Russ Roberts

Cowen on Your Inner Economist

EconTalk Episode with Tyler Cowen
Hosted by Russ Roberts
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Tyler CowenTyler Cowen, of George Mason University, talks about his new book, Discover Your Inner Economist: Use Incentives to Fall in Love, Survive Your Next Meeting, and Motivate Your Dentist. Cowen, legendary blogger at MarginalRevolution.com, talks with EconTalk host Russ Roberts about the economics of parenting, reading, dentistry, art museums and education. Highlights include Tyler's favorite art museum and what to see there along with the challenges of being a tourist in Morocco.

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0:36Intro. What do you mean by an "inner economist"? All of us make economic decisions and weigh benefits and costs every day, trying to match means to ends. If we can be just a little more self-reflective, self-critical, self-aware, we can get a better result. Economics is the science of the logic of choice, matching means to ends, making better decisions, thinking about how incentives operate and what costs really mean. Possible subtitle: Economics is the study of how to get the most out of life. The wealthier society becomes, the more likely economics will be about some non-traditional topic. Where and how do you listen to a podcast? While jogging? while coding? Does anyone listen to podcasts while reading? Incentives. Crummy textbook view: if you want something, pay for it. Book is critical of idea of using money as an incentive. If you use it too brutally or too frequently people start to feel controlled. Family setting, Zelizer podcast, why is money so unhealthy or ineffective in those settings? Is it only control issue? Some of it is symbolic, that it's about something other than loyalties. Slippery slope: pay daughter to do dishes engenders question: Will they pay me for good grades? picking the right major? Nerdy personality types: may be the best way to deal with them is to just pay them. Have to figure it out to decide when to use money. Wikipedia editors. Affiliation. Why people give money to causes. Open Source software. People want to be part of something grand and glorious. Identity in marketing campaigns. What are economists missing by not looking at identity? Under-explored frontier of economics. Adam Smith understood it—Theory of Moral Sentiments is about the incentives in non-monetary sides of our lives. What moves us to act to help someone? Proximity? similarity?
9:56Implications for politics: People get a large sense of their identity from political parties. Underneath is a better way of thinking about voting. Voting is like writing a letter to the newspaper. Cowen: Writing book has brought me back to my Austrian subjectivist roots. Key question is not what's the incentive, but what do people believe is the case? Smith, Menger. Inner psychologist: George Stigler once said "There's only one social science and we are its practitioners." Economists should be reading more psychology, need to break down the distinction. Daniel Kahneman shared Nobel Prize with Vernon Smith. Silos of the academy. Sociology. Roland Fryer suggests paying students to do well in school in inner cities. Good idea for very bad schools—there's no downside. More skeptical of paying for grades at better schools, in the suburbs. Can replace the right motivation with the extrinsic motivation of getting money. Pay people to read. Lumpiness to inspirational stories, need to have the right story, have to invest in it. Harmful to replace the story with the wrong one. If you are a proofreader, maybe it's the right incentive to get paid, but not generalizable. How do I get someone to have that intrinsic desire if they don't have it? Most people start loving books when they see that it matters to them personally. No guarantee of that. Harry Potter is very important because it's framed in the right way. Wouldn't be popular to a kid on a desert island, though. Is modeling reading and keeping kids away from computers a good parenting strategy? A lot of what kids do on computers is read. But what about novels and poetry? Is interest in fiction ebbing away?
19:01What about movies? Is visual fiction replacing books? YouTube, TV shows. It has to be very good to hold my attention. More choice, stuff is cheaper, we are wealthier. Flitting. "When in doubt, walk out." Before you go to a movie, ask yourself if you are willing to walk out if it is bad. Better use of your time, you'll see more good movies, take more chances. When reading a book, ask yourself: Is this the very best possible book in the world I could be reading at this time? Tongue-in-cheek but taken seriously. One person said he came across that passage and put Cowen's book down because he had never read Pride and Prejudice. People can do a lot better just by being a little self-critical, asking simple question. Attention spans. Gumption and perseverance versus wasting your time. Robin Hanson: In which direction is the bias likely to lie? In many areas, "I need to see things through" is appropriate--say, commitments to family and friends. But what about Kirkegaard, Fear and Trembling? Hard going—will people put it down too quickly? Substitution and income effects. How many books have you read more than once? Most of what Harold Bloom discusses as Western Classics, Shakespeare, the Bible, Plato, read five times. Complex ideas. How can we get ourselves and our students better at what we do? Feeling that nothing is supposed to hurt. Social tendency. It will hurt more in the long run if you flunk out. Forcing methods of study. Chess book by Alexander Kotov, key life lessons. Huge mistake to play through the moves. Should keep future moves a secret from yourself, write your moves down, and force yourself to see if they match the expert's.
28:07Teaching economics. Give students open-ended problems, no answer, want students to struggle, argue with their classmates, write them up on their own. But many don't, and are comforted when they just hear the answer in class. Hard to get students—and ourselves—to do the hard work necessary to learn. Generally, teaching that way is not popular. Painful to have to defend your own propositions in the face of being challenged. We don't understand very well how education works. Can you replace teachers with DVDs of the great lecturers? Probably wouldn't work, but why not? What makes education effective? Reading a blog may be as good a way to learn economics as reading a book. Hearing people chat, tell stories. Talking about each other's ideas is intrinsically valuable, valuable to be part of a small discoursing community. Emulates the dinner table. Anecdote: Alfred Marshall was teaching a class, and Pigou was only student. Pigou sits down, Marshall just reads his lecture notes.
33:43The dentist story: The dentist probably has more formal information about your teeth than you do. "Procedure x is in your self-interest." But dentist is motivated mostly by money; but we want to think dentist is motivated by love. Markets do not always give us the signals we need to figure this all out. What do you pay for something when you are in a foreign country? Most people are unwilling to argue with their dentist, have already surrendered control. For dentists and doctors people are more likely to say yes and then cancel the appointment. Third party payments also complicate the decisions. Informational problem: how little we know as consumers of dental, health, auto care about what we are buying. Google, Microsoft help. We're uncomfortable with creating random samples, more comfortable with delusion. Example: Russ is missing a tooth. Dentist said "Of course you need to have an implant." Russ asked why? "If you don't then the tooth above will grow down and become a long fang" and cause trouble. What are the odds? How long will it take? Both Russ and dentist have biases, delusions. Hard to find reliable information on the odds of a fang. Fear factor. Most people don't really want to know. Tourist: hiring a guide in Morocco. Need a guide in Marrakesh to not get lost, city very medieval. But guide will take you where he wants to go, to shops that give him commissions. Guides offer to do it for free, saying "I am your friend." Bring you to their favorite shops and you can't run away or you are lost. Hiring a guide kept other guides away. People used to offer to "watch your car" while you are gone when parking in bad neighborhoods. Code for a bribe to keep your hubcaps and stereo from disappearing—likely taken by the person himself if you don't fork up the bribe. Sometimes need to learn the "can't do no matter what" side of things.
41:48Art. We shouldn't expect museums to be pleasant places. They cater to donors. In U.S. admission fee is only 10-15% of what museum gets. But donors don't always care about how much fun I'm having in a museum. They like museums to be high-status, serious, big buildings and wide-open spaces. Unlike the grocery store or McDonald's, funded by the customers. If you are going to a donor-funded museum, expect to be overwhelmed by all the greatness there, but you may want something easier to digest. In this room, which picture would you steal, what's my favorite picture, least favorite picture? Helps break it down. Zoos are funded much more by admissions. Zoo suggests a path, much easier, rarely get lost. Museums offer guided tours but often more about how exalted it is than about making it fun. Favorite: Museum of Modern Art in NY, never has messed up how to hang a room. How many times? 120. Russ has been there once, rented the headset. What is not to be missed? Mondrian room. Matisse room. At the National Gallery in Washington, D.C., half of their rooms have clashing colors or different moods—it's not that they don't understand the problem but that they just don't have the facilities to arrange it in the right way. "The older I get, the bigger a difference that makes." Menil Collection in Houston is very well-hung. Disadvantage of the real world, can't order it the way you'd like. Personal sequences would differ.
49:47Universities also are beset by similar problem—clientele's tuition payments are not main source of funding. Harvard, donations. Networking, affiliation, selling status can overwhelm the goal of education. Aesthetically disappointing. At a different kind of university, you'd have more donors who care about educational results, actually caring that a place was dynamic intellectually rather than thinking in terms of a warm glow. Certification role of education, students have a variety of purposes. Would a university pursuing education for its own sake have any students? St. John's, Oxford. Cultural, social. Franklin and Marshall orientation, can't say anything if it would offend a parent in the room. Brainstorming: is it a waste of time? In arts and science evidence that small groups who talk together can do great things. But in median workplace environment brainstorming is more about feeling you are doing something, coalitions and alliances, not about solving problems. Blogging: very intense at George Mason. Why are we so involved in it? Will it last? Is it self-indulgence or important? Two main places are George Mason and Harvard, Kennedy School. Entry barrier, hard to blog. Helpful to be a generalist. Most academics just can't blog well.

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COMMENTS (17 to date)
Antone writes:

This is economcis? Where is the evidence?

It is in vogue for economists to show how smart they are but this book comes across as arbitrary seat of the pants hypothesizing. Whether it is dating or the quality of food, this book provides a lot of conjectures and very little actual evidence. Give us some evidence.

On dating: "A pure `hard to get' strategy fails to satisfy what signaling theorists call--forgive the nerdspeak--`a separating equilibrium.' In other words, it does not sort (or `separate') the winners from the losers. `Hard to get' is too easy for the losers to mimic." What is the evidence that Cowen is right on this? May be it is that certain people are losers precisely because they are not good a mimicking? When you get to game theory there are too many possible outcomes and testing the claims is usually besides the point, but what is the point of having a bunch of possibility theorems that you can't even prove are right or wrong?

Going from movie screen to movie screen in a theater sounds pretty stupid. Why wait for a highly predictable ending when a fabulous scene might be unfolding in the movie playing next door? I do you know that the great scene isn't at the end and that the movie on the next screen will have a nice segment coming up?

Take the advice on dentists: "I don't think I can control my dentist or receive the very best care. By giving up this quest for control, however, I might get care that is just a little better than average." Talk about arbitrary claims. What about reputations in ensuring quality? What is the point of all this?

This interview would have been a lot more interesting if Roberts had challenged him once and a while these nonempirically based claims. There weren't even cited papers that one could look at for evidence.

SPA writes:

Stigler would have wanted some empirical evidence. Right? Much of this seems pretty abitrary to me.

I agree that we need the 'right story," but what is provided in this book as far as evidence goes that he has the "right story"?

The discussions on parenting may or not be right, but this podcast hasn't convinced me of anything. Sure this isn't economics. You just have two guys just talking. "it seems to me . . . ." was too common a statement.

This notion that paying people money can cause problems may be true, but I don't see much systematic evidence in this book or even footnotes that point to studies that provide evidence.

This particular podcast was the most time wasting one that I have listened to. Give me a discussion of demand curves being downward sloping. If I wanted rambling noneconomic reasoning, I would have listened to NPR.

Chappy writes:

The comments so far seem shrill and defensive. I wonder, whence the venom? Professional jealousy? Were these people robbed of something by this podcast? Were they promised something dear and shortchanged, such that they have reason to feel so personally wronged? Or is it mere bad manners on the internet? I suspect it is this last point. The two posts have good questions in them, but those questions are wrapped in acrimony.

Wacky Hermit writes:

I listen to EconTalk while I'm reading sometimes, if I'm only skimming. For example, I'm on several email lists, and I peruse the digests for stuff that's interesting to me. I also do other things while listening. Right now (well, after I submit this comment) I'm grading math exams while listening. I also listen more than once, because I'm too dense to get everything in one go-through.

Richard Sprague writes:

Russ, you mention in passing that your kids are good readers because their parents read a lot. But have you looked at studies that show no correlation between the reading habits of parents and their children (once you correct for income, mother's educ level, etc.)?

Maybe in a future podcast you can discuss the work of socialization psychologist Judith Rich Harris, author of "The Nurture Assumption". Come to think of it, she's another example of somebody who might feel comfortable joining departments with economists.

Alex J. writes:

I listen to all of the (good) econtalk podcasts multiple times. Econtalk is so much better than other mp3s that I can get my hands on that the others aren't very satisfying. I like cultural experiences of all kinds that bear repeat consumption.

Russ, Tyler mentioned that he was a generalist. Both of his podcasts were far ranging, but didn't go into much detail about the subjects covered. If you invite Cowen back for a third podcast, it might be interesting to cover one subject in depth (and for a longer duration, like the Taleb podcast). His (forthcoming?) book on macro-economics might be a good topic. His description of teaching macro to grad students sounded intriguing.

Antone, I think Roberts and Cowen see eye to eye on enough things that they don't have to go into much detail about the support for Cowen's propositions. They can go ahead and talk about implications. I bet that Cowen's book provides more justifications.

EricMcFadden writes:

I play solitaire while listening to podcasts. It seems wasteful to listen to things again and again to get what you would get with one somewhat focused listening.
Some of the previous posts complain about there being a lack of evidence to support claims in the podcast. Try to remember that economists are not usually able to prove things like a mathematician would, but there is still a lot of useful insight. Relax people.

Simon Clark writes:

I've been listening to EconTalk for a few of months now and I thought it was time I commented!

Great podcast, I look forward to it every week. I'm an economics student in the UK, and I usually listen to it on its own as I find it hard to, say, read and listen at the same time.

This has been one of the best of your podcasts so far. Tyler is very interesting and great to listen to. I've not read his book (yet) but I don't think empirical evidence is 100% necessary. Sometimes its helpful just to put out ideas with logical justifications to inspire empirical research and, quite simply, thought. Even if everything he says fails to appear in the real world, its interesting!

simon.q writes:

I'm an economic major student from China, so i think i can benifit from Econ Talk a lot. and if there is a script for each talk, it will be better, you know, as a student whose native language is not english, i have some difficulties in catching up talks, however, i make a substantial improvement in my listening, thank you.

John Lott writes:

As a frequent listener and someone who has read much but not all of Tyler's book, I have to say that I found this podcast pretty disappointing. A lot of the discussion here just appears to me to be arbitrary conjectures. Some discussions such as the problems with paying children money to get things done make no sense to me. You pay the child to do the dishes or you do something else to get them to do them. Why aren't all the possible "controlling"? Can children rebel against you controlling them through guilt or any other method that you use? Isn't the problem simply trying to get the kids to do things? Why is there something inherent in offering money as opposed to some other alternative? What bothers me is that in neither the podcast nor the book is there an attempt at discussing alternative explanations. What is the evidence that paying kids gets them to do things for the wrong reasons? It could be that your payment to kids indicates to them that you really feel that having them do certain things is extremely important. Who knows, but I don't think that I heard anything here that I haven't already heard before in popular discussions and it didn't convince me either. I am not trying to be overly critical, but simply stating what I think is problematic.

I thought that the points raised in the first comment about dating and dentists. Again, they both provide examples of not acknowledging or dealing with alternative explanations.

I disagree with the previous commentor. Some data sometimes that allows one to differentiate alternative explanations is implrtant. It is what makes economics a science. But if you aren't going to use data or point to studies that will help provide some evidence, please at least try to provide some comparison with alternative explanations and a greater use of the fundamental tools of economics (downward sloping demand curves).

Does Tyler really think Daniel Kahneman's work is that useful for economists to follow? To me, it has always seemed to be a big black box with simply noting regularities with a proper theory to set up the tests or a real attempt to see if the rational economics model could explain the results. If he really believes this, I would have liked some more discussion of this than simply saying that he one the Nobel Prize.

Salaam Yitbarek writes:

Russ,

I listen to econtalk podcasts a few times, always while doing something else.

I've always been sceptical about statistics (perhaps why I loved the Taleb podcast), or to put it more accurately, about the way we tend to use statistics (including econometrics) to draw dubious conclusions. A purely conjectural theoretical discussion is fine by me, and is of course the best way to bounce around ideas and gain new insights.

However, I agree with John Lott above in that I would prefer a little more play of the devil's advocate during these podcasts. I realize you can't entertain all possible perspectives in an hour, but I think it's important that the major points are sufficiently argued, especially when you and your guest happen to have the same opinions.

Your short discussion on the minimum wage on one of your previous podcasts (I don't remember which one) is a case in point. I remembering waiting in vain for a serious exploration for the case for a minimum wage, if only to illustrate the strength of the case against.

Brad Hutchings writes:

I am blown away by some of the comments here. I feel like a few of you would harass Robert Cialdini for not being rigorous enough in his classic "Influence: Science and Practice". What if the point is to be accessible? I would bet that most of Russ's audience (podcast) and most of Tyler's audience (book and blog) don't want to be academic economists, but want an accessible, distilled version of what these smart guys are thinking about. Sorry, I have no studies or empirical evidence to back that up.

Josh Knox writes:

There should be a link to Robin Hanson's blog in the podcasts and blogs section, as it is mentioned in the podcast. (For those of you who demand evidence, Cowen mentions it in the 32nd minute of the podcast.)

Josh says:

There should be a link to Robin Hanson's blog

I re-listened (thanks for that time mark) and I think Cowen's referring to his own blog right then. All the same, Hanson's blog is certainly relevant as an example of the way economists use their blogs to think out loud with other economists, comparable to sitting at the lunch table together. I've added it to the Readings. Thanks!

BJCefola writes:

One of the comments from the discussion touched on whether professors and class rooms would be replaced by a recording or representation of the 'best' professor, akin to listening to a CD of Pavarotti instead of hiring a local singer. I recommend skimming "The Social Life of Information" by Brown and Duguid. It has a nice discussion on the difference between "learning about economics", which you could get from a book or podcast, and "learning to be an economist", which is something else.

Mike Fladlien writes:

i listen to econtalk on my iPod while driving to and from my mom's...i loved this podcast...if you doubt the empirical nature of the work, why don't you test it? i'm going to experiment in class with paying students for better grades...i will pay them with "tokens" that can be redeemed for various items around the school...i think the best part of the book is that one has to test tyler's theories and become, as robert frank would say, an economic naturalist.

Isaac Crawford writes:

I usually play solitaire while listening to Econtalk on my computer. I'm surprised that neither Tyler nor yourself tied the "How rich we are," conversation to the decline of the novel conversation. As our time becomes more valuable, we try to economize on any given activity. I find myself much more likely to start a novel here in Yemen (when I can get them in English) than I would have been in the US. I chalk most of that up to not having a lot to do here... I believe that authors also have more options to write and get paid these days.

I do find that blogging helps me understand economics better. With any luck, I'm helping someone else too:-)

Isaac Crawford
Blogging in Yemen
www.isaharr.com

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