When to Rob a Bank: ...And 131 More Warped Suggestions and Well-Intended Rants (12 page)

        
Q
. Does your research say anything about risk-taking of the sort taken by the administrators at Penn State, who chose not to expose the sexual crimes of football coach Jerry Sandusky?

        
A
. In such a case, the loss associated with bringing the scandal into the open now is large, immediate, and easy to imagine, whereas the disastrous consequences of procrastination are both vague and delayed. This is probably how many cover-up attempts begin. If people were certain that cover-ups would have very bad personal consequences (as happened in this case), we may see fewer cover-ups in future. From that point of view, the decisive reaction of the board of the university is likely to have beneficial consequences down the road.

        
Q
. Levitt said you thought
SuperFreakonomics
would change the world for the worse. What did you mean by that?

        
A
. It was a joking comment on the discussion of technological solutions to the global-warming problem in
SuperFreakonomics.
I thought that the favorable presentation
of some solutions could suggest to readers that there is not much to worry about if the problem is easily solved. Not a serious disagreement.

        
Q
. How can your research and writing help people make better decisions in health care, whether it’s on the demand side or the supply side?

        
A
. I don’t believe that you can expect the choices of patients and providers to change without changing the situation in which they operate. The incentives of fee-for-service are powerful, and so is the social norm that health is priceless (especially when paid for by a third party). Where the psychology of behavior change and the nudges of behavioral economics come into play is in planning for a transition to a better system. The question that must be asked is “How can we make it easy for physicians and patients to change in the desired direction?,” which is closely related to, “Why don’t they already want the change?” Quite often, when you raise this question, you may discover that some inexpensive tweaks in the context will substantially change behavior. (For example, we know that people are more likely to pay their taxes if they believe that other people pay their taxes.)

        
Q
. Can you address the relationship between happiness and satisfaction?

        
A
. Yes, being happy (on average) in the moment and being satisfied retrospectively are not the same thing. People are most likely to be happy if they spend a lot of time with people they love, and most likely to be satisfied if they achieve conventional goals, such as high income and a stable marriage.

        
Q
. Do you have any advice for guiding otherwise intelligent people to consider the legitimacy of scientific ideas or evidence that they happen to disagree with?

        
A
. It is useful to distinguish the content of thoughts from the mechanisms of thinking. Some biases (e.g., preconceived notions, unscientific beliefs, specific stereotypes) are biases of content and are likely to be culture-bound. Other biases (e.g., the neglect of statistics, the neglect of ambiguity, the general fact that we are prone to stereotyping) are inevitable side effects of the operation of general-purpose psychological mechanisms.

        
Q
. Is it possible that one barrier for women trying to work in male-dominated fields is that such an environment demands extra mental effort on behalf of the women?

        
A
. Being self-conscious takes up mental capacity and is certainly not good for performance. Furthermore, the more self-conscious you are, the more likely you are to interpret (and sometimes misinterpret) the attitudes
of others as gender-based, which is bound to make things worse. However, there is hope: self-consciousness is likely to diminish when you are in a stable environment, interacting with people you know well. The trend appears to be favorable: improving attitudes of men, rising representation of women in many male-dominated occupations, so the future is likely to be better than the past.

These days, I read a lot of books on an iPad using the Kindle app. It is for the most part a very good experience, especially for recreational reading.

The other day, on vacation with the family, I came across a pitfall. I was reading the old football novel
North Dallas Forty
. It’s pretty entertaining—especially the race stuff and drug stuff. As it happened, my nine-year-old daughter was curled up beside me reading her book,
The Doll People
, in a dead-tree version. She took at look at what I was reading. Her eyes immediately found a four-letter word.

“Hey,” she said. “That’s a bad word!”

“Yes,” I said. “Yes it is.”

And then, out of some childish parental instinct, I covered up the offending word with my thumb. What was I so scared of? I don’t know what I was even trying to accomplish.
She had already seen the word! Did my thumb have the power to make her unsee it? Even if it did, what would be the benefit?

As it happened, my thumb didn’t just hide the word from her view; it touched the word on the screen—which, helpfully, pulls up a dictionary definition of the word
:

VULGAR SLANG v. [trans.] 1 have sexual intercourse with (someone).

[intrans.] (of two people) have sexual intercourse.

2 ruin or damage (something).

Thank you, technology. You are indeed a double-edged sword. And it serves me right for being so f---ing scared of my daughter seeing a curse word.

I found myself in a Las Vegas sports book the other day with good friend and economist
John List
. Since we both live in Chicago and have kids who play baseball, we thought it would be fun to bet some money on the Chicago White Sox. It would give us a reason to root for the White Sox, and give our kids a reason to open up the morning paper to see if the team had won.

We have no special information about the White Sox, no inside information. It was purely for consumption value.

If the sports book would give us a fair bet, i.e., the equivalent of a fifty-fifty coin toss, we would be willing to bet a lot because we aren’t very risk-averse. I’d say we would have been willing to bet at least $10,000, probably even more.

But of course the sports book doesn’t offer fair bets. On the particular bet we were looking at—how many games the White Sox would win over the course of the regular season—the sports book charges about an 8 percent vigorish, or commission. At that price, we decided, we were willing to bet $2,500. Eight percent of $2,500 is $200, so essentially we were willing to pay the sports book $200 in expectation to let us place this bet.

So we strolled up to the betting window and said we wanted $2,500 on the White Sox to win more than 84.5 games this year.

The lady behind the counter said the biggest bet we could make was $300.

What?!

We asked her why, and she called over a manager who told us the reason: the casino “didn’t want to take too much risk on this kind of bet.”

This casino is part of Caesars Entertainment, the largest casino company in the world, with annual revenues approaching $10 billion. And they aren’t willing to let us pay them $200 to flip a coin for $2,500?

The next thing you know, the casino will tell me I can’t
lay $2,500 on “black” at the roulette table. After all, it is essentially the same gamble as our White Sox bet—a coin toss in which the casino gets better than fair odds.

This seems like a crazy way to run a business. It is especially surprising because Caesars is one of the few big businesses run by an economist, Gary Loveman, who has brought good economic thinking to many other aspects of the company’s operations.

If I weren’t an economist, running a sports book would be a pretty good job. I wonder if Caesars is accepting résumés?

The U.S. government recently
shut down the three major Internet poker sites
for American players. Here are four reasons why this move makes no sense:

1
.    
Prohibitions that focus on punishing suppliers are largely ineffective. The prohibition of Internet poker is no exception.

When there is consumer demand for a good or service, it is extremely difficult to fight the problem through government punishments of suppliers. Illegal drugs are a good example. Americans want cocaine. Over the last forty years of the “War on Drugs,” we have expended
enormous amounts of resources locking up drug dealers. (Contrary to public opinion, the punishment of drug users has been relatively limited; by my estimates, 95 percent of the prison time served has been by drug sellers, as opposed to users.) Especially when the demand for a good is inelastic, squashing supply is ineffective. Making life difficult for incumbent suppliers entices new entrants who are eager to meet existing demand.

How do I know that the U.S. crackdown on Internet poker sites is ineffective? Within thirty minutes of my account being shut down on
Full Tilt Poker
, one of the big companies affected by the crackdown, I was able to start an account at a different, smaller poker site, depositing $500 via my credit card with no problem.

2
.    
Relative to the consumer surplus generated by online poker, the externalities caused are small. Government interventions should focus on cases where the opposite is true.

Americans love poker. In a given year, Americans pay billions of dollars to be able to play the game online. I don’t think I am exaggerating when I estimate that more than five million Americans have played poker online. Professional poker players are celebrities. The typical online poker player is not hurting anyone else, just like the typical moviegoer or sports enthusiast. There are, of course, gambling addicts; addicts impose costs on others. But the nature of Internet poker, with readily enforceable
limits on how much money can be downloaded in a given period, is actually a much better environment for regulating addictive behavior than are poker casinos.

3
.    
From a moral perspective, it is inconsistent for the government to condone and profit from gambling on the one hand, while criminalizing private providers of Internet poker on the other
.

It would be understandable if, for reasons I disagree with, the government adopted a consistent stance against gambling of all sorts. But governments are enormous beneficiaries of gambling income, both through lotteries and sanctioned casinos. So there can be no moral high ground on the issue. I am certainly sympathetic to the government’s desire to glean tax revenue from gambling activities. The right way to do that, however, is not a prohibition, but rather a regulatory framework in which governments take their cut of the action. For all parties involved, that sort of system is more efficient than the current approach.

4
.    
Even under the government’s own laws, it would seem that there is little question that online poker should be legal.

While I personally think the logic underlying the
Unlawful Internet Gambling Enforcement Act
, which governs online gambling, is deeply flawed, it is nonetheless the law of the land. Under the UIGEA, games of skill are
exempted from the law, which is supposed to apply only to games of chance. So legally, whether online poker is legal comes down to the court’s interpretation of whether poker is predominantly a game of skill. If you’ve ever played poker, it would seem self-evident that poker is a game of skill. If you need any further evidence, I recently co-wrote
a paper
with Tom Miles, a professor at the University of Chicago Law School, called “The Role of Skill Versus Luck in Poker.” It uses data from the 2010 World Series of Poker to confirm what was already obvious.

What do Bruce Pardo and Atif Irfan have in common?

In case you’re not familiar with their names, let me rephrase:

What does the white guy who
dressed up as Santa and killed his ex-wife and her family
(and then committed suicide) have in common with the
Muslim guy who got thrown off an AirTran flight
on suspicion of terrorism?

The answer is that both of them had their intentions badly misread. The one who should have been scary to people who knew him wasn’t; and the one who scared the people who didn’t know him turned out to not be scary at all.

As we’ll see below, this is a common pattern. But before going forward, let me first backtrack a bit.

Pardo was a churchgoer whom no one pegged as a homicidal
maniac. “He’s a totally different person from what you hear and see on the news for what he did,” said a family friend. “I’m shocked, literally, I’m shocked. I can’t believe that’s actually the same guy.”

Irfan, born in Detroit, is a tax attorney who lives with his family in Alexandria, Virginia. He was flying from Washington, D.C., to Florida with several members of his family for a religious retreat. He and his brother were reportedly discussing which are the “safest” seats on an airplane. “Other people heard them, misconstrued them,” an AirTran spokesman
told
The Washington Post
. “It just so happened these people were of Muslim faith and appearance. It escalated, it got out of hand, and everyone took precautions.” The “precautions” involved removing all the Irfans from the plane and calling in the FBI to question them. They were promptly cleared by the FBI as definitely-not-terrorists, but AirTran still wouldn’t fly them to Florida.

So which would you be more scared of: an American Muslim family you knew nothing about or the guy from your church who had just gone through a divorce?