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A Few Thoughts About Freakonomics From Steven Levitt

Just months after the release of SuperFreakonomics: Global Cooling, Patriotic Prostitutes, and Why Suicide Bombers Should Buy Life Insurance, noted economist Steven D. Levitt of the University of Chicago will deliver the opening keynote address next month at the GMAC Annual Industry Conference in San Diego.

Levitt, who penned the new book as well as the best-selling original Freakonomics with Stephen J. Dubner, looks for the hidden truths in the economics of everyday life. He’ll share some of his insights in the context of graduate management education. In May, Levitt took a few minutes out of his busy schedule to talk briefly with Graduate Management News.

Q: If Freakonomics is about the “hidden side of everything,” what’s one thing that business schools might be overlooking in terms of their curriculum?

A: The next level of business innovation or expertise could very well center around experimentation and using the scientific method to better tease out causalities and correlations. Except for a class that I taught at the Booth School, I’m not aware of any business school that has put an emphasis on experimentation, whereas going forward in business I think that really could be a tremendously valuable skill.

Q: Again from the perspective of Freakonomics, what’s one thing that business schools might be overlooking in terms of admissions?

A: One thing that could be done is to try to do more with feedback—to learn about what worked and what didn’t work in the past. My guess is that most schools don’t invest much time after students graduate to [analyze the criteria] they used to predict which students they should admit and to see what actually worked. [Schools might want to assess] the metrics they use to see if they are actually predictive of student outcomes. It’s an obvious thing to do, but my experience suggests that it’s not something that people do very often.

Q: In day-to-day practice, how might a business school dean apply principles of Freakonomics?

A: I think it’s good to bring in the market mechanism wherever you can. For example, think about how to allocate students to classes. I don’t know how common this is, but one of the things that I think we do pretty well at Booth is use a market mechanism to let students bid on classes. [Students start with a fixed budget of points, adding more as they take courses. They spend points to gain admittance to classes they wish to take.] So when you have classes that are highly sought after, the students who really want the class the most are the ones that ought to bid the highest. By bidding highest that means they won’t get all the other classes they want. It’s a way to let students show their preferences.

Q: Is there a Freakonomics perspective for improving the global economy?

A: I can make up answers about the economy about as well as the next economist, but I think that’s not really what we are about. What we do in Freakonomics is really about microeconomics—the study of individual behavior and how someone who is faced with a problems sorts it out, comes to a conclusion, and makes a choice. But how individual actions aggregate up into an economy—those problems turn out to be so hard that no economist, not just me, seems to have good answers to those questions. I try to take the easy questions, and let the macroeconomists stumble around on the hard ones.

Q: What kind of takeaways do you hope the people at GMAC’s Annual Industry Conference might gain from your talk?

A: I hope to entertain as well as teach. Many academics feel that that’s an either/or, that entertainment shouldn’t be part of enlightenment, but I strongly disagree with that.

A lot of what I do is about thinking differently. It’s about taking a problem that everybody looks at the same way and try to look at it in a different way. I think that when you are in admissions in a business school, for example, and you are competing with all other business schools for the exact same set of students, thinking differently, picking out the diamond in the rough, understanding what characteristics will make someone thrive both in your school and in business, is a very valuable asset.

The William B. Ogden Distinguished Service Professor of Economics at the University of Chicago, Levitt won the John Bates Clark Medal as the most influential economist in America under the age of 40. Registration for the GMAC Annual Industry Conference is now open.

Note: Coming up in the June Deans Digest: An interview with Rich Lyons, the Bank of America Dean at the Haas School of Business at the University of California, Berkeley, and the other featured keynote speaker at GMAC’s Annual Industry Conference. To subscribe to Deans Digest, register or update your profile on

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