#154 - Steve Levitt, Ph.D.: A rogue economist's view on climate change, mental health, the ethics of experiments, and more
Steven Levitt, economist and co-author of Freakonomics, discusses his unconventional path in economics, the field's limitations, and controversial views on climate change. He shares insights on mental health in education, decision-making, and the value of unique perspectives on various societal issues.
Deep Dive Analysis
14 Topic Outline
Unlikely Path to Economics and Its Limitations
Distinguishing Microeconomics from Macroeconomics
The Relationship Between Data, Theory, and Models
Revisiting Climate Change and Geoengineering Solutions
Blurred Lines Between Climate Science and Advocacy
The 'Manhattan Project' Idea for Climate Solutions
Reflections on Career Path and Being Oneself
Writing Freakonomics and Navigating Controversies
Appreciation for Mental Health in Education
Understanding Human Decision-Making Flaws
The Stagnation of Horse Racing Speeds
Observing the World Free of Language
Rethinking Medical Ethics in Experimentation
The Case for a Market in Organ Donation
6 Key Concepts
Comparative Advantage
This economic concept describes how individuals or entities can produce goods or services at a lower opportunity cost than others. Steve Levitt realized he inherently understood this principle from a young age, even without knowing its formal name, which helped him recognize his natural inclination towards economic thinking.
Macroeconomics
This branch of economics studies the economy as a whole, focusing on large-scale issues like inflation, banking, unemployment, and economic growth. It is considered incredibly complex due to billions of individual actors and intricate systems, making it difficult to model and understand effectively.
Microeconomics
This branch of economics focuses on the study of individual decision-making in situations of scarcity and competition. It analyzes how individuals and firms make choices regarding income, jobs, production, and location, often using formal models and incorporating behavioral psychology.
Externalities
In economics, an externality refers to a cost or benefit incurred by a third party who is not directly involved in a transaction or activity. In the context of climate change, individual behaviors that contribute to carbon emissions have almost no effect on the individual but a negative effect on the rest of the world, making behavior change an ineffective solution.
Radical Acceptance
This concept, often associated with dialectical behavioral therapy, involves fully and completely accepting reality as it is, without judgment or resistance. Peter Attia notes its difficulty, while Steve Levitt describes an unconscious form of it in his own life, particularly after experiencing profound loss.
Coercion in Research
Institutional review boards (IRBs) typically limit honorariums in studies to prevent coercion, fearing that large payments might exploit vulnerable populations. However, Steve Levitt argues that this approach is flawed, as low payments disproportionately target the vulnerable, whereas sufficiently high payments could attract a broad range of volunteers, including those from higher socioeconomic strata, thereby mitigating ethical concerns.
9 Questions Answered
Steve Levitt initially took an introductory economics course in college because it was popular and easy. He found he had a natural intuition for economic concepts like comparative advantage, leading him to pursue economics as a path of least resistance, despite not being internally motivated by the subject itself.
He argues that climate change is fundamentally an 'externality problem,' where individual actions have negligible personal impact but significant negative effects on the collective. Historically, problems rooted in externalities have never been solved purely by appealing to people to 'do the right thing' without technological or systemic changes.
Steve Levitt proposes gathering the 1,000 smartest scientists, providing them with ample resources in a dedicated location, and tasking them for five years to develop a cheap, out-of-the-box solution to climate change, such as advanced carbon sequestration, or to definitively determine if such a solution is impossible.
Dubner initially wrote a New York Times article about Levitt. Later, they decided to write Freakonomics primarily for financial reasons, without a clear theme or title. Their belief that the book wouldn't sell widely freed them to write unconventionally, which ultimately contributed to its unexpected success.
Unlike previous media portrayals of Levitt's academic work on abortion, the book allowed them to tell their story fully, emphasizing the empirical link between legalized abortion reducing unwanted children and a subsequent decline in crime. This nuanced presentation resonated with both pro-choice and pro-life readers, who interpreted it through their own lenses.
No, Steve Levitt believes humans are generally bad at making decisions, citing insights from behavioral economics and the personal struggles of even experts like Daniel Kahneman. He suggests that our evolutionary wiring, adapted for short-term, intense risks, is ill-suited for the complex, chronic challenges of modern life.
Steve Levitt speculates that unlike human sports, there may have been minimal advancements in horse training techniques over the past 40-50 years. He suggests current training methods, which involve limited running and stall time, could be dramatically improved with more sophisticated, human-athlete-like approaches to fitness and conditioning.
Steve Levitt practices observing the world through his senses without attaching words or labels to his thoughts or perceptions. He finds that this practice makes it very difficult to feel unhappy or angry, suggesting that language is critical to feeling victimized or experiencing negative emotions with their full impact.
Steve Levitt argues that small honorariums are coercive because they disproportionately attract vulnerable individuals who may feel compelled to participate for financial reasons. He suggests that for high-stakes studies, offering very large payments would attract a broad, diverse volunteer pool, thereby mitigating ethical concerns about exploitation and coercion.
29 Actionable Insights
1. Release Burden of Others’ Opinions
Make a conscious choice to not care what other people think about you, as this frees you from significant burden and allows you to live more authentically and happily.
2. Practice Radical Acceptance
Cultivate the ability to radically accept things that are beyond your control, especially in the face of major life events, as this can lead to a profound sense of calm and reduce struggle.
3. Prioritize Mental Health
Recognize and invest in mental health tools and self-care, as these are dramatically more important for navigating the world and fostering happiness than traditional education often suggests.
4. Differentiate Objectives, Strategies, Tactics
Clearly distinguish between your ultimate objective, the strategies to achieve it, and the specific tactics employed, to avoid misdirection and ensure effective problem-solving.
5. Reframe Problems for Solutions
When facing a problem, reframe the core question to focus on the desired outcome rather than just limiting factors, which can unlock more effective and diverse solutions.
6. Invest in R&D for Asymmetric Risks
Prioritize investment in research and development for problems with asymmetric, high-impact risks, as the cost of R&D is trivial compared to the potential costs of disaster or implementation.
7. Launch ‘Manhattan Project’ for Grand Challenges
For significant global problems, advocate for or initiate a focused, interdisciplinary ‘Manhattan Project’ approach, pooling top scientific talent and resources to find rapid, innovative solutions.
8. Address Externalities Systemically
Understand that problems fundamentally driven by externalities (where individual actions have little personal effect but negative societal impact) are rarely solved by individual behavior change alone; systemic or technological solutions are often required.
9. Change Default Environment
To effectively drive behavior change, focus on altering the default environment and social norms rather than solely relying on individuals to ‘do the right thing’.
10. Practice Word-Free Observation
Train yourself to observe the world and think without relying on language, as this practice can lead to a different way of processing emotions and potentially reduce feelings of unhappiness or anger.
11. Set Spending Thresholds
Establish a personal rule to not worry about decisions involving small amounts of money (e.g., under $5, $10, or even $100), as this frees up significant mental bandwidth and reduces daily burden.
12. Embrace Uncertainty & Foster Autonomy
As a parent, accept the inherent uncertainty of the world and your limited control over your children’s lives, fostering their autonomy and independence from a young age.
13. Express Love Explicitly
Make a conscious effort to regularly express feelings of love and affection to family members, counteracting societal norms that might discourage such open communication.
14. Overhaul Education for Life Skills
Advocate for a radical overhaul of the education curriculum to prioritize teaching children essential life skills, conflict resolution, and tools for happiness and well-being, rather than solely academic subjects.
15. Experiment & Innovate in Education
Encourage and subsidize experimentation and innovation in educational approaches, allowing different models to run and identifying what effectively helps students cope with the world.
16. Separate Facts from Implications
When analyzing information or engaging in discussions, make a sharp distinction between verifiable facts and the implications or interpretations drawn from those facts.
17. Establish Facts Before Debate
Before engaging in a debate or discussion, ask participants to clearly lay out the foundational facts they believe to be true, ensuring agreement on facts before discussing their implications.
18. Fail Quickly Strategy
Adopt a strategy of ‘failing quickly’ in endeavors, allowing for rapid identification of unworkable paths and redirection of effort.
19. Pursue Personal Interests in Work
Focus on studying and researching topics that genuinely interest you, even if they are unconventional, as this can lead to unique contributions and personal fulfillment.
20. Be Yourself & Adapt
Practice being yourself and pursuing what you like, and if a path isn’t working, be willing to take a different one, rather than trying to conform to external expectations.
21. Shift to Knowledge Production
Transition from being a consumer of knowledge to an active producer of knowledge, which is essential for intellectual growth and contribution in academic or professional fields.
22. Ask Questions When Tired of Answering
When you feel fatigued by answering questions, shift to asking questions yourself, as it is often more engaging and interesting.
23. Use Data & Intelligence to Overcome Physical Limits
When physical talent is a limiting factor, leverage intelligence and data-driven approaches to develop tools and strategies for significant improvement.
24. Consistent Practice is Key
Understand that consistent and deliberate practice is crucial for significant improvement in any skill or endeavor.
25. Apply Deliberate, Varied Training
For physical performance, implement a deliberate and varied training regimen, including activities like zone two training or cross-training, to build capacity and efficiency.
26. Avoid Inaction in Decision-Making
Recognize that many of the worst decisions stem from inaction rather than flawed action, encouraging a bias towards making choices.
27. Learn to Quit Sooner
Develop the ability to quit situations or endeavors that are no longer serving you, ideally sooner than your natural inclination, to avoid being stuck in bad situations.
28. Class Selection Strategy
When choosing academic courses, prioritize classes that are widely popular, as they are often both high-quality and manageable.
29. Offer High Compensation for Research
For high-stakes medical research where volunteers are needed, offer sufficiently high financial compensation to attract a broad and diverse pool of participants, thereby addressing ethical concerns around coercion and vulnerability.
7 Key Quotes
I was never interested in economics. I'm probably still not interested in economics. But the way I became an economist was really through the back door.
Steve Levitt
When I looked around and I was the dumbest person in the room, it was just sense of joy.
Steve Levitt
there's never in the history of mankind been a problem that is fundamentally about externalities, which has been solved by telling people you should just do the right thing and hoping that suddenly everyone's just going to start doing the right thing.
Steve Levitt
we confuse the objective, the strategy and the tactics all day long.
Peter Attia
all models are wrong. Some are useful.
Steve Levitt (quoting a physicist)
the decision to not care what people think about me, it's not a decision in like, Oh, I went back to school. I didn't go to school, but, but I somehow just made a choice. It's a choice. I don't know if you call it choice. I made a choice to just not care what other people thought about me, which was a big choice for me because like most high school kids, I, all I cared about was what other people thought about me. And at some point I just broke with that and was happy to live with the consequences. And it's just a great way to live. It just frees you up from so much burden.
Steve Levitt
I find that it's very difficult for me to be unhappy or angry without words. That words are really critical to feeling victimized, to feeling, it's not that I don't feel angry, but I feel very, very differently in the absence of words than with words.
Steve Levitt
1 Protocols
Manhattan Project for Climate Change
Steve Levitt- Convince the 1,000 smartest scientists in the world to stop whatever they're doing and work on climate change.
- Put these scientists in a dedicated, interdisciplinary research environment, similar to Los Alamos.
- Provide them with ample resources and funding.
- Task them to work for five years to discover a cheap, out-of-the-box solution (e.g., carbon sequestration) or definitively determine if no such solution is feasible.