Tyler Cowen on Your Inner Economist 9/10/2007

Welcome to EconTalk, part of the Library of Economics and Liberty. I'm your host, Russ Roberts, of George Mason University and Stanford University's Hoover Institution. Our website is econtalk.org, where you can subscribe, find other episodes, comment on this podcast, and find links and other information related to today's conversation. Our email address is mail@econtalk.org. We'd love to hear from you. My guest today is Tyler Cowen, my colleague here at George Mason University. Tyler blogs with Alex Tabarrok at MarginalRevolution.com. His latest book, just published by Dutton, is Discover Your Inner Economist: Use Incentives to Fall in Love, Survive Your Next Meeting, and Motivate Your Dentist. Tyler, welcome back to EconTalk.

Thank you for having me back.

So, Tyler, our topic today is your book, Discover Your Inner Economist. Now, I'm sure there are some of our listeners who might prefer to leave their inner economist undiscovered, but I think you have something more comforting in mind than they might imagine. Tell us about one's inner economist. What do you have in mind?

By inner economist, I mean the notion that all of us are already making economic decisions every day. We're weighing benefit and cost. We're trying to match means to ends. So we're behaving in the framework of economics in any case. But if we're willing to be just a little more self-reflective, sometimes a little more self-critical, a little more self-aware, then we can improve how our inner economist behaves and get a better result. That's the central premise of my book.

Now when you use the word economics and economist, you don't mean just financial matters, of course.

That's right. Economics, I view, 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.

If I were subtitling this book for accuracy rather than sales— it has a nice subtitle now, but one subtitle you might use is— might have used is the one of my favorite definitions of economics, which is that economics is the study of how to get the most out of life. And what I found interesting about your book is the range of insights that you have about how to get the most out of life, which really in some ways what the book's about partially. Would you agree?

That's right. And the wealthier society becomes, the more likely it's the case that economics is about some unorthodox area. Because food is what really matters when you're poor, and then shelter, and then being able to send your kids to school. But when you can do all of those things, different areas of life at the margin become increasingly important for your happiness, well-being, and virtue.

Yeah, it's kind of frightening what we spent some of our time on.

You mean in modern American society? Yeah. Absolutely.

This being one of those things. Sitting around talking about one's inner economist while thousands of people around the world spend an hour listening is a rather remarkable statement about our standard of living, I think.

And that it's a serious question for people. How should I listen to my podcast? In little bits, on my iPod, at home, at work? It actually influences your happiness, knowing what's the right way for you to listen to a podcast.

And listeners often tell me, and I ask them when they email me, and I encourage anyone out there to share how you listen. Some people listen commuting. Some while exercising, but others do it while computer coding, uh, doing the dishes, playing, um, online computer games, uh, and everybody's got their own style that works for them.

Do you have any people who listen while they're reading?

Um, it's a good question. Uh, I— not that I know of, but I wouldn't be surprised if there's— if you're out there, uh, if you do listen while you're reading, let me know. Or if you do something really offbeat while, uh, while listening, I'd be interested in knowing. Of course, some people tell me that because they listen in peculiar ways, they listen to them more than once, which wouldn't have struck me as a common phenomenon, but I think it is somewhat common. People out there do listen more than once because they're multitasking. It's kind of weird. The first part of the book, you talk about incentives and do a really nice job getting away from the sort of what we might call the strawman economist view of incentives or the textbook view, the crummy textbook view that says if you want something, you should pay for it. So you're very critical of this idea in certain contexts, other contexts not so critical obviously, but in some contexts, you're critical of the idea of using money to incentivize people. Why is that? What's wrong with the, the standard textbook idea that the more you pay, the more you get.

One thing that can go wrong with using money as an incentive is if you use it too brutally or too frequently, people start to feel controlled, and they resent feeling controlled, and they rebel against your incentive scheme altogether. That's not the only problem with using monetary incentives. There are problems of measurement, there are problems of displacing intrinsic or internal motivations, But I think the single most underrated problem with using money is simply that we all have this need to feel we're autonomous, we're in charge, it's our project, we're setting priorities, and often those two things can clash.

That theme runs through the book, this theme of control, and I found it very provocative. I think we do lots of things to feel in control, and we avoid things that make us feel like we're not in control. Why would the use of money in those settings, particularly if I want to use the example used in the book, the family setting. We've had some podcasts on this question before. We had one with Viviana Zelizer on the use of money in intimate situations. Why is money so unhealthy? And I think it is, but why is money so ineffective unhealthy or to be avoided in those settings? Is it only the issue of control?

Some of it is a symbolic issue. By using money, you're putting the symbol on the table that it's about something other than loyalties and obligations. And some of it, I think, is a slippery slope problem. Let's say you try to pay your daughter to do the dishes. She then thinks, "Well, will they pay me to get good grades? To date the right boy? To choose the right major?" And no one knows exactly where the process is supposed to end once one agrees it's a legitimate way of motivating effort within the family. And, of course, usually the parents are the ones with all the money. So, a lot of children instinctively rebel against this. But I think one implication of the book is you can figure out cases where monetary incentives will work well. A lot of what I would call nerdy personality types they're not always that socially aware. And often the best way to deal with them is just pay them to do something, they'll do it, they'll take the money, they're happy, there's no resentment, no feeling of loss of control, it's just a complete win-win. So in part, just figure out the social context of the payer and the recipient, and ask yourself, what are the control issues here?

To take the other side, one of the more remarkable aspects of of modern life is what people are willing to do for non-monetary returns. Open source software being one of those things where no money changes hands and people, those geeky nerdy types you're talking about, seem very pleased to do something for nothing. A little bit surprising.

The same is true of Wikipedia editors.

Yeah.

But I think a central motivation of human beings, it's not in economics nearly enough, it's this idea of affiliation. It's also why people give money to causes. They want to be affiliated with the cause in some meaningful way. Same with open source software. They're a part of something truly grand and glorious.

Yeah, I agree that that's underdiscussed and underthought of in economics. I suspect it's well understood by certain marketers. Right? Basically, some of the marketing campaigns that we see are about identity, which is a variation on this affiliation that you're talking about. It's— affiliation is one way we establish our identity. What might economists do who are interested in this issue? What are we missing when we don't look at affiliation and identity?

I think we're missing a really significant part of human motivation. And the wealthier society gets, again, the more important these motivations become. But I think of marketing, which I understand it's an art, not a science. A lot of it's very crude. A lot of it can be painful to read. But it's the great underexplored frontier in economics. I think it's where, in many ways, the cutting edge of economics should be, is to try to make sense of the insights of marketing in a more fundamental way and then use that to make the model of human behavior a lot richer.

Adam Smith understood it.

Sure, he understood almost everything. Way back when.

The Theory of Moral Sentiments is to a large extent an exploration of the non-monetary side of our lives and what else we— the things we care about beyond money.

And which images we find salient and somehow stir or provoke our sympathy. He doesn't use the word marketing, but as you know, there are long discussions. Is it proximity? Is it similarity? Is it whatever, that moves us to act and help someone.

What are the implications for, uh, this idea for politics? Have you thought about that? Politics is obviously an example where people, I think, get a large sense of their identity from their political affiliation. Do you think that's true?

I do. I think underneath this all is a better way of thinking about voting. There have been theories of expressive voting for a long time. I think they're fundamentally correct, but they don't quite have enough substance to really have the predictive power we would like.

Yeah, they predict that people vote, which is really not the most interesting.

That's right. And they don't predict who doesn't vote. I tend to think of voting as like writing a letter to the newspaper in many ways. Another thing that's happened to me by writing the book, it's brought me much closer back to my Austrian subjectivist roots.

Oh, yeah?

Because the key question is no longer, "What's the incentive?" That is a key question, but to understand the incentive, you have to ask, "What do people believe is the case?" So, subjective perceptions of the objective incentives out there, that becomes the new starting point, really an old starting point for economics going back to Smith and Menger. But I used to think subjectivism was a kind of trivial insight. Of course, value's subjective, so what? But now I'm much more thinking subjectivism really is an important Austrian insight that's been neglected, and it's how to make the theory of incentives do its work.

A lot of the book is about discovering not just your inner economist, but your inner psychologist. It's very much, I would say, on the interface between economics and psychology. Do you read psychology? I probably made this quote of George Stigler before on this topic, but George Stigler said, "There's only one social science and we are its practitioners." Rather arrogant imperialist remark about economics, perhaps true, but perhaps not. What are your thoughts on that? Does economics— should we be reading more psychology, studying more psychology?

Well, I think we should be reading more psychology. A lot of economists are already doing this, the experimentalists, the cognitive people. The neuro people. But I think more radically, we need to break down the old distinction between economics and psychology. When the day comes that a psychologist wins the Nobel Prize in Economics— Daniel Kahneman— I take that pretty seriously. And I'm not sure economics versus psychology is a meaningful distinction other than in the evolved sense that you have a degree in one or the other.

Yeah, the bizarre silos of the academy.

That's right. For that matter, sociology. Sociology, social psychology, and experimental economics— should those really be different fields of inquiry? I don't think so.

All kind of doing the same thing.

That's right.

Let me come back to an application that you mentioned in the book of the incentive issue. You mentioned the work of Roland Fryer. He is— last time I noticed, I don't know if he's still doing this or if it's been tested or not, maybe you know— Tyler Cowen. He was talking about paying students to do well in school, particularly in inner-city schools where attachment to school and performance is weak. And the idea is that money would enhance that. Do you think that's a good idea, a bad idea?

I think for very bad schools it's a good idea. There's literally no downside. Things are so bad they can't get worse. I think some people will respond. To the money. You're not displacing intrinsic desires to get good grades because often they're not there. I'm much, much more skeptical about paying for grades at upper-middle-class schools, say, in the suburbs. There I would more likely be opposed.

Well, the standard argument, and you mention, I think, in the book, is that you'll replace the right motivation with an extrinsic motivation just to get the money. Why might it not be the case that from the experience of learning— I don't expect my daughter to start enjoying doing the dishes if I pay her, so I can see that's not going to work. I'd like her to do it out of family loyalty or for whatever reasons. But to pay people to read, say, is that a bad thing? Is it harmful? Is it going to give people some— is it going to hardwire, you know, I don't know, create some bad reason for reading? Is that really a problem?

I think there's a lumpiness to the inspirational stories we tell ourselves, that we really can only have a few major stories and we need to have the right ones because if you're stuck with the wrong story, you can't just sub in the right story whenever you need it. And you need to have a story that's salient and that's focal, and once you adopt it, you have to invest so much in that story that you just can't pick and choose when you're going to use it. And then I think replacing the intrinsic desire with the desire for money really is harmful because most of the time there won't be someone paying you to read and reading is still valuable.

So the worry there is that you'll become a mercenary in your story rather than a lover of reading.

That's right. And for some people that may be a fine decision for some professions. Let's say you're a proofreader. And that's all you do, and you don't care about books, you're never going to care about books, and someone pays you to quote-unquote read and find typographical mistakes. If a person's happy doing that, that's fine, but we need to understand it as such and not think that it's a generalizable story about how we can pay people to read.

I suspect most proofreaders actually like books, but I take the point. How do I get someone to have that intrinsic desire if they don't have it. So if I'm, I'm Roland Fryer or whoever it is trying to motivate students who aren't interested in school, what's the alternative to this right now?

The way most people start loving books is they see that the book somehow matters to them. It matters to some very private concern. It relates to some person they know, some role model, a parent, maybe a religion. They pick up the book and the book comes to life for them. And there's no guarantee of that. The book has to be framed in the right way. Because a lot of these books are pretty abstract or difficult, but even young people are capable of loving them. Harry Potter is a very important book for a lot of young people, but only because it's framed in the right way. If you gave these same young kids the same Harry Potter on a desert island, I think a lot of them would just say, "Eh, that's okay," and not care.

Help you reach the coconuts.

Exactly. So we— What are you standing on? When you start paying a person to read, again, I think there are plenty of people who are not reading anyway. You know, why not try? That's okay. But you're still, for potential readers, running this very serious risk of interfering with the framing, of making the reading about, you know, the reader, the me, what I call the me factor in the book. And that's why I think it generally doesn't work.

What do you think of the future of reading? Are you worried about it? You're one of the most voracious readers I know, and you talk in the book about some important reading habits, which you're welcome to share as we talk about this. But, you know, I care deeply that my kids are readers. Then again, I was born in 1954. I wonder if they'll care that their kids are readers. I'm thinking about it because we're talking about different ways to motivate people to read. I suspect my kids read because I read. My wife and I read, and we've read to our kids. We've modeled that behavior, as the saying goes. We've worked really hard to get our kids interested in reading, and we've spent an enormously small amount of time getting them interested in the computer, sort of going against the standard wisdom that says you gotta get your kids up and running on PowerPoint by the time they're 4 and a half, or they're just not gonna be able to compete in the modern world. We've gone the other way. We've kept them away from PowerPoint as much as possible, away from video games, away from computer games, and they read. I think that's a good idea. I think that's a good parenting strategy. I think it bodes well for the future.

I'm very pro-reading. I think that's a good parenting strategy. I don't worry much about reading per se, if only because a lot of what people do on computers is read. But I do worry about longer forms and longer novels, and I worry about fiction and poetry, which to me are very important. And I think more and more we're seeing teenagers and young people where the formative intellectual or spiritual or emotional influence, it is not a work of fiction, but it's more a work of non-fiction. This need not be bad or inferior, but I really do see interest in fiction, serious fiction, as ebbing away. And I don't know how to reverse that trend. I think the package is too large. It's hard to sample. It's hard to dart in and out. And I know all about Harry Potter. And all the kids reading it. But fundamentally, I do not think that's the major trend. I think that's more of a social event, like joining a club.

Well, what about movies? You think movies are replacing— which, you know, they're not— they're fiction. It's different genre, you know, it's different medium, obviously. It's a shorter medium, as you point out, right? I consume a movie in 2 hours. Most fiction takes more than 2 hours. It would seem to me that that visual fiction is what's replacing books.

I agree, but I don't think you're going far enough. I think movies are dying. 2 hours for so many people is too long, that it's YouTube, it's TV shows. For me to watch an hour show, or say a 53-minute show, there's really no risk of impatience. But a 2-hour movie at home on the small screen, I can't I can go to the kitchen, I can look at the internet. It has to be very good to hold my attention. And I think within the visual arts, we're seeing the same kind of shortening.

Well, there's a lot more choice out there, and the stuff's cheaper, uh, and we're wealthier. Why don't you talk a little bit about some of your advice to readers and moviegoers of, of, uh, flitting, you might call it, which you endorse.

Well, one simple piece of advice I give to moviegoers is, "When in doubt, walk out." The movie usually does not get better from your point of view. You're not gonna get your money back. You might as well at least get some of your time back. And if you're willing to do so, you can even go to a multiplex and try another movie. Maybe you're with a date, you can't leave, the other people don't wanna walk out. That— sure, that makes good sense. But simply saying to yourself at the beginning, "Am I willing to walk out?" and come up with a rational answer to that question and then see it through. I think a person can save a lot of time and see a lot more good movies. It also means you'll take more chances on movies. There's a lot of movies I'll go see where if I knew I was committed to staying, I never would have gone to see the movie, and sometimes they're great. Uh, there's a part of the book which I meant completely tongue-in-cheek, but I've had a great number of people write me They took it very seriously. I said, when you're reading a book, ask yourself, is this the very best possible book in the world I could be reading right now at this moment in time?

I think that's great advice. That was tongue-in-cheek? Come on.

I meant it as a kind of joke.

A little hyperbole, maybe, but it's—

Not completely in jest, but just saying, look, don't take for granted that you should be reading this book. I had people write me, they were saying, well, I was reading the book, and I thought maybe this is only the third book in the world that I should be reading, and I was torn, and I was worried about your advice, and then I started thinking, is your book the best book in the world I could be reading? One person wrote me, said he came across that passage and put my book down because he had never read Pride and Prejudice, and how did I feel about this? So I think to literally ask yourself the question, is this the best book I could be reading, the computational requirements To answer it in a serious way, it's not possible, but simply to be critical and say, "Look, why am I doing this, watching this movie, reading this book?" People can do a lot better just by asking a very simple question.

But there is a tension. You know, we're talking about the shortening of attention spans and people not having the Sitzfleisch to get through a 2-hour experience, let alone a an epic novel, but there's something important about the, quote, irrational desire to see things through to the end. It took me a long, long time, probably— it's probably been less than 10 years for me to adopt your reading habit. I finished every book I started. It meant— true, it meant that I chose my books carefully, and I was probably never dipped into some books that I should have, but I had a sort of moral code to finish my book. And I have a similar code about movies. I've walked out of very few movies in my life. And I— it's an interesting trade-off there between gumption and perseverance versus wasting your time, right? If you encourage people to walk out of movies and put books down, there may be some unintended consequences.

Well, to take a clue from Robin Hanson, we need to ask, "In which direction is the bias likely to lie?" And I think we have the following emblazed on our souls. You have the intuition, "I need to see through my friendships, my family relationships, my parenting." All areas where you really do need to see these things through. It's very important for your integrity as a human being and for virtue. So, your coded story is, "I need to see things through." But I believe it is entirely possible to be more critical about books and movies without violating, say, your familial commitments or commitments to friends. In fact, you'll have more time to keep them just by making that coded message a little more diverse.

I agree with that. I'm just more worried people aren't going to finish fear and trembling, like Kierkegaard, because it's slow going. You know, there are a lot of books that, you know, after 50 pages you kind of say, "Boy, let's move on," that are worth finishing, right? I'm not sure that's the right example, but—

It's my hope that people find this liberating. Clearly, there's a substitution effect and an income effect, but I would like to think a lot of people out there will say, "Hey, I don't have to finish Kierkegaard." So now I'm free to pick it up. And those people who will really love it, some of them have now picked it up. And the people who don't like it, they really were not going to like it so much anyway. So it is my hope— I don't have evidence for this, but it's my hope— we'll get more people loving Fear and Trembling.

Do you ever read a book more than once?

Sure, many, many times.

How many books would you say you've read more than once?

Most of what would count as Western classics, say what Harold Bloom discusses in The Western Canon, I've read 2 or as many as 5 or 6 times. But I don't read too many other books more than once. But those books I tend to go back to as many times as I can, and I also take them on trips, and I'm never bored by them.

Is that rereading a pleasure, or is it educational, or both?

It's both. Yeah. So like Shakespeare or the Bible or Plato, I'll read, you know, a minimum of 5 times.

It beats Harry Potter, which many people read more than once. Um, on the subject of short attention spans and stick-to-itiveness, one of the observations you make in the book, which rang very true for me, is the habit of our students in dealing with complex ideas and the tendency to look over something and say, "Oh yeah, I got the idea of that," rather than really immerse themselves in it. You give some advice on how to get around that, which is to sit down with a clock and actually write out the answers. Most people don't have the discipline to do that. Any other thoughts on how to make our students and ourselves as students of life better at what we do rather than, again, just sort of taking a quick look at something.

I think there's something in American culture today that is in some regards harmful. It's this feeling that nothing is supposed to hurt. Even going to the dentist isn't supposed to hurt anymore. And it's great that it doesn't, but on the other hand, we shy away from hurt when it comes time to do certain kinds of studying or work. And I don't know how to overturn that social tendency. I guess my minor effort is what I wrote to say, "Look, let it hurt. It'll hurt a lot more in the long run if you don't do well on your comprehensive exams and flunk out of your PhD program." So I'm very much an advocate of what are called forcing methods of study. There was an old chess book which made this point. I think it was by Alexander Kotov. I read it, I was 13. And it rang so true to me. It was one of the key life lessons. Kotov said, when you're studying chess games, it's a huge mistake to play through the moves. What you should do is keep each future move a secret and write out your own annotations to the game—what you think they should be doing, should have done—and then at the end, check what you wrote out against what the expert wrote, and force yourself to try to figure out each move and why, rather than just go through the moves, "Oh, I see why he did that ex post, I understand this." that the latter way you learn nothing, but the Forcin-Kotov method of study is actually how I learned to play chess.

Well, it seems like the right way actually would be to write out your moves and then slide the paper down one move, see if they match. If they don't match, start over, go down the different path of the tree and do it each time, which is unbearably challenging for being disciplined, but would be the right way to do it.

Per hour you learn much more. The other is just entertainment.

Well, let's talk about teaching economics, which is not unrelated to this chess problem and other things in life. One thing I do is I give my students open-ended problems. I'm sure you do the same thing. There's no answer. And I give them these questions because I want them to struggle and try to figure them out and do what we're talking about. Some of them do. Some of the students sit and— I want them to argue with their classmates, their study mates, and then go and write these questions up on their own. But a lot of people don't. They do exactly what, what you talk about in the book. They glance over the question, they take a quick stab at it, and then they're comforted by the fact that they've heard the answer in class when I go over the homework. Of course, that's not the goal at all, and I think, as you point out, I think very little learning goes on. Some does. I don't think it's worthless, but it's remarkable how much more learning goes on when you immerse yourself in the first person of trying to answer those questions. It's interesting how hard it is to get students and ourselves— I don't want to pick on my students because, as I said, one, many of them do these problems, and two, I struggle with this myself. It's easy to just kind of say, oh yeah, I get it, or I've heard the answer. Any thoughts in the classroom to get people to do those step-by-step proofs? I guess one way is to give them part of the answer and say, OK, here's a hint. Mm-hmm.

But I've tried teaching that way, and it generally hasn't been popular. It's not. I once taught a class where a big part of the grade was that the student take an oral exam with me and defend some proposition, and I keep on asking till they can't defend it anymore. And I thought it was great that they really learned what does it mean to be able to make a claim and defend it, and most of them learned it within the first 2 minutes. It didn't take an hour of pushing to get to the point of learning. But I believe it was extremely unpopular. Yeah, it's painful. Yeah, it's painful. The idea that you could be pushed to saying, "I don't know," about a proposition that you chose within, you know, less than 2 minutes' time, and you're a PhD candidate, it's pretty tough.

I'm thinking of undergraduates mostly and trying to get them to understand the economic way of thinking. I think part of the lesson here, which runs through the book as well, is that for me, not for everybody, but for me, the most interesting parts of economics are an art, not a science. I really don't care if my students learn the first-order conditions, so I don't teach them the first-order conditions. I don't think there's much use to an undergraduate of understanding that. I want them to understand that art of mixing incentives and when markets— apply and when they struggle. And that's a very hard thing to teach. We don't teach it very well, I don't think.

I think we also don't understand very well how education works. So there's the common conundrum: what if they abolished the live teachers and replaced us with a DVD of whoever we thought was the best economics lecturer— Milton Friedman, Paul Krugman— and just got rid of all of us? I'm pretty sure this wouldn't work. And the market test has voted against this pretty decisively. But exactly why it wouldn't work, I don't think we understand. That what is it about personal contact and being there and sharing the audience and the face-to-face that makes live education effective? Yeah, I agree. And what can we do to strengthen that? It's almost as much social theater as education in the information sense.

I think the challenge is really the immersion that we're referring to, the grappling, the wrestling with the ideas. I suspect, unfortunately or not, maybe it's good, that reading a blog, a handful of blogs, 4 or 5, is probably as good a way to learn economics as sitting and listening to a lecture or reading a book that's got a you know, a formal narrative to it. Hearing people chat, tell stories, and analyze stories is probably a pretty effective way to learn the artful part of economics.

Especially if they're people who talk about each other. This is why when I blog, and you do this too, I'll talk about Robin Hanson and Bryan and you and a number of other people. I'm doing this to make my own points, of course, but I'm also doing it because I think it's intrinsically valuable for its own sake for the reader. To be part of a discoursing community, like a small group or a family setting, that the person learns better if I'm talking repeatedly about a small number of people.

You know, I think the dinner table, which is what this is emulating, is an underappreciated educational device. That's right. As opposed to the lecture hall. There's a story that Alfred Marshall— was it Alfred Marshall? I can't remember if it was the student or the teacher. I think, who would be the student and the teacher of Marshall and Pagoo?

The teacher of Marshall?

No, who, Marshall is, I've got Marshall and Pagoo in the room. Who's older? Marshall's older. Okay, so Marshall's, I think, the story is that Marshall, I think, was teaching some class and Pagoo was the only student. This may be apocryphal. I may have the names wrong. But supposedly, Bhagat comes in the first day, he's the only student, he sits down. Marshall comes in and starts reading from his lecture notes, which he does throughout the whole semester, um, losing the opportunity for an intimate conversation and just recreating a lecture hall for one person. Bizarre, bizarre technique. Let's turn to the dentist who you mentioned a minute ago. Um, the dentist story is to me very emblematic of a major problem in, in in life that markets don't seem to solve very well, which is your dentist has more information than you do about your teeth, probably. I want— I underline the word probably. The dentist has more, at least formal, information about dentistry than you do. You know more about your mouth perhaps, but dentist knows a lot. Your dentist says procedure X is now in your self-interest. You understand that the dentist is motivated by money, but you're not supposed to think that. Most people sort of presume, I think falsely, that the dentist is mainly motivated by love. And so when the dentist says you need a root canal, you need an extraction, whatever it is, you tend to nod and take out your credit card or fill out the insurance forms and just go along with it. There's a nagging feeling in the back of my mind— and sometimes it's at the front of my mind and I speak up and act accordingly— that no, bad idea. It's amazing how few tools we have for dealing with this challenge. I mean, it pops up in lots of settings. One of the more interesting ones you talk about in the book is what to pay for something when you're in a foreign country. You really don't have a feel for what the going rate is for a guide or this rug or that antique. Markets could protect you from that.

I'm not sure they do. I think what makes the dentist problem so much harder, it's not just information, it's that most people are unwilling to argue with their dentist because they've given up control. You're almost strapped into the chair, your mouth has been opened, you've told the dentist it's okay to hurt me. He subjected you to pain. You've taken it with a smile, and psychologically you're not in the right mood to say no in the way that you would say no to an auto mechanic. And I find people, even when they wanna say no to their dentist, they're much more likely to say yes and then cancel the appointment than to argue on the spot. Yeah. And I think the same is true for doctors. It's not just information, it's psychology of a kind. You've ceded control and it's hard to get it back.

Well, the role of third-party payment is a huge factor as well. The dentist presumes or the doctor presumes when you're not paying that of course you'll have it, which of course is not my reaction. I'm worried about unintended side effects. I don't like to do wasteful stuff. I have a value with time. But putting aside the contextual problem, the control problem, Let's talk about the informational problem. It's remarkable to me how little we know as consumers, and part of this is the third-party payment maybe, but it's remarkable to me how little we know as consumers of dental care, healthcare, auto care about what we're buying.

You know, Google and Microsoft are both working on ways to solve this problem, but as Robin Hanson pointed out, we're quite unwilling to let people behave on stochastic medical information and take real chances and generate more information that's a public good. And of course, the person was willing to take the chance. But the idea that you would pick a random sample of whatever and judge a doctor on that basis and agree to a procedure— we're very uncomfortable with it as a society. We feel the need to recreate this illusion. You're being taken care of, everyone's being taken care of, we wouldn't do this unless we I knew it was the right thing. And I think we need to get away from that mindset, but it's very hard to do.

Well, you talk in the book a lot about delusion, and let me give you an example from dentistry that intrigues me and, and see what you, what you think. I'm missing a tooth. I had a tooth extracted, and my dentist said, well, of course you need to have an implant. And I said, why? Uh, it's in the back of my mouth. It's— I can chew fine without it. It's not ugly, that there's not a gaping hole that's apparent, I don't think. Speak up if you think I'm wrong. And I was told, well, if I didn't do this, then the tooth above would grow down and become a long fang and fill up the space. And the right question, of course, is what are the odds and when would that happen? Is it— if it's gonna happen in 5 years, get— let's get the implant. It's gonna happen in 60 years, you know, let's keep an eye on it. So I don't like pain and I don't like to pay for something that's unnecessary. So of course, my natural delusion is to assume that the odds of this happening are much smaller. Of course, the dentist is also deluded. The dentist is probably likely out of self-interest to convince herself that, that they— you're going to get fangs.

Dentistry is important. Why else would you become a dentist?

Yeah. And fangs are bad. So it just— it's interesting that it's hard to find reliable information on the odds of a fang, whereas other things we have lots of information. I don't know why that's not—

I think it's the fear factor that even when we have the information, which is often not the case, most people don't want to know it. Like comparative death rates at hospitals or with different doctors, that information is highly imperfect.

Yeah, that's true.

But what we've got is not very popular.

Let's go back to the tourist, which is something you have a lot of interesting experiences with. Talk about the challenge of hiring a makeshift guide on the road in a less than developed country.

Well, this happened to me when I went to Morocco, which is now, I'm guessing, 12 or 13 years ago. When you're wandering around the inner city of Marrakesh, You really do need a guide. I tend to travel in fairly exotic ways and I think of myself as a brave tourist, but simply not to get lost. There are no street signs, it's a medieval environment, you must have a guide. But the problem is any guide you hire will take you where the guide wants to go, which is to shops where the guide will get commissions. And it's hard to bid for the guide's loyalty because in essence the shop owners are bidding more. So you'll come across guides and the guide will say, "I will be your guide for free." And I'll say, "No, I want to pay you to get the guide to do my bidding." The guide says, "No, I insist, I will do it for free. I am your friend." Now I know that's a joke, but it's actually impossible to get a guide to work for you for anything other than quote-unquote "for free." And then they bring you into the center of the souk, they bring you to their favorite shops, and you can't just run away or you're lost. And then I tried doing it without a guide. I thought, "Look, okay, I'll get lost, but I'm going to try this. If I walk around long enough, I'll find my way back out." It's probably true. But what happened is, without a guide, so many other would-be guides harassed me that I eventually broke down and hired a guide, just to keep the other would-be guides away.

Sure. It happens when someone offers to protect your car in certain urban environments. It used to happen in America. I haven't seen it lately, but maybe I'm just not parking in the right places. But it used to be, you know, you'd park your car and someone would offer to watch your car while you were gone. Of course, the incentives there are pretty clear, so you often would hire them for the right— as long as the price was right. Now, of course, there's competition among guides. Presumably, the shopkeepers are competing and trying to find guides that that are relatively pleasant to be around. But there are some asymmetries in the incentive structure there, I guess, that make it challenging.

So some incentive problems just don't get solved, I think, is the lesson. And just knowing which those are, I think, is a big part of economics. We like to push the can-do side of things, but sometimes it's the can't-do no matter what is what we need to learn.

Okay, let's shift gears. You talk a lot about art in the book, as your readers would expect, your blog readers. One of the more interesting observations you make is that we shouldn't expect museums to be pleasant places. They cater to donors, not the rest of us. Explain.

It depends what country you're in, but say you're in the United States. The admission charges for museums would maybe be 10 to 15% of budget. If that. Most of what the museum gets, it gets from private donors or to some extent it gets it from different levels of government. So there's a competitive process of sorts here and museums have to be geared to make their donors happy. There's nothing wrong with this in my view. The donors are in essence supporting the museum and if they want a certain kind of museum, to me that's entirely fair. But donors don't always care about how much fun I'm having in the museum. So I'm saying when I enter the museum, I need to mentally restructure it to be the kind of environment I'm used to. The donors like museums typically to be high status, to be somewhat serious, to not in every way be accessible. They love glorious looking buildings and big open spaces, which can be very beautiful, but again, it's not always what I want. And part of what I'm doing is just tapping people on the shoulder and saying, "Hey, look, you know, you may love art, but you have to realize this is in some way a hostile environment, and if you're gonna master it, you have to understand why it's a hostile environment and come up with a way of overcoming that." Unlike the grocery store. Unlike the grocery store or McDonald's, which are really funded completely by the customers, and they're there to be easy and simple.

So what are the lessons for the museum-goer?

If you're going to a museum and it's mostly donor-funded, uh, expect it to be more serious an experience than maybe you would like. Expect to be overwhelmed by all the greatness there. The donors will tend to want an overwhelming show of amazing artworks, but you as a viewer might want something that's easier to digest. So you have to break it down and make it easier to digest. One of the hints I give is just to ask yourself, in this room, what picture would I steal? Or what's my favorite picture? Or what's my least favorite? And make it into a kind of low, deliberately low-status game, because that's what the museum itself won't do for you. They'll give you those headsets and a somewhat serious academic talk on the paintings, but often that's not what I want. I want a way to make it digestible, not to be overwhelmed by more information.

I've used that advice, which I heard from you before I I read your book with my kids. It's remarkably effective. If I take my kids, who range in age from 7 to 14, if I take them to an art museum, they tend to sort of wander around. They're looking, they're looking, you know, they're wandering around. They're looking at the paintings as they might if they were taking a hike. But when you tell them, in this room, which painting would you take home, all of a sudden I'm tapping into, at least for some of them, one, I'm tapping into their competitive side, which they're going to say, I want the best painting. So they're all suddenly going to look at all the paintings in a, in a very different way. But they're more importantly, they're looking at the paintings, which they really aren't doing in, in the, uh, in the general walkthrough.

It's interesting to compare museums to zoos because zoos are funded much more by admissions charges, and zoos tend to be pretty easy. So often you go to the zoo and they give you a path. They tell you, "Take this path." You don't have to do it, but museums generally won't do the same thing in such an explicit way. They're somehow too remote to tell you, "Take this path," or to lay it out in a fun, easy way for you. Just think how often people get lost in the rooms of museums. You know, do we backtrack? Do we go this way? Do we go that way? What do I do? Who knows? You don't usually have that problem at a zoo. It's a great point.

There's really no— I'm thinking of the National Gallery of Art here in DC. It's magnificent. There's tons of interesting things to see there. And I fortunately, the first time I went there, I asked the docent at the front desk, what do I want to see here that I shouldn't miss? That's one way to do it, at least, rather than just wandering aimlessly. But once There probably is a useful, interesting sequence. You could get more out of it than less. And you're right, there's no suggested path or paths, assuming there'd be more than one.

Lots of them. There are guided tours one can take, but even there, it's often more about how exalted it all is and not about making it fun.

So what are your 3 favorite museums in the world?

Oh, that's such a tough question, but it would have to be museums— 5. Museum— the more you list, the tougher it gets. One would be easier. Museum of Modern Art in New York would have to be number one. They have an incredible 20th century collection, and I think they have amazing taste in what they hang and how they hang it. I've never seen them mess up how a museum room is hung, and just about every other museum does that. That's what I like most about them. They understand how to hang a room.

So before I'll cut you off the rest of the list now, save you the challenge of listing the next 4. How many times you've been to that museum, roughly? 100, 120. So I've been once. Okay. Um, and I just stumbled through it. You know, I looked, I opened the— there's a— they give you that little folder of things. Um, there was some exhibition I rented the headset. By the way, when I returned it and I informed the, the person behind the desk that it wasn't working, as a kindness to the next person, she reacted defensively and angrily. It was a great New York experience. But I wandered through that museum rather aimlessly, enjoyed it very much. It is— it's a wonderful museum. But if one of our listeners wants to go to that museum and not wander aimlessly without having the floor plan in front of you Can you list a few things that are not to be missed there?

What always bowls me over is the Mondrian room. I think it's just amazing. They reserve one room for Mondrians. Most of them are abstracts, but not all of them are. And they rotate what's in the room. But all you see in the room ever is Mondrian. Or sometimes there'll be like a student of Mondrian or something in the style. But it's a completely pure experience. The Matisse room is done the same way. If you go somewhere like the National Gallery in Washington, which is an excellent museum, but in my opinion half of their rooms are in some sense ruined because they put clashing colors next to each other. One aesthetic or mood will interfere with another, and it's not that they're idiots. They don't have the facilities to quite just arrange it in the right way. They're not always doing this by choice. They don't have the perfect things to hang, but for me, the, the older I get, the bigger a difference that makes, is how well do they understand the museum. The Menil Collection in Houston is very well hung. It doesn't change a lot, but that's another excellent, excellent museum.

It's one of the disadvantages of the real world is that we can't order it the way we'd like. Obviously, the ideal National Gallery experience for you would be different than mine, and you'd get to walk through it in the sequence with the rooms hung the way you'd like them to be, and I'd get to go through it my own way. I guess someday it's imaginable we'd have some virtual art experience where we could make the museum the way we wanted it, or our house could, could hold art that was profound. You talk about in the book that would allow me to design my own room, at least in a more pleasing way for my own taste. Your point about museums, that much of the money comes from other sources rather than the clientele, would also hold for universities. Sure. That would appear to be a problem with American education, university education. Do you think that's true?

Depends what you mean by problem. So you have wealthy people who give a lot of money to Harvard. Now, I wonder exactly why they're giving the money. Maybe it's affiliation, but it seems to me Harvard doesn't need the money. And if I had that kind of money, or the small amount of money I do have, I don't give any of it to Harvard, even though I studied there. But if we're just looking at strict consumer sovereignty, if we say the people wanna give their money and they give it, they get what they bargained for, whatever that might be. Right, whatever that might be. I mean, that's fine. I don't want to interfere with that, but it does seem to me that universities of that kind, they're over-specialized in networking and producing an image and selling status and affiliation, and they don't have enough of a really educational vision in a dynamic way. And at some, I guess almost aesthetic level, I'm disappointed in that. Again, not that I want to interfere with the process of people giving if that's what they want to do.

What might be different in a different kind of university?

I think in a different university you would have more donors who care about educational results and they would demand more of the university in that way. I don't mean in the sense of interfering with curriculum, but just actually caring that a place was dynamic intellectually, rather than thinking of the donation in terms of a warm glow.

I think the certification role of education is the biggest challenge that we have. Students are here for such a wide variety of purposes. Beyond just exploring the intellectual foundations of Western civilization or other civilizations that it's inevitably going to be the case whether this donor problem is solved or not. I wonder what a university— I don't know if a university that pursued education for its own sake would have many students. It's not clear it would.

I think of St. John's sometimes is like that. Now I may be naïve. I've never been there. Ever, not even visited, much less— never gone to it. But I have at least this illusion there are a few places, maybe parts of like philosophy, politics, and economics at Oxford. Again, it might be illusion. I think of parts of what we have here as really being about a kind of dynamic education.

Not all of it, but some of it. Absolutely. I don't mean to slight the American educational system. I think there are many things we do very, very well. And the intellectually curious student can have a great experience at many, many places here. I find it remarkable how large a proportion of students' time, energy, and the university's time and energy is spent on things that are not educational, that are cultural, social, entertainment, hotel, resort, you know, just bizarre.

Yeah. And then on the supply side, there's a need not to let anyone criticize curriculum or the school. There's a sort of least common denominator approach. So I went to Jana's orientation at Franklin Marshall, I guess 2 weeks ago. And the president spoke, the provost spoke, the dean spoke. They all seem like smart people. Sure they are. I never thought like, "Gee, I know something these people don't." But the striking thing is it was obvious they're not allowed to say anything that would offend any single parent in the room. And I understand that, but you can see the problem when that's the prevailing incentive.

Larry Summers said something that was unpopular and paid a severe price. It's not a great sign for the role of universities as places to explore ideas. That's right. Before we end, I've got to ask you about one small thing in the book. You came down very hard against brainstorming. Now, brainstorming, this idea that we'll get together and shoot the breeze and come up with some good ideas, do you think it ever has anything good ever come of it? In the book you suggest it's mainly a waste of time and that we come up with our best ideas on our own. Anything good about brainstorming?

I think it's a power law distribution. There's a lot of evidence, most of all in the arts, but also in science, that small groups that talk to each other regularly and have a competitive spirit, they can do great things. Picasso and Braque, uh, the physicists who developed the atomic bomb, classical political economy, the Austrian school. There are many examples and those to me all seem to hold up. But I think in your median workplace environment, not at the extremes of the power law distribution, That most of brainstorming is feeling you're doing something. Some of it is just about signaling coalitions and alliances. But in terms of being a way to solve problems, I don't think it's that useful.

Let's end talking a little bit about blogging. Blogging here at George Mason in the economics department is rampant. There are other places where it's taken pretty seriously, but I don't think any place is as intense about it as we are here. Do you think that'll last? Do you think it'll last here? That's number one. Do you think it's gonna grow elsewhere? Are other places likely to do it? Is there a reason why we're so, like, involved in it here? And do you think it's important, or do you think it's just a form of self-indulgence on our part. I think it's important.

As we said before, it's one of the best ways of doing economic education, most of all for the blogger. I'm not even thinking about the audience. I think it will last here as long as our department is anything like the way it is now, because we're mostly people who have something to say. We're less specialized. It's easier for generalists to have dialogue with other blogs and with their colleagues. I think it is spreading to many places. What's odd is that the two main blogging places are George Mason and Harvard. So, I'm pretty happy to be in that company. But of the top schools, I think Harvard Economics and the Kennedy School has been the most interesting for a while now and the most willing to have different ideas or the most generalist, more say than MIT would be or Stanford would be. And the relative prominence of Harvard in blogging is a reflection of that. But I think that entry barrier will keep out most academics. In my opinion, it's really hard to blog. I don't think it's necessarily that hard for me because of how I've developed my research interests, that is being a kind of generalist and reading a lot of books. Uh, but my experience with guest bloggers has not in every way been positive. And I think most academics just can't blog well and they'll never be able to. I don't think it should be required of them, but when you meet ones who can do it, they're almost always interesting people and people you can learn from.

My guest today has been Tyler Cowen of George Mason University, the author of Discover Your Inner Economist. Tyler, thanks for joining us. Thanks for having me. This is EconTalk. Part of the Library of Economics and Liberty. For more EconTalk, go to econtalk.org, where you can also comment on today's podcast and find links and readings related to today's conversation. The sound engineer for EconTalk is Rich Goyette. I'm your host, Russ Roberts. Thanks for listening. Talk to you on Monday.