The Man Behind Freakonomics
Steven Levitt, John Bates Clark Medal Winner and Professor of Economics at the University, Speaks at the GSB
Alison Nickum, '06
Issue date: 5/12/05 Section: GSB News
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"Thank you all for coming. I really don't have that much to say."
Admittedly, it was hard for me to believe this, given that the guy saying it was 1) the 2003 winner of the John Bates Clark Medal, 2) author of a book titled Freakonomics, and 3) the source of fascinating and poignant analysis on all kinds of bizarre yet relevant topics. Thanks to the GSB for having provided such a great opportunity for students to hear from him!
Prof. Levitt began by talking a little bit about the University of Chicago's Initiative on Chicago Price Theory, which he heads. "It'll be called the Becker Center as soon as we find enough rich people [to fund it]," he joked. But, before he got too involved in describing the initiative, he first sought to answer what perhaps many were wondering: what exactly is price theory? Price theory, Prof. Levitt said, is a "uniquely Chicago view of how you should think about economics." It's the idea that, if you have a set of tools for understanding, you can answer almost any problem in the world by sitting in an office and reflecting on it in the right way. Recently, Prof. Levitt said, economics has become much more of an empirical discipline, mostly due to improvements in technology. The price theory initiative would underscore the importance of underlying theory as a way to intuitively understand and/or anticipate empirical outcomes. The real meaning of price theory (which Prof. Levitt says has a "terrible name," insofar as it is not intuitive) is the rigorous use of basic economic ideas, and the tying of those ideas to data to solve empirical problems. "I think of price theory as being kind of like the 'R' of 'R&D.' It won't directly benefit you, but every once in a while it will hit you a home run."
Continuing his discussion of price theory, Prof. Levitt paid an extraordinary compliment to the GSB's own Kevin Murphy: "Kevin is the greatest price theorist alive. Maybe the best ever." Prof. Levitt wasn't kidding. Right about then, everyone in the room who hadn't already taken a class with Prof. Murphy was scrambling to figure out how to fit one in before he or she graduated. Prof. Levitt gave a lighthearted example of Prof. Murphy's price theory prowess. As he is oft wont to do, Prof. Levitt selected a somewhat controversial subject: the GSB cafeteria. One day, he and Prof. Murphy were getting lunch, and Prof. Levitt remarked about how expensive everything was. Prof. Murphy, on the other hand, pointed out that, given the lines and crowding, it could be actually considered underpriced. Sad, but true.
Admittedly, it was hard for me to believe this, given that the guy saying it was 1) the 2003 winner of the John Bates Clark Medal, 2) author of a book titled Freakonomics, and 3) the source of fascinating and poignant analysis on all kinds of bizarre yet relevant topics. Thanks to the GSB for having provided such a great opportunity for students to hear from him!
 Photo by Anthony W. Smith |
Prof. Levitt began by talking a little bit about the University of Chicago's Initiative on Chicago Price Theory, which he heads. "It'll be called the Becker Center as soon as we find enough rich people [to fund it]," he joked. But, before he got too involved in describing the initiative, he first sought to answer what perhaps many were wondering: what exactly is price theory? Price theory, Prof. Levitt said, is a "uniquely Chicago view of how you should think about economics." It's the idea that, if you have a set of tools for understanding, you can answer almost any problem in the world by sitting in an office and reflecting on it in the right way. Recently, Prof. Levitt said, economics has become much more of an empirical discipline, mostly due to improvements in technology. The price theory initiative would underscore the importance of underlying theory as a way to intuitively understand and/or anticipate empirical outcomes. The real meaning of price theory (which Prof. Levitt says has a "terrible name," insofar as it is not intuitive) is the rigorous use of basic economic ideas, and the tying of those ideas to data to solve empirical problems. "I think of price theory as being kind of like the 'R' of 'R&D.' It won't directly benefit you, but every once in a while it will hit you a home run."
Continuing his discussion of price theory, Prof. Levitt paid an extraordinary compliment to the GSB's own Kevin Murphy: "Kevin is the greatest price theorist alive. Maybe the best ever." Prof. Levitt wasn't kidding. Right about then, everyone in the room who hadn't already taken a class with Prof. Murphy was scrambling to figure out how to fit one in before he or she graduated. Prof. Levitt gave a lighthearted example of Prof. Murphy's price theory prowess. As he is oft wont to do, Prof. Levitt selected a somewhat controversial subject: the GSB cafeteria. One day, he and Prof. Murphy were getting lunch, and Prof. Levitt remarked about how expensive everything was. Prof. Murphy, on the other hand, pointed out that, given the lines and crowding, it could be actually considered underpriced. Sad, but true.