif you had a certain amount of prestige,

(25:03):
and people would invite you toparticipate in solving real problems.
And so for me, that really sadly, I mean,I loved academics when I was doing it
actively, but it really was part of thedeath knell for my interest in academics
is that as much as I loved writing papers,I loved doing other things more.
And soI started allocating my time differently.

That's fascinating, so when you win the John Bates Clark Medal,
I know there's an AEA committee.
Is it kind of like the Nobel Prize wherethey call you super early in the morning
and they tell you that,or is it just an email?
I'm curious how did the Freakonomics bookdeal happen after you won the Clark Medal?

(25:44):
You sort of wanted to go out andpopularize the sort of applied micro
approach to everything and sort of explainhow valuable this sort of approach was?
Or like, did it sort of cometogether through unintended means?

So on the Clark Medal, it definitely wasn't early in the morning,
cuz I think they met in US timeinstead of European time, and so
I wasn't really privyto what was going on.
But I just know that I was sitting in myoffice, I was visiting Stanford that year,
and I got a call from Avina Stixit, whowould never call me in a million years,
hasn't called [LAUGH] Me before since.

(26:20):
And he was calling to tell methat I'd won the Clark Medal,
and then nothing else really happens.
A bunch of people write you an email,but nothing follows.
But the only thing that did happen wasthat the New York Times magazine wanted to
write a piece on me, and
Steven Dubner ended up beingthe reporter who was put on it.

(26:40):
And then he wrote a piece about me,which created.
He hates it when I say this, butcreated this persona about me that was so
far from the truth, but thought itwas delicious and exciting to people.
Me, as this Indiana Jones of economics,
who you just posit a question andI stare off into space a little bit.

(27:01):
I type at my computer andI deliver the answer.
So it couldn't have beenfurther from the truth.
But people loved the profile of mecuz he painted the things that were
weird about me, buthe really made me heroic in my weirdness.
And so then the publishers wereinterested in me doing a book,
but I categorically said no.
And eventually, Stephen Dubner'sagent called me up and said, hey,

(27:24):
why don't you write a bookwith Stephen Dubner?
And I said, number one, I have nointerest in writing a popular book.
Number two,
I'm sure Dubner doesn't want to writea book with me because we honestly didn't
get along that well when he cameout to interview me the first time.
But we agreed to talk and we shared.

(27:44):
We had a real commonality,
which is that neither of usreally wanted to write this book.
Neither of us thought anybody wouldread a book if we did write it.
But we both were kindaprostitutes in some sense.
And so for the right amount of money,we were willing to write this book.
And interestingly, the right amountof money turned out to be similar for
both of us.
And so, much to our surprise,we got offered,

(28:07):
I don't know, three times thatamount of money to write the book.
And then the only thing that stood in theway of us writing the book is we had to
figure out how to divide the profit,you know the payments.
And Dubner, I don't remember the exactnumbers, but Dubner came to me and
he said, hey, I know it'suncomfortable to talk about this, but
we need to decide to split.
And he said, I was thinking 60 40.

(28:29):
And I said, I was actuallythinking two thirds, one third.
And he said, I'm just not willingto write this book for one third.
And I said, no, no, I was thinking twothirds for you and one third for me.
And he said, I was thinking 60% foryou and 40% for me.
So it's the easiest negotiation ever,we settled on 50/50.
We both felt like we got a lot of surplus,and
we've had a great relationship ever since.

(28:51):
So we definitely did not enter this withsome idea that we were on a mission to
better the world.
I mean, we really thought,no one's gonna read this book.
The only question we had was theimmorality of taking all this money from
the publisher fora book that no one was gonna read.
And it shocked everyone.
I mean, from top to bottom, it shockedeveryone that this book took off.

Well, it's amazing how successful it's been 20 years on and
still going strong.
Let me get back to yourintellectual transformation at
UChicago in the Department of Economics.
I remember in another interview that youdid with Kevin Murphy a few years ago.

(29:33):
You described that when you first joinedthe UChicago Economics Department from
being a student at MIT and Harvard,that you hoped to change the UChicago
department and make it more into sortof the MIT Harvard mold at first.
And UChicago, being sort of the famousfree market Chicago school stronghold,
famously being at odds with MIT andHarvard,

(29:55):
the famous Keynesianstronghold in Cambridge.
But you said that you since become verymuch more part of the Chicago tradition.
I think you cited Gary Becker as being onewho influenced you greatly in this regard.
And I remember some stories youhad about going the quadrangle
club with Austin Goolsbee and Gary Becker,

(30:15):
and how Gary would sort of always knowthe right answer to how to model things.
I'm curious, how would you describe yourown intellectual transformation since
you first walked in the door at UChicagoas an assistant professor up until now?

So I cannot imagine I was arrogant enough to believe that I was
going to change Chicago.
So that's not my recollection.
What I remember, of course,
you can't really believe whatpeople say they remember.
What I remember was that I wasgoing to Chicago for two or
three years because I wantedto get to know the enemy.

(30:49):
I didn't wanna change them.
I just wanted to see how they thought soI could respond better to them.
And what attracted me to Chicago,be honest,
is the only time I had beenon campus to give a seminar.
It was a free-for-all, andit was crazy and chaotic,
really unlike any seminarI've given before or since.

(31:14):
But I was really stunned,I'll tell you just,
I won't tell you the detailsof what happened.
But at the end, Sam Peltzman,who was not a young man,
he must have been probablyin his sixties by then.
As everyone was walking out ofthe seminar, he put his arm around one
of the other older faculty at Chicago,and I could hear with the earshot of me.

(31:39):
He says, we haven't taken someone apartlike that since George Stigler was here.
And that was the kind of chaos thatreigned at Chicago in those days.
And I was attracted to it.
And I really wanted to go.
And people asked me different questionsthan I'd ever heard before, and
I liked that.
So I showed up at Chicago.
Let me say, before I went there, everyonethought I was crazy to go to Chicago, so

(32:01):
one of my mentors at Harvard was AndreSchleifer, who himself was from Chicago.
And when I told Andre that I was going tothe Department of Economics of Chicago,
he said something like, if you do that,I will never talk to you again.
I said, why not?
He said, because it shows that you are so
fucking stupid that you'renot worth talking to,
only a moron would go to the Universityof Chicago department of Economics.

(32:25):
But I went, and my goal was tobe there a couple of years, and
I would learn price there.
I really wanted to learn price there.
And what was interesting is two things.
First, I just absolutely got convertedto the power of Chicago thinking,
as I heard people like Gary Becker andKevin Murphy and
everyone talking,it just made sense to me.

(32:49):
It was a different version of the world,
there's a more serious economicapplication than really.
I wasn't an economist at MIT,
I was a data scientist who was messingaround with data, and I loved it.
Now, what's funny, I'm not good at Chicagoprice theory, I never really learned it.
There's nobody,if you talk to people like Kevin Murphy or
if Gary Becker were alive and he said,hey, is Levitt any good at price there?

(33:11):
They say, no, no, he's not,but he appreciates it, and
that's the important thing, and he asksthe right questions and he lets us, and
we help him with it, so no one willconfuse me for being good at it.
But I liked it, and if you look atmy research, once I got to Chicago,
I began writing completelydifferent kinds of papers, and

(33:32):
it was very influential, and I never left.
I thought about leaving from time to time,but it really, for me,
became an incredible intellectualhome where I always felt challenged.
Where I always had thisoptimism that someday I was
really gonna get good at price theory.
But it's [LAUGH] Hard, it turns out thatprice theory is actually hard to learn,

(33:55):
and some people seem to get it naturally,and I wasn't one of those people.

It's amazing, just the department, and
I think a lot of people maynot realize this, just one.
How difficult it has been to get tenure,
or how difficult it was to gettenure in Chicago at that time.
I think my sense is that they would onlytenure people who they felt would be,
future Nobel Prize winners, andthat sort of influenced their hiring.

(34:24):
So I think really speaks towhat they saw in you, and
it's just amazing to think, too.
I remember stories about,I think it was Milton Friedman and
George Stigler trying to hire Schleiferwhen they did hire him to see Chicago.
They sort of famously had this photoof them on some sidewalks saying,

(34:44):
why don't you come joinus on the sidewalk?
And it's amazing just how muchthe department has changed since then.
And I feel like with the passing ofmany great Chicago economists, Friedman,
Becker, Lucas Stigler,there are far fewer Chicago school
associated economists now at UChicagothan there were a decade ago.

(35:05):
But there are some like yourself,John List,
Ken Murphy, Casey Mulligan,Robert Topel and
others who I think still care aboutthe Chicago tradition in different ways.
In your mind, is there a future for
Chicago price theoryin the Chicago school?
My sense of, I guess,
how Chicago price theory is different fromjust standard micro first year grab micro.

(35:29):
Is that there's less care about utilityfunctions and we just go straight to
demand and supply curves andreally are careful in thinking about them.
And you're still at Chicagothe first-year grad micro
sequence is still called Chicago Pricetheory and it's still taught differently.
I'm curious, what do you think aboutthe future of the Chicago tradition,

(35:52):
the Chicago school,do you think it's in decline or
do you see it having a long-lived future?
I know there are otherpeople that I haven't listed
that they care deeply about it, some whoare at Chicago and many who are not,
there's a big diaspora as well now.

So let me divide into two.
So, I don't know, you know a lot moreabout macro than I do, but my sense is
that, so we go back to 70s, there's a realgap between how Chicago thought about
macro and how Chicago thought aboutmacro compared to the rest of the world.
And interestingly, the Chicagoview essentially won in macro, and
our students placed well and influenced,and I think everywhere now around.

Still placed very well in macro.

Yeah, yeah, sort of everywhere, every macro department feels
a lot like heavily influenced by Chicago,and I think for better, for
worse, that has been a success story forthe Chicago way of thinking.
It's just really the opposite,I think for Chicago micro,

(36:53):
we have not had very many studentswho've gone out and been influential,
maybe Ed Glaser being a clearcounterexample to that.
And I think in the marketplace forideas, I gotta say that Chicago price
theory really has lost andit hasn't caught people's imagination, and

(37:13):
I remember I was on a call withMilton Friedman long after he left.
He left Chicago in 1978, butthis must have been 20 something
years later where he was, he wasvery upset that Chicago price theory
was not doing well,that it wasn't being appreciated.
And I remember Casey Mulligan saying,hey, Milton,

(37:34):
I thought you believed in markets,let's just face it.
Price theory is losing in the market forideas, and Milton Friedman got so
upset about that he believed in marketsuntil it applied to Chicago price theory,
where he thought thatit was the right way.
So markets shouldn'thave any bearing on it.
But I think that's just the truth,that the people who you think of
as being the logical heirs to Chicagoprice theory, the two that come to

(37:58):
mind really are Ed Glaser andJesse Shapiro, they're not a Chicago.
When Kevin Murphy retiring,there just isn't anybody around now,
really, other than Casey Mulligan,who could really keep the torch going.
And the movement in terms of textbooks andwhat people are taught is just so

(38:20):
away from what I think of Chicago Pricethree, which is not as mathematical.
It's more about how you takethe simple tools, the very old tools,
you know, tools that go back to peoplelike Marshall and how you use them.
It's really the skill that Isee in Chicago price theorist,
the one that I don't have,is how do you look at a problem and

(38:43):
understand it throughthe lens of the right tool?
And it's not complicated, it's usuallyvery simple, once you can see it,
it's usually not much more thanintermediate micro is what gets applied.
And it's more artistic, and
I really feel like our fieldhas moved towards technicality,
harder proofs, more mathematical,and I don't see any going back,

(39:06):
I think it is essentially lostto posterity at this point.

Yeah, and I think a bit of a shame in the sense that it really
emphasized economic intuition and
really that sort of taking that beingfront and center above all else.
But I mean, at the same rate,
you see all these great feats ofthese mathematical economists,
you think Paul Milgrom and his auctiontheory, and they've informed FCC auctions.

(39:34):
So I do understand the sort of counterargument around mathematics and
rigor, and at Stanford,it's sort of the home of economic theory.
I see that a lot, andI get where they come from on that, but
it is a bit of a shame thatthe Chicago price theory,

(39:56):
has been diminished inthe way that it has.
But I know Casey Mulligan's Chicago PrizeTheory book is coming out in a second
edition soon.
So would never write thingsoff completely, but agreed.
It certainly seems like it's ina bit of a diminished state.
I wanna turn now to just likethe applied micro-legacy at Chicago.

(40:20):
You are great friends with John List, and
I think we'll both agreed that list isin line for a Nobel Prize in Economics.
You and John at Chicago really broughtapplied micro to a department which even
now continues to be one of the morestructural departments like Yale,
Northwestern and Stanford,rather than one of the more, I'd say,
applied micro departments like MIT,Harvard, and Berkeley.

(40:42):
Paint with a very broad brush here.
But you and John have been very unafraidwhen it comes to going into the real
world, trying to run field experiments,whether it's working with Uber, Johnson's,
working with Lyft and
Walmart, you trying to get people to makelife decisions based on a coin flip.
You guys started doing this all at a timewhen it was probably frowned upon in

(41:03):
academia in the 2000s.
Curious, what in your mind has beenthe greatest contributions and
legacy of team appliedmicro at Chicago thus far?

So I think John List is amazing.
He's amazing in two regards.
First, he came out of nowhere, right?
He came from the lowest ranked institutionaround, University of Central Florida.
And he had a boldness of thinkingabout the power of experiments.
It's embarrassing to talk about it now.

(41:33):
But somehow in my mind, in my training,I just had the idea that you weren't
allowed to generate your own data,that somehow as an economist,
you were supposed to take data thatwere out there and analyze them.
And then John came along and juststarted creating his own datasets, and
they were in silly things aboutbaseball card, buying and

(41:54):
selling baseball cards,or pins, decorative pins.
And I remember when I first raninto John's work, thinking, wait,
you're not allowed to do that.
And then I thought, wait,wait, of course you are.
Why did I think you weren'tallowed to do that?
Well, who put that idea in my headthat we couldn't be data creators?
And it was a blindness.
It was an interestingblindness to a real truth.

(42:16):
And so bringing John to Chicago,I really worked hard,
had to fight a lot ofresistance to bring him.
It was one of the best things Iever could have done for Chicago,
because he's just been a forceof nature his entire life.
And our years,
maybe we had a seven, ten years wherewe collaborated on a bunch of papers.

(42:36):
It's so much fun, so exciting.
It was interesting for
me because just like I thoughtI'd be a Chicago Price theorist,
I thought I would be good at doing fieldexperiments, and it turned out I wasn't.
I was never very good at coming up withthese great ideas about how to use
randomization to answer questions.
John was good at that, and I wasn't.

(42:58):
So, honestly, I think I give 90%of the credit to John there,
because John has justbeen the most forceful.
John has been unbelievable in the waythat he has transformed the way people
think about the world.
And along the way, John did a real serviceto the profession by making people think
harder about lab experiments, cuz there'sreal reliance on lab experiments,

(43:22):
which I think don't turn out to beall that useful in our context.
And bringing the idea that you cando these randomized experiments.
Not that John was the first one todo these field experiments, but
I think he did them in ways thatopened people's eyes to the power.
And so there was a moment therewhere Michael Greenstone,
who went away and then came back,Mark Duggan, Roland Fryer.

(43:46):
There was just a group of us aroundthat were some of my closest friends and
all awesome economists,and it was so much fun.
If I look back on my career, those are theyears I remember as being the golden years
where, yeah, I just loved going intowork every day, and you never knew what
you'd be working on the next day,cuz ideas were flying so fast.

That's great, and I know you golf a lot with John.
I mean,John himself is a great golfer, and
I think is he played atthe collegiate level.
I know you guys were playing somuch golf at one point that I think you
were [LAUGH] almost getting ready forthe seniors tour.
I guess this is maybe an unknown thing,but

(44:29):
it seems like there's just tons of Chicagofaculty members that are super into golf.
I know Fama and Thaler andmany others are, but so much so
that I think you guys are playing everyweek at one point, or maybe still are.
I'm curious, how much was golf,I guess, part of that, I guess,
culture of going out and takinga break from being in the office, but

(44:51):
also talking about ideas while you'reon the course, obviously, as well?

I mean, John and I played a lot of golf.
And eventually,I would play with Fama many times a week.
Eugene Fama and I would play, andRichard Thaler would be there sometimes.
It's unusual where you'dplay a threesome and
you'd be the only one who doesn't havea Nobel Prize who's playing in your group.
It was just John and I,we were best friends, and

(45:17):
John was an amazing golfer andI was a wannabe of an amazing golfer.
I was trying hard to become one.
And we had a lot of fun with that.
But I would say our time in the golfcourse, if you've been around John,
you know that he's talkingabout work all day long.
It's always about your next paper andyour next study and how are things going.

(45:40):
But when I played with Fama and Thaler,
that was just purely three old guysgetting together to play golf.
That was a very different style of thing,much more like you might think of.
But, in general,
I would say the golfing culture wasnot really important to anything.
It was just how my friendship withJohn evolved into something we did.

(46:02):
But it could have been anything.

Well, that's fascinating, and as a lover of golf is why I
can totally understand how muchfun it is to get out there and
sort of enjoy nature, and a great way toget to know other people very deeply.
So I think the big sort of newsthat I'd heard from you recently is

(46:24):
that you're going emeritus next year.
You're retiring from academiaat the age of maybe 56 or 57.
I'm curious, why leave so young?
I guess many, say, Ramsey, Fischer Black,many of them, I guess, died very young.
Many others left at the top of their game.

(46:47):
I'm curious, what has changed your, andwe've talked about this a little bit, but
I'm curious, how have yourviews about academia changed?
And what has inspired you, I guess,
to retire from academiaat this current stage?

I think two different forces are at work here.
The first one is that maybebetween five and ten years ago,
I worked on three or four projects thatI was just incredibly excited about,
that I felt were some of the bestresearch that I'd ever done.
Research I did on making decisionswhere I had people out in the real

(47:23):
world toss coins andinfluence what they did.
I did this study of Hurricane Katrina,which, again, no one cared about it.
But, well, let me leave that,if you edit, yeah, that's it.
I did study Hurricane Katrina, where welooked at what the actual effect was on
people's life outcomesin a quasi-random way.
Who happened or happened not tobe affected by Hurricane Katrina?

(47:45):
John Donohue and I wrote a paperthat was a 20-year follow-up to
our earlier paper on abortion and crime.
And it was unlike really any othereconomics paper I've ever heard of,
because we made a prediction in ourfirst paper that was published in.
In 2001 about what wouldhappen over the next 20 years.
And then we went back to the data20 years later, and we said,
did our prediction hold?

(48:07):
And it was an interesting paper to write,
because we just simply replicatedeverything we had done 20 years earlier.
We really were completely handcuffed bythe choices we had made 20 years earlier.
And it turned out that exactlywhat we expected to happen, and
maybe even to a greater degree than wehad predicted, had come true in terms
of abortion seemingly still havingan extremely important effect on crime.

(48:28):
So those were examplesof papers I worked on.
Last one I worked on that I was so excitedabout was estimating a demand curve for
Uber, because it makes economistsfurious when I say it.
But in some sense, I think it wasthe first interesting demand curve that
economists have everbeen able to estimate.
Because to estimate demand curve,

(48:49):
you have to have pricevariation along a huge range.
And we were the first people to have that.
So these were four papers that I wasreally excited about, and collectively,
they had zero impact.
They didn't publish well, by andlarge, nobody cared about them.
And I remember looking at onepoint at the citations and
seeing that collectivelythey had six citations.

(49:11):
I thought, my God, what am I doing?
I just spent the last two years ofmy life, and nobody cares about it.
And I really think it's true that the wayI approached economic problems went out
of fashion, went out of vogue, andfor better, for worse, probably,
the profession is better for
having a different set of standardsthan I was used to meeting up with.

(49:32):
And that was really discouraging to me.
And you combine that with the factthat along with Steven Dubner,
we've got this media franchisewhere Dubner's podcast,
Freakonomics Radio,gets a couple million downloads a month.
If I want to get a message out,
I can get it to millions of peoplethrough a different medium.

(49:56):
It just didn't make sense to meto keep on puttering around,
doing all this work, spending years towrite papers that no one cared about.
When I had other ways ofgetting my ideas out and
really my interests were elsewhere,I didn't get any thrill.
Be one thing,if I got a thrill from publishing,
if I loved the act of publishing, and

(50:17):
it made me feel great to see my name insome journal, then it would be different.
But I never cared about that.
I just liked answering the problems.
And I realized there were better ways,there were better venues for
me to answer problems.
And so really, the question isn't,why am I retiring now?
The question I should ask myself iswhy didn't I retire a long time ago?
It made no sense.
I've just been, I've thought, I've knownfor years it's the wrong place for

(50:42):
me to be.
And it just took me a long time tofigure out how to extricate myself from
academics and I'm so glad I'm doing.
It's good for everyone,it doesn't make any sense to.
It feels to me awful to be ina place where I'm not excited and
where I'm not contributing materially.
So for me it feels like a breathof fresh air to be saying,

(51:05):
hey, I'm not gonna be an academic anymore.
I'm going to be doingwhat I really love to do.

Well, it's an interesting question I ask this myself a lot too,
about are we running out ofgood ideas in academia and
at least academic economics and finance?
I'm a little more on the finance side,but I think 50 years ago things
like the Black Scholes papers werewritten, Black Scholes and Merton papers.

(51:34):
And that was an option pricingformula that everyone in Wall street
around the world eventually used forquite a period of time.
The price options,what a massive impact that was.
Or think about the CAPM orthink about Paul Milgrom and
the FCC using their auction theoryformulas to auction off spectrum.

(51:58):
I just think about all theseideas that had so much impact.
I wonder now, just with somany researchers,
to what degree there'sstill low-hanging fruit?
I think it just gets harder and harder.
I think at some level tobe able to innovate, and so
the bar just keeps on being higher.
But at the same rate,

(52:19):
I wonder too if the marginal impactof an academic is perhaps declining.
In the same respect Bob Gordon andpeople like that argue that we're running
out of ideas and that we've alreadyinvented all the great inventions,
whether it's commercial air travel,AC, automobile, computer, you name it.

(52:41):
Even things like the iPhone ormaybe some ChatGPT, chatbot sorts of
things are really minor innovationswhen you think about the long-run.

I'm older than you.
People have always said that.
People are always sayingwe've run out of good ideas.
I don't buy that at all.
At least when I talk to smartpeople outside of academics,
outside of economics, their view isthat AI is not minor, AI is enormous.
And I think within economics,the profession,

(53:14):
if you can anthropomorphizethe profession,
it has made choices not to focus itsattention on things like black scholes.
It's really right now, I thinkthe profession is very inward looking.
It's rewarding people who dothings that are seen as hard.
It's really blurringthe lines between theory and

(53:36):
empirics with structural in a waythat it's an experiment that I
personally don't thinkhas worked out very well.
And so I think that, I mean,the great ideas you're talking about,
like Black Scholes, are few andfar between anyway.
But the rewards are not there forpeople who have practical insights,

(53:57):
are not rewarded greatlyin the profession.
The rewards come to peoplewho make innovations,
theoretical innovations, right?
Who come up with new techniques, who dohard stuff that other people can't do.
So I think in that sense, economics isgoing to become, my prediction is that
economics is going to become less and lessrelevant, more and more inwardly focused.

(54:20):
And honestly,I wouldn't be that surprised if economics
ends up going the way of anthropology orsociology.
Which were prominent andthought to be very promising and
important disciplines, buthave fallen dramatically in their stature
because they ended up being morearcane and more focused inwardly.

(54:44):
So I have a really bad feelingabout the future of economics, and
I don't see an easy way to change it.

Yeah, it's interesting for sure, and
I definitely see that structuralshift that's going on.
A lot of people I think are getting backinto estimate very complicated models
rather than simple reduce form ones,and we'll see how that pans out.
It'll be like a pendulum, andthings could come back as well.

(55:14):
I totally agree with youon the AI optimism point.
I sort of disagree withBob Gordon on that.
It seems to be enormous promise anda lot of very interesting questions that
I think are propping up, whetherit's effects on the labor market or
effects on really anypart of our daily lives.

As I think about what I did as an economist, trying to look for
interesting angles to ask questions,honestly, I think AI,
if I were young, I think what I would betrying to do would be to figure out how to
get AI to answer those questions for me.
I think that the nature of the economistand what the economist does is going to be

(55:56):
transformed greatly inexactly the way that.
But the nature of somany jobs are changing, and
I think almost everyone who does a job hasthis illusion that AI is never gonna touch
their job,it's just gonna touch everyone else's job.
But I really think that the besthope is I look forward for
economics, the best hope is thatAI actually ends up being so

(56:18):
much better than people atdoing the idea generation.
And the finding ofinteresting patterns and
data that could be the key to a realrenaissance in empirical economics.
But we'll see, we'll see how it plays out.

Absolutely, we went from the day before ChatGPT 3.5 went public,
taking a long period of time to writea book or wherever have you abstract.
Or introduction to an academic paper,
to a world where you can writea book in a matter of minutes,
or an introduction in a matter ofseconds with the help of a chat bot.

(56:59):
So I totally agree with you that theproductivity and sort of possibilities for
economists completely changes.
And I'm sure you must remember what it waslike writing empirical papers in the early
mid 90s, how much that's changed, justwith innovations like Stata and so forth.
This is sort of just the nextpart of that evolution, and

(57:22):
I'm sure it just will continueto get more interesting, and
especially as we can upload datainto some of these chat bots.
So I'm curious,just in talking about the department,
I feel like this is sucha huge shift in your career or
such a huge announcement thatyou're retiring from academia.

(57:44):
I just think about across the years,you've interacted with a lot of colleagues
at the UChicago Department of Economicsand adjacent departments at Chicago.
I'm curious, there have been somany characters that have come through
the department over the years andso many great stories.
It's such a famed department andcertainly thinking to the days of

(58:06):
Friedman Becker,Lucas Sigler has had so much influence.
I'm curious, in all your travels, whohave been some of the most memorable or
colorful people that you've come across?
I know Gary Becker was a very big mentorto you, and perhaps one of the people that
contributes to you staying at Chicago andnot going back to Harvard MIT stories.

(58:28):
I remember Jim Heckman famously saying,you don't do real economics.
Obviously, he's more part of the world.
That's one of the nicestthings he ever said about me.

That was a compliment coming from Jim,
relative to what he used to say.

Well all these Jim Heckman stories I hear there's,
I remember the times when you and JohnLott were both at Chicago coming up with
some very different ideas aboutthe economics of crime, and
I heard some of those stories as well.
I'm curious,across all your years at Chicago,
what have been some of the morememorable moments for you.

(59:01):
Whether they're very importantsort of career changing moments or
big sort of epiphany type moments, or
just the sort of people that you'veenjoyed or enjoyed as much as others.

Yeah, so on the positive side,
Gary Becker was an amazing human being,a brilliant economist.
The time that I got to spend with him andKevin Murphy, there's no thinker
on the planet like Kevin Murphy,Kevin is just a phenomenon almost.
I don't even know how to describeKevin's insight and his brother.

(59:35):
I'll tell you one story about Kevin.
So I was working on a paper withPaul Heaton and Roland Fryer, and
we were trying.
So Kevin wasn't doing very much,Kevin never does very much.
Kevin's just in the backgrounddoing his thing, and
you go tap him on the shoulderwhen you have a problem.
So we had a problem, we couldn't figureout how to do one particular thing.

(59:56):
And so we went and we sat with Kevin,we explained the problem to him, and
Kevin said, I don't know.
I don't know what to do,I don't know how to answer that problem,
I don't know how to solve that.
And I looked up, said, what, kevin?
What are you talking about?
I've never heard you say that before.
How about you just go to the board andlet's see what happens?
So Kevin went to the board, andfrom scratch, it turns out,

(01:00:17):
ended up deriving principal componentsanalysis from the very basic principles.
And it was interesting cause Paul Heaton,who was a graduate student at the time,
now at Penn, he went back and he looked atand he said, what's so strange is actually
went back in the textbooks, andthey don't teach that in the textbooks.
What Kevin just arrived was the initialway that the first people who came up with

(01:00:39):
principal components, how they derived it.
But he couldn't possiblyhave ever read that,
he literally just invented itfrom scratch at the board.
And that was what it waslike being around Kevin,
no matter what question you asked him,he could figure it out.
And if he didn't know it, a lot oftimes he just knew it somehow, but
then he could just figure it out.

(01:00:59):
And if you're like me andyou enjoyed being around genius,
it was just soamazing to spend time with Kevin.
Now on the negative side, my God,some of the bad personality
settings that have inhabitedChicago really, really stand out.
And I gotta be careful, cause John Lott'salready sued me in federal court for

(01:01:22):
things I said about.
Let me not talk about John Lott,cause he is important in the partner.
But Hackman is just such a character.
Amazing economist, an amazing thinker.
I once went to him with anotherproblem I couldn't solve.
And I must have given like three sentenceof description when he stopped me.
And he went andhe grabbed some old book off his shelf,
it was exactly what I needed.

(01:01:43):
I don't even know how he could understandfrom the three sentence I said,
exactly the structure, mathematicalstructure I needed to solve this problem.
It is an absolute genius,but a nightmare personality.
He eventually decided that he andI were at war for the future of economics,
although I never saw it that way.
And he did crazy things.

(01:02:04):
I just tell you one crazy thing he did.
At one point,he started a new seminar series.
So in academic departments,to have the labor economic series,
the macroeconomic series,he started a new seminar.
And I'm not even joking,I'm literally telling you the truth.
It was called the Get Outthe Sleaze seminar.
And the only thing you needed to beinvited to speak was to be critical of me.

(01:02:29):
So it was an entire semesterof some academics, a lot.
Some of them weren't even academic,you didn't have to be an academic.
You just had to not like me andhave publicly said, you don't like me.
And he invited guest after guest,whose only agenda was to destroy me,
to come on campus to present their work.
And then I think finally, the departmentchair, at the end of the semester,

(01:02:53):
it was really awkward forthe grad students.
Because the grad students, [LAUGH] We'rebeing asked to organize this, and we're
frightened of what Heckman's responsewould be if they didn't follow through.
But I think they felt awkward beingaround me when they were doing this.
And then we have these importantexams that people take at Chicago.
And Hackman would routinely put a questionon the exam, which was my work, and

(01:03:17):
asking the students to say whatwas terrible about my work.
And that's what you needed to get toprogress on, and your PhD was said.
It didn't bother me that much causeI didn't take it that seriously.
But the the extremes that he wouldgo to to try to make life difficult,
not just for me, but forothers, really it's stunning.

(01:03:42):
In a business world,you just couldn't get away with that.
But in academics, there's enoughfreedom that people can just
do really anti social things andso still get away with it.
And we all hoped that when he wonthe Nobel prize, He would relax, but
it was just the opposite.
He said, God, it's so bad.

(01:04:04):
He would be kinda friendly with me,too, on and off.
He'd say, it's so awful,
now they have the Nobel Prize,everybody thinks I'm washed up.
I have to work three times harder,
to prove to them,that I'm just as good as ever.
He really had an unusual person.
He has a really unusual personality.

>> Jon Hartley (01:04:18):
Yeah, he's, I feel he's one of those rare economists who gets more
productive after winning the Nobel Prize,like, him and Tom Sargent,
I feel, are still in the mostproductive years of their lives.
And I feel they should maybe bring backthe, there was this award that the AEA
used to give out many years ago,and they actually.
They brought it out at the same timeas the Clark medal used to be called

(01:04:42):
the Friends Walker Medal, andvery famous economist long ago.
But the idea was,
this would be Nobel of Nobel, or,best of Nobel kind of economists.
And it was only givenout every five years.
And I think, Alan Hansen anda bunch of very famous people won it.
But I wonder if you introducedsome sort of a, best of Nobel or

(01:05:03):
even sort of higher prize, whetheryou could possibly incentivize more,
Jim Heckman,Tom Sargent like productivity.
But, I mean, they're already doing it,so my hats off to them.
But amazing just too,I guess Jim Heckman's also, I guess,
much more on the structuralside of things.

(01:05:25):
And I think there was really no.
You think about the history of Chicago andwhere most of the early applied micro
revolution kind of happened, orcredibility revolution sort of happened.
It was largely, at Princeton andthen MIT and Harvard, for the most part.
And it really wasn't, I think, until youshowed up, that there were really any

(01:05:46):
people doing simple diff and diff orplausibly exogenous type work, and that,
in general, people were stillpretty structural at that point.
I'm sure, when you first walked inthe door as a young scholar, there were,
I'm sure, many naysayers at that point,not just Jim Heckman.
Was it a bit difficult to.

>> Steve Levitt (01:06:04):
Tell you another story.
So, Ed Prescott, who was mostly notin Chicago, but he did visit Chicago,
at least once if not twice.
I remember Prescott, who isa macroeconomist, extremely sophisticated.
Lucas style.

>> Jon Hartley (01:06:16):
Even more so, all about theory.
Theory first, if the data doesn't matchthe theory, then the data is wrong.
[LAUGH] not the theory.

So, Prescott, he was kind of.
I was afraid of Prescott,I'm afraid of a lot of people.
I was afraid of Prescott.
But one day, I happened tofind myself sitting with him.
And Prescott said, I really like you.
I really like you as an economist.
And I said, what?
Why?
He said, cuz you have enough sense,to not mess with theory, right?
You're no good at anything theoretical, soyou just stick to point estimates, right?

(01:06:50):
And I need point estimates, right?
People who do what I do, we needpoint estimates to calibrate a mouth.
What I hate, is I hate people like you,who think you're good at theory, and then
you get everything confused, but you don'thave that problem, you're bad at theory.
[LAUGH] He's right.
I mean, it was a really,it was an insightful statement.

(01:07:11):
Now, most of the Minnesota,macro people, hated me, despised me.
And he was one of the rarepeople who didn't mind me.
But, it's funny, everybody,everyone in Chicago was always kind to me.
And Lars Henrisksen and I, a long time,
did a whole bunch of the providing ofsocial goods within the department.

(01:07:33):
I worked really closely with Lars on somany things.
And intellectually,we couldn't be further apart.
I couldn't understand anythingin Lars's papers, and
Lars wouldn't have liked what I was doing.
There was a void, and there's nobody who'sreally doing much in the department.
And so, Lars and I would get together,and try to make it a better place.
So I have to say,it was an incredibly welcoming department.

(01:07:54):
And people were really.
It was okay, to do your thing.
And I think the idea was as long as youwere the best at what you were doing, or
perceived as being good at whatyou're doing, it was okay.
And there was a sense of this market andmarketplace of ideas.
And Nancy Stokey would say to me, look,I don't understand what you're working on,
but people seem to like it,and that's important.

(01:08:17):
And that was, I think, a lot of whathappened at Chicago, that allowed.
And I think the other thing that reallyworked at Chicago, is I look back is,
that when it came to new hires,we looked at what they were doing.
And everybody, even it was far fromtheir field, tried to understand it, and
we tried to come to our own decisions.

(01:08:37):
And sometimes that was disastrous,and sometimes it worked well, but
it meant that we weren'tjust following the crowd.
And we weren't Harvard or MIT or Stanford.
Those were always places, I think,
that were more attractiveto mainstream economists.
So we had to make bets on weird people and
odd people that wouldn't necessarilybe attractive to those places.
And John list be a great example, right?

(01:08:58):
John List with the University of Marylandag econ department when we found him,
and those were the kinda hires, andthe thinking that made Chicago different.
Now, honestly, I'd say, Chicago is almostexactly like the other departments.
You'd be hard pressed, I think, if youblinded everything and you took Stanford,
Chicago, Princeton, MIT, Harvard,it would be hard to find a real

(01:09:21):
individuality that's sodifferent at Chicago than anywhere else.

>> Jon Hartley (01:09:25):
Well, some people would say that Chicago, true,
hardcore Chicago type people,or Chicago, Minnesota people.
Might say, Chicago's kind of gone soft,
since maybe the 90s or the days thatyou started there in the sense that at
that time I think they werefailing out half the students.
And I think that's changed a lot now,as far as I understand it.

(01:09:48):
I guess the upside of that, obviously,
it's getting thrown out of economics PhDprogram, is a pretty terrifying thing.
But I've heard stories from people whosaid, well, it allowed more people to get
accepted and people who otherwisewouldn't have been able to go.
If it was kind of thing where,they took much fewer students but

(01:10:08):
didn't fill anybody out.
They gave those people an opportunity andallowed the department to take risks on
students who were maybenot getting in elsewhere.
But we're able to get in there, and we'reable to really sort of show their master
in those first couple of yearsof their Econ PhD program.
And I'm sure there's many stories.
How in your mind hasthe culture sort of shifted?

(01:10:30):
Obviously, there's the seminar format,which famously,
I think people tend totear things to shreds.
Some seminars, the money seminar, I think,was started by Friedman, very famous.
Have you sort of noticed that change orhad a hand in some of that?

I don't know if I've had a hand in it.
I haven't really done very much to changeit, but it has changed and for better and
for worse.
But I really, I do think it was,
it wasn't really an equilibriumwhere Chicago was to be,
to try to be an elite departmentmade up of iconoclasts.
It's just a hard thing to replicate andmaintain.

(01:11:11):
And I'll be totally honest,the environment in Chicago was toxic.
It was back in the day,it was mean spirited.
There was, by virtue ofeverybody being an iconoclast,
there was a lot of bad personalities,and especially for the grad students.
I really don't, I'm totally with you thata virtue of letting in a lot of people and

(01:11:32):
then flunking them out,
is that some people who wouldn'thave had a chance got a chance.
But the toxicity of the environment,and I compare it to when I went to MIT.
At MIT, they brought you in as a PhDstudent, and they made you think,
they made you believe you werethe future of the discipline, and
they treated you like you mattered.

(01:11:55):
And you practiced,you acted like you mattered,
you acted like you weregonna be a future economist.
Really, we beat the stuffingout of our grad students so
badly that most of them left the programshells of their former self.
So, honestly, I think what might beideal would be if we had a kindler,
gentler Chicago that still had a littlebit more of the iconocost flavor.

(01:12:20):
But I'm just not sure it's possible,
I'm not sure that we couldhave accomplished both.
But I definitely think that we've movedin the direction of saving people's
mental health, their sanity, from thechaos that was reigning when I got there.
Which is why Andre Schleifer said,don't go there.
Because it was crazy.
It was completely out of control andmaybe that was good for scholarship, but

(01:12:44):
it was destructive as well.

>> Jon Hartley (01:12:46):
Yeah, I recall there was some phrase about using pressure to
make diamonds out of coal orsomething like that.
I agree with I totallyagree how destructive and
terrible that can sort of be on just froma human and compassion sort of standpoint.
I remember taking your economics of crimeclass at Chicago, which was great in

(01:13:09):
the sense that it wasn't really justa class about economics of crime.
But was really just an intro to appliedmicro and everything you needed to know,
and certainly had influence on me andsort of my appreciation for
plausibly exogenous identification.
And even though I'm sort of more ofa finance macro person, I remember
in that class, you took the whole classto this gun range at Deb's gun range in.

(01:13:33):
I think it was Gary, Indiana.
I'm curious what was the goalin your mind with that trip?
And I know, I think every other year,
I think you'd bring a prostituteinto class or something like that.
And it's amazing to me in the sensethat I don't know if the idea was to
expose what's primarily a progressivestudent body to something that most would.
Would never do, to this day,

(01:13:53):
I think that's one of the fewtimes I've ever shot a gun to.
I'm curious, what was yourthinking about that class and
the other classes thatyou taught at Chicago?
Clearly, I think, different fromthe rest of the pack in terms of
the experiences that studentswould take from that class.
And I think many people also getting toknow you sort of got plugged into your

(01:14:14):
network.
I got an internship withthe Dallas Cowboys out of that,
out of getting to knowyou through that class.
And I'm sure manother people,students who've come to work with you over
the years,got to know you through that class.
What, in your mind,when it came to teaching at Chicago,
how did you want to dothings differently and was.

(01:14:34):
I guess, intentional that you wantedto sort of partly recruit out of that
class to your various endeavors.
Whether it's been your work with Uber oryour work at TGG or your academic work or
other projects that you've had,academic or otherwise, in the real world.
I'm curious,what was your approach to teaching?

So there aren't really any incentives to teach?
Well, no one really cares how you teach.
But what I quickly learned isthat it's a lot more fun to teach
a good course than to teach a bad course.
And part of what makes a classgood is if you actually have fun.
And soI put a real premium on trying to make
integrate learning with fun andstorytelling and

(01:15:19):
doing things that would be enjoyable forthe kids.
And so the gun range, I think, was a greatexample because almost nobody who was in
the class would have ever shot a gun.
They thought guns werethe worst things ever.
They thought anyone who liked gunsmust be a complete lunatic and

(01:15:39):
so it was not only fun gave a chance forus all to have dinner together and
sit in some greasy spoon restaurant andGary.
But I've heard a number of studentssay that that was one of the most
transformative things they did in Chicago,
because it made them seesomeone else's perspective.

(01:16:00):
It made them see why people like guns andfeel the power of guns.
And so when I would bring a call,girlfriend of mine into class and
she would lecture, people would tell me itwas the best lecture they'd seen in their
four years at the UFC.
And so I wouldn't say I triedthat hard around the edges.
I just tried to bethe tiniest bit creative and

(01:16:23):
to give students experiences andnot just lecture to them.
I think we do a horrendousjob in higher education,
especially at research institutes,of giving students the kind
of experiences that will transform theminto being big thinkers or good citizens.

(01:16:43):
Whatever we want them to be.
So that in my own little way, I tried tocreate something that would be memorable.
Because what I found is that when I'dbeen there at U of C for five years and
the first class I taught came back for
the five year union,I talked with a bunch of students.
They couldn't rememberanything from my course.
They could remember nothing.
I remember one student came up to me andsaid, when I asked what they remembered,

(01:17:05):
they couldn't rememberhow to do Lagrangians.
They couldn't anything.
But the one said,
I do remember one time you forgot topick up your daughter from daycare and
your wife was so mad at you, that waswhat they remembered about my class.
And when I heard that, I realized, well,I'm teaching the wrong kind of class.
I got to teach a classthat has more stories and
less Lagrangians if I want tohave impact on people's lives.

>> Jon Hartley (01:17:29):
That's fascinating, you're pretty bearish on academia.
We've sort of established that, maybesome hope with AI and some other things.
I'm curious,just on higher education as a whole,
would you describe yourself as beingbearish and not very optimistic,
or that it's sort of in need ofa deep technological transformation?

Well, that's a hard question, and
I couldn't pretend toreally know the answers.
I don't think we're doing a very goodjob right now in creating thinkers.
The whole system is really rigged towardsmemorization and towards tactical or
strategic manipulation ofthe students to get good grades and

(01:18:11):
not really about asking bigquestions about learning.
So I think what we'redoing is deeply flawed.
Do I have a really greatalternative to it?
No, not really.
I think I'd like to see alternatives tothe typical four year college, I think so.
So I think that I would like to seesomething more like a college GED,

(01:18:32):
which right now, what is college really?
For many people,college is about the consumption value.
It's about going and having fun andmeeting people and it's not about so
much what you learn.
It's about the sickening value.
Look, I'd rather, I'd rather free that up.
So the people who can't afford to spend$60,000 a year to go to a place like
the UFC.
Let them show that they know everythingthat a student who goes there knows just

(01:18:57):
by taking a test that proves it.
Now, there are a lot of difficultiesaround that, but I would like to see that.
But I think hard, these are hard issues.
And one thing we know is that educationis extremely resistant to change.
If you look at the Dow Jonescomponents from 1929 or 1915,
you won't even recognize the namesof the companies back then.

(01:19:19):
They don't exist, they're not important.
But if you look at the top 20universities in the country in 1920,
it's pretty much the sameset of schools you have now.
So I don't know.
Those are great questions.
I think that if we werestarting from scratch,
we would never createa system like we have.
But at the same time, look,
do people come from other countriesto attend schools in the US?

(01:19:42):
Absolutely, very few people inthe US go outside of the country to
attend other places.
We're doing something right in higher end.
I just think that the possibilitiesare much, much greater.

>> Jon Hartley (01:19:53):
Makes sense, absolutely,
it'll be interesting to see how highereducation is transformed by AI.
If at all I mean, I guess it's soresistant to change, but
I guess it's been a bit adaptive inthe sense that computers are pretty
well integrated as well, and so forth.
I'm curious, just last question here,really, about Freakonomics,
your future and your retirement fromacademia and what you hope to do.

(01:20:16):
Freakonomics is such a central partof popularizing the applied micro
approach to questions in the 2000s.
And since then you've got a wholefreakonomics radio empire that
continues on 20 years later, going strong.
You've got this wonderful podcast,people who I mostly admire,
one-on-one interviews that you're doing,what are the things that you're

(01:20:40):
getting most excited about today andenjoying doing most now?

I spent 30 years just trying to come up with ideas,
trying to really, it's all I did is I wastrying to generate ideas and test them,
and it was to the exclusionof everything else.
I really was very narrow,very focused internally.
One thing I really enjoy now iswith my podcast is that I'm not
a creator of ideas,I'm more a curator of ideas.

(01:21:07):
I find awesome people and I get to readwhat they do and learn about them.
And it's been fun for
me to go from being a producer ofknowledge to a consumer of knowledge.
It's really just been enjoyable.
So, for me it's just been greatconsumption value associated with that.
And I think it's a good balance.
I think it's, I don't know what the futureholds for me, but it's definitely been

(01:21:30):
useful for me to spend some timelearning what other people are doing,
rather than focusing on justtrying to create things myself.
The other thing I'm working onis I have a center at Chicago,
it's called the risk center,and it's very practical.
We're just trying to go out andhelp solve social problems.
Taking a view of a mix of academics,a startup mentality,

(01:21:52):
and a kind of NGO mentality.
Try to take the best of those threedifferent kinds of entities together to
tackle problems.
And we've got a great group of people,
and I wouldn't say we'vebeen that successful yet.
We've had a few wins,mostly we've had losses.
But it's fun,
it's practical, it's about how doyou actually get things implemented?

(01:22:13):
And for me it's a nice antidote to theacademic process, where for me, the fun
part of academics was always the idea,get a sense of whether it works or not.
And then 95% of your time is dottingthe I's and crossing the t's and
trying to convince referees that,well, you've got.
What I like about the real world isthat that ratio is really tilted away.

(01:22:35):
So that implementation is hard,don't get me wrong, but
all of that time perfecting and
disproving any other possible competinghypothesis, that was never fun for me.
So it's fun to go out, try and patchtogether the best halfway solution you can
do, andthen see if you can get it to work.
So that's really what I spendmost of my time doing now.

>> Jon Hartley (01:22:57):
Well, that's fascinating,
I know you had a project inthe pandemic that was being championed
by the risk center that was all abouthelping people negotiate their rent.
There's a huge problem in the pandemic,that people were having issues
renegotiating their leases and rent andnegotiating to get more favorable terms.
And I remember you sort of worked withsome lawyers to just put out some broad

(01:23:21):
public good sort of documentsthat people could use.
And my guess is that that's oneof your risk success stories.

No failure, nobody.

>> Jon Hartley (01:23:30):
No failure?

So, we put together a template that was really designed to help
commercial real estate,
to lessen the cost of renegotiationin commercial real estate.
By having a template, you could use thatdidn't require sophistication, that just
required a landlord and a tenant agreeingto really a one dimensional term about,
[COUGH] Two dimensions, really, how muchwill you cut the rent in the short run and

(01:23:53):
how much of that will have tobe paid back in the future?
But nobody cared.
I mean, that is the problem that weput it out there and we couldn't get.
I'm not sure anybody actually negotiateda contract using that template.
So, yeah, that's hard.
It's like academics.
It's hard to get people's attention andhard to make things happen.
But I will say it was fun.

(01:24:15):
It was fun sitting down with the lawyers.
It was fun sitting down withthe commercial real estate people,
learning about the problem,trying to come up with a solution.
And had it worked,it might have been amazing.
It might have really done a lotof good for a lot of people.
It didn't, but that's okay.
We learned something from it, andit didn't take more than three,
four days of our time to really do it.

(01:24:36):
So, although it wasn't a success, itcertainly wasn't our worst failure either.

>> Jon Hartley (01:24:40):
Well, it's amazing, and I hope there's some more golf in that your
academic retirement as well,in that future.
Steve, it's been a real honor to haveyou on both as a student of yours,
having taken your class at Chicago andkeeping in touch with you over the years.
It's been a real honor to really justtalk about your career in full and

(01:25:01):
what you're still doing now.
I think you've been obviouslya transformative part of the University of
Chicago Department of Economics.
So, I really appreciate you coming on.
Been a real honor to beable to interview you here.

Well, thanks, I'm the past, and hopefully you're the future.
So I'll be watching with interestto see where your career goes.

>> Jon Hartley (01:25:19):
Thanks so much, Steve.
Today my guest was Steve Levitt, who isthe William B Ogden Distinguished Service
professor of economics atthe University of Chicago.
As well as the co-author ofthe bestselling Freakonomics,
all of its sequels, and co-founderof the Freakonomics Radio Network.
This is the capitalism andfreedom of the 21st century
podcast where we talk about economics,markets and public policy.

(01:25:42):
I'm John Hartley, your host.
Thanks so much for joining us.
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Steven D. Levitt (Freakonomics co-author and U Chicago Econ Prof) on His Career and Decision to Retire From Academic Economics

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