Freakonomics @ IOD: Examining Data Ain’t No Monkey Business
Apologies in advance if you had no incentive to show up at the Freakonomics keynote session earlier this morning at Information on Demand, because it was, without question, the highlight of my week here in Las Vegas (aside from the Bengal tiger I discovered hiding in my hotel bathroom).
Just as with Malcolm Gladwell last year, author Stephen Dubner and economist Steven Levitt artfully integrated some of the themes of the event into their two-man show, and in the process perhaps nearly stole the whole show.
Dubner spoke first, asking the audience to “raise your hand if you’re a genius,” then recognizing the power of his own incentives, warned us away from stealing Levitt: “Find your own, he’s mine.”
Two best-selling books and a documentary movie later, I can’t say as I blame him. Dubner kicked the session off explaining how he and Levitt came into one another’s orbit, arguing that he was fascinated Levitt was using data to find out what was going on in “the real world.”
Levitt, on the other hand, explained how he eventually became the accidental economist who was abysmal at math and clueless when it came to different varieties of derivatives, but was still able to muscle through at the encouragement of his father, who had found his own niche as a medical researcher on “intestinal gas.”
“The king of farts,” went the GQ profile headline about his father, joked Levitt, before Dubner returned to the stage and kidded that that made Levitt “the prince of farts.”
All hot air aside, Levitt explained his niche became the study of the nichest, yet fascinating, realms of data, and the people who helped unravel them. Ultimately, though, Levitt was studying the power of incentives, and how they motivated — or didn’t — people across all walks of life.
Like the guy at the IRS who realized there weren’t really 7 million people named “Fluffy,” and how, almost overnight, 7 million people suddenly disappeared from U.S. tax rolls when the Social Security # started being required by filers in 1987 and they could no longer file their ghostly dependents!
Levitt went on to explain he wanted to become the kind of “real economist” who, when he made a mistake, could throw world markets “into convulsions.” But of course, to be a real economist, he’d have to be good at math, so instead focused on problem sets that nobody else was interested in.
Dubner returned to the fore to explain one of those scenarios, a Yale researcher named Keith Chen who wanted to understand the impact of money in a monkey economy.
That is to say, how capuchin monkeys would react to having money introduced into their milieu (in this case, a research cage at Yale).
The hilarity of the story that ensued couldn’t possibly be done total justice in my retelling here, but know that it had the makings of a great story which you can read more about here in a New York Times article by the authors.
The long and short of it is that monkeys don’t monkey around with money much, at least not how Chen the researcher thought they might, particularly when said money interferes with what the monkeys really wanted more of (food and sex), but they did find a novel way to fit money into their Yale cage monkey business.
As Dubner explained the lesson, economists are all about measuring preferences (revealed and declared), and that the monkeys started to buy more food when the prices of the things they liked to eat most went up, not unlike people.
Ultimately, it’s all about loss aversion, whether the loss be more food or sex.
Speaking of the latter, Levitt returned at this point to close out the session, using another anecdotal example that demonstrated the power of pricing in that most marginal of markets, prostitution.
Never one to shy away from the fringes, Levitt explained how he became acquainted with a high dollar escort in Chicago through a “mutual acquaintance” and who was interested in helping him with his research on the economics of street level escorts.
Turns out, the escort had a Palm Pilot filled with useful data for his investigation, but also came loaded with a background in computer programming and now street business savvy, and she was ultimately able to one-up Levitt when he asked her to lecture to one of his classes, charging a full $100 more per hour than her standard hourly rate, but apparently giving one of the best lectures at the University of Chicago that his students had had in their entire four year tenure.
Though it may not have said much about he and his colleagues’ teaching abilities, the story did reveal to the global IOD audience that Levitt and Dubner continue to unearth powerful data where seemingly none exist, and to relate the revealing insights behind that data in a way that gives testament to the truths and lies of the human condition.