Steve Levitt Interview: Opinions on “ObamaCare” and “Freakonomics” 101
by Mark Skousen, Contributing Editor
Monday, December 28, 2009: Issue #1165
In economic circles, it’s one of the most sought-after interviews. It’s also one of the toughest to get.
But a couple of weeks ago, I headed to Chicago to chat with Steve Levitt, University of Chicago economist and author of the No.1 bestseller, Freakonomics, and the sequel, SuperFreakonomics. He grants few interviews, so I felt lucky to spend 30 minutes with him.
Levitt is an American wunderkind. A few years ago, he won the John Bates Clark Award for the brightest economist under the age of 40. Another bestselling author, Malcolm Gladwell, (The Tipping Point) says Levitt “has the most interesting mind in America.”
That is evidenced in both his books, where he uncovers some intriguing curiosities, such as…
- A backyard swimming pool is much more dangerous than owning a gun.
- Chemotherapy only extends the life of elderly people by an average of two months.
- Cable TV has increased the crime rate in America.
His books also deal with novel ways to solve such diverse problems as hurricanes, corruption, crime and inflation.
But I wasn’t there to discuss those topics. I wanted to hit other burning issues, such as healthcare reform (dubbed “ObamaCare”), the financial crisis, the stock market and global warming.
And Levitt provided some fascinating insights…
Forget Obamanomics… This is Freakonomics At Its Finest With Steve Levitt
When it comes to the world’s economic problems, Steve Levitt is generally upbeat about our ability to solve them.
Despite facing the worst financial crisis since the Great Depression, he told me that we have the “tools to unlock the secrets of the world.”
But when it comes to dealing with the problems in Washington, Levitt isn’t impressed and is less optimistic. When I asked him about a variety of issues before Congress, he came out swinging (and Levitt is an economist not known for his political biases).
~ On healthcare reform: “Central planning of any kind is bad. It won’t solve the problem and, in fact, will make it worse. Any government program that ignores the fundamental importance of marginal pricing is bound to fail.”
~ On the financial crisis: “The government blew the crisis way out of proportion. It was crazy the way people panicked. This is not the end of capitalism by any means. The federal government overreacted to the crisis and ran up monstrous deficits. Now we’re paying the price.”
~ On banks and financial institutions deemed “too big to fail”: “A huge mistake – the worst by far because it hurts smaller competitors. This is a real problem.”
Our conversation then turned towards the stock market…
Steve Levitt Encouraged by Behavioral Economics
While Steve Levitt stopped short of predicting where the stock market is headed, he said the new field of behavioral economics is encouraging, as it raises serious doubts about efficient markets and index investing.
“We learned a long time ago that we academic economists can’t predict the future, so we’ve stopped trying. We’ll leave that up to you guys,” he said, pointing to me and referring to others who specialize in the art of forecasting.
Levitt is also critical of economic “technocrats” who want to make institutional changes to improve behavior. “It suggests a certain arrogance, that somehow these guys in Washington know better than the average citizen, and that may not be true,” he warned.
And when it comes to taxes, Levitt likes the flat-tax idea: “We need to make the world simpler and do away with all the special exemptions such as deductions for mortgages, employer healthcare, etc., and substitute one simple, flat income tax rate.”
In his latest book, SuperFreakonomics, Levitt also argues that self-interest is much stronger than people think, even when it comes to donating to charities and other altruistic causes. People who give anonymously might be doing so for selfish reasons to keep their name off fundraising lists.
I asked him, “Does that mean you are a fan of Ayn Rand and her philosophy of selfishness?”
“No,” he responded. “I’m more a fan of Adam Smith.” Adam Smith actually taught that commerce and trade moderates the passions of greed and selfishness and encourages tradesmen to respond to the needs of others without engaging in fraud and deception.
Maybe it’s time Steve Levitt hit Washington to head up Obama’s National Economic Council.
Good trading – AEIOU,