March 22, 2021

Mental models

#154 – Steve Levitt, Ph.D.: A rogue economist’s view on climate change, mental health, the ethics of experiments, and more

“What economists do now is they're asked not just to estimate parameters really well, but to embed those parameters into models, which then have enough degrees of freedom that you can start to imagine: if I turn this dial to that dial, what would happen?” —Steve Levitt

Read Time 23 minutes

Steven Levitt is a professor of economics at the University of Chicago and the co-author of the bestselling book Freakonomics and its two sequels. In this episode, Steve discusses his unlikely path to a career in economics and his view of the current state, and limitations, of the field. He also gives his unique perspective on contemporary issues including climate change, mental health in education, how to evaluate whether an experiment is ethical, decision making, horse racing, and much more.  



We discuss:

  • How Steve ended up in economics (2:45);
  • Current trends in the field of economics: macro vs. micro, usefulness of models, and the relationship between data and theory (8:45);
  • Revisiting what Steve wrote about climate change in SuperFreakonomics, and why it’s unlikely to be solved with behavioral change (18:45);
  • The consequences of a blurred line between climate science and advocacy (27:30);
  • Answering climate questions with a “Manhattan Project for climate change” (31:45);
  • Steve’s reflections on his career path and how he found his way by being himself (40:00);
  • How Steve came to write Freakonomics (and its sequels), and the topics which caused the most controversy (53:00);
  • How Steve came to appreciate mental health through parenting, and the need to emphasize mental health into the education system (1:10:15); 
  • Why people are bad at making decisions (1:26:45);
  • Deliberating on why horse racing times haven’t advance much in decades (1:34:30);
  • Reducing the impact of negative emotions by observing the world free of language (1:44:00);
  • Changing our thinking about what it means to conduct experiments ethically (1:49:00); and
  • More.


How Steve ended up in economics [2:45]

  • Steve was not interested in economics
  • At Harvard, he sought out the courses most students took because they were easy, and the introductory economics course was one
    • During a lecture on comparative advantage, Steve was annoyed because he thought it was so obvious
    • But the same lecture had confused his friend, so he realized that way of thinking came naturally to him

“It became clearer and clearer to me that I was just born thinking like an economist” —Steve Levitt

  • Did management consulting but hated it, so got PhD in economics
  • He feels lucky because his career ended up being the result of “a series of mistakes, miscalculations and ignorance”


Current trends in the field of economics: macro vs. micro, usefulness of models, and the relationship between data and theory [8:45]

Macroeconomics vs. microeconomics

  • Macroeconomics
    • What most people think of when they hear “economics”
    • Things like inflation, banking, unemployment, economic growth
    • Very complex and economists haven’t done a good job of understanding it
  • Microeconomics
    • Study of individual decision-making
    • E.g., how people decide how to spend income, how one chooses a job and how many hours to work, etc.
  • Can analyze with formal model based on rationality or newer models like behavioral economics that takes more psychology and mistakes into account
    • Econ has traditionally been a theoretical discipline
    • But now also econometrics, analyzing “messy” data

“Macro in the end is really complicated. . .very self-referential models because the problems are so hard that you need to abstract so greatly to try to deal with the macro problems that I think we don’t have a good handle on them. So I’ve really steered clear of the macro problems to focus on the individual decision-making, which is, I think, … much more relevant.” —Steve Levitt

Current trends in economics 

  • Two big prizes in econ are Nobel Prize and the John Bates Clark Medal (given to the most influential American economist under the age of 40)
    • Steve won the Clark medal in 2003
    • In the last 20-30 years, the Clark medal has gone to people who address the intersection of theory and data 

Economics at a crossroads…

{end of show notes preview}

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Steve Levitt, Ph.D.

Steven Levitt is the William B. Ogden Distinguished Service Professor of Economics at the University of Chicago as well as the Director of the Becker Center on Chicago Price Theory.  In addition, he is the founding partner of The Greater Good Group (TGG) consulting firm.  The co-author of the bestselling book Freakonomics and its two sequels, he won the John Bates Clark Medal (one of the highest honors in the economics field) in 2003.  In 2006, Steve was named one of Time Magazine’s 100 People Who Shape Our World. He received his undergraduate degree from Harvard and his PhD from MIT.

Twitter: @Freakonomics

Facebook: Freakonomics

Website (including podcast):

Academic website:

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  1. most sports are word free. for example, in golf, it is fine to run the numbers (distance, wind speed, slope, etc), but when time to hitting the ball, turn off the words and swing…

  2. On global warming: please comment on the basic arguments against CO2 caused global warming. Namely that CO2 levels have been much higher in the past and not correlated with temperatures and that CO2 levels increase AFTER the global temperatures rise.

  3. Peter and Steven, your love of Secretariat is shared by me as he is the reason for my professional start with horses and specifically Thoroughbred race horses in 1973. If watching the race at Belmont Park doesn’t give you goosebumps ( then you are just a city slicker. And for those anti-horse racing, don’t get the wrong idea. In the right hands, horse racing is a team sport between willing partners (Eddie Sweat, the groom, was his best friend). Unfortunately, most in today’s horse racing business are only focused on the money with little, if any, horsemanship. I no longer visit the race tracks for work but I can tell you personal, one on one stories of Skip Away (in the top 100 all time Thoroughbreds) and Fusichi Pegasus ($5.1 million yearling and KY Derby winner) as I was blessed with working on them “back in the day.”

    Now for the bad news. Your approach to developing a winning race horse will need a lot of work requiring fresh theories and reviving old work. This goes into 3 categories: 1) genetics, 2) physics / biophysics and 3) nutrition / exercise physiology.

    Genetics, I believe, is a fool’s errand. Everyone has played with this and it has gotten the race horse nowhere (as you suggested in this podcast).

    The physics was studied extensively starting with one of the first uses of the motion film camera. George Pratt, a professor at MIT, was prolific in horse gait analysis in the 1970’s. There was a physics student at Cornell in 1978-9 who I watched as a student there. She filmed at 500 frames per second the effects of the force on the limbs as horses landed at the trot on a force plate. I’ll always remember seeing the shock wave rise proximally along the metatarsal (the cannon bone of the horse) where there is only bone, tendon and skin (no muscle). Also, James Rooney, DVM wrote a brilliant book called “The Biomechanics Of Lameness In Horses” where he explained the use of vectors (force strength applied in a direction) in the development of exercise induced limb pathology.

    Nutrition and exercise physiology for horses is the equivalent to discussing nutrition / exercise physiology in humans who are strict vegetarians. Insulin, mitochondria and the Kreb’s cycle are the same (I presume) but the raw materials consumed are vastly different. This is the reason I spend so much time in your podcasts interpreting their human information for horse owners. Obesity and IR are epidemic in horses with a myriad of associated diseases downstream from this occurring in horses. If you want a great race horse (with longevity) then start with eliminating sugar (grain).

    There is then the discussion of the demise of Secretariat from Equine Metabolic Syndrome and the crippling disease of laminitis of the hooves (equivalent to hitting your middle finger nail with a hammer and then walking on it). He was obese. The racing didn’t kill him, the grain did.

    I thought you two might appreciate at least one listener who understood your desire to create a perfect race horse. Doc T

  4. Steven Levitt served up a rare intellectual’s feast of winsome self-deprecation and humility. Recalling the joke about the physicist, chemist and economist who find themselves stranded on a desert island with unopened cans of food but without tools, to which the economist is given the punchline “Assuming a can opener …” I rather quickly lost count of Mr. Levitt’s can openers ! Indeed, as with the vagaries of life so goes the vagaries of macroeconomics.

    However, as one who was personally struck one summer in pubescence by the revelation, Meno boy-like, of my own certain mortality, I was both envious and baffled that such thoughts appear not to have burdened the youthful Mr. Levitt. Also noteworthy to me that he qualified his single use of the word “spiritual” _ “for lack of a better word” _ as if an intellectual embarrassment. And yet, as he relates, when once summoned by the Obama administration, how quickly the topic of “mental health policy” was dropped, Mr. Levitt confesses his own evasion of past grief and missed parental love. Easier to segue to education, bad decision making and horse racing.

    Mr. Levitt is wise to say that “evolution is not necessarily our friend”, a reliable guide in directing the future of our technologically lock-and-loaded species. Also, in accord with his thoughts on climate change, “not everyone is willing to suffer or is convinced we should”. But the overwhelming evidence of our brute evolution tells us that we will suffer, inevitably, and mostly because of ourselves. It will take at least if not more than that broken iceberg the size of New Jersey (and floating towards Bermuda) to convince the dim, hardened and greedy of the world otherwise. Or to reference the grim and haunting line announced by the escaped criminal “Misfit” in Flannery O’Connor’s “A Good Man Is Hard To Find” : “She would have been a good woman if it had been somebody there to shoot her every minute of her life.”

    I may be the only PA podcast supporter and enthusiast who self-describes as a fledgling half-century Christian humanist – dialectically affirming the empirical fact(s) of evolution alongside a transcendent teleology, theology and faith. And I contend that there are some matters that the best of randomized controlled trials and a detached, radically accepting stoicism can never answer. Mr. Levitt’s adopted Serenity Prayer, for example, was authored by the late Yale Protestant theologian Reinhold Niebuhr – not by a refined atheist such as Sam Harris – whose empiricism and endorsement of things “spiritual” was neither an embarrassment nor a contradiction. And Niebuhr’s combined theology and realism monumentally influenced the likes of poet WH Auden, international relations theorist Hans Morgenthau and Barak Obama.

    For lack of a better word ? There may not be a better word because that, in fact, is the word.

    All the same, I remain grateful for “Freakonomics”, read it in 2007 and remember it years later as well worth the purchase.

  5. Dear P and S-
    I would love to hear more thoughts on the economics of human experimentation. As a doctor that is actually a subject that has crossed my mind.
    One thing I find fascinating that may be a way to nudge you premium organ market is the influence of tech on healthcare.
    By that I mean the struggle between medical ethics of the established medical industrial complex and all of the healthcare related tech companies. Perhaps it’s possible that private industry could begin that conversation.
    I know that there’s some pretty amazing ideas out there that I would step up for if the ROI was right. My personal Werner Forssmann offer to Nueralink: once y’all have things dialed enough that you can’t get any further without human experimentation, give me a shout and we’ll chat.

    Thanks P and S for the time and an amazing conversation.

  6. Hey Peter,

    I really liked your conversation with Steve, particularly the personal perspective on Steve’s life, which I hadn’t heard before, despite having listened to a few podcasts with him as a guest.

    I have, however, one critical remark. I felt that you dealt with the climate change topic (particularly geo-engineering) in a quite non-chalant and not sufficiently rigorous manner. One might think that isn’t so crucial, since it was one topic among many and not the central focus of either your conversation or the podcast in general.
    But, I think, there is a risk in doing so, as you consider your “core areas” regarding all things longevity with such an extremely high degree of rigor while always looking at multiple relevant facets.
    This was not the case with geo-engineering (just as one peeve among many – a warming climate is just one facet of the problem, we do not fix ocean acidification, species extinction, … by “just” cooling the climate). I felt some sort of disclaimers á la “this is just a very brief intro which is not as holistic as other conversations” would have been appropriate.
    A more holistic consideration of the topic of geo-engineering, for other interested listeners, is available here:

    Thanks for all the great content, Peter + Team, and kind regards from Germany

  7. Hi Peter (and Steve)- Regarding right and left brain hemisphere perspectives & research- Iain McGilchrist was recently interviewed by Sam on Making Sense- McGilchrist’s book “The Master and his Emmisary” is ALL about this topic. It would seem Steve’s intuitions on this topic are well informed.


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