1 00:00:02,68 --> 00:00:07,97 Yes. Absolutely. So is a child. 2 00:00:08,21 --> 00:00:17,84 We were twenty four seven plane sports we would play baseball and summer in the football season we would play football. 3 00:00:18,36 --> 00:00:24,47 We would play soccer the family in which I was raised was really all about sports 4 00:00:24,47 --> 00:00:31,94 and I sort of took that passion to a market called the collectibles market so. 5 00:00:32,76 --> 00:00:40,19 When I was a kid I would grass in the summer and then I would take that money and buy baseball cards 6 00:00:40,19 --> 00:00:48,51 and in the winter I was raised in Wisconsin. So I would shovel snow. I would take that money and buy baseball cards. 7 00:00:49,18 --> 00:00:58,02 And from there. I became this kind of this love of the of the sports card market or the baseball card market you. 8 00:00:58,94 --> 00:01:09,78 Are very well that's right. So trading actually gave me an outlet to use sports. 9 00:01:10,07 --> 00:01:17,91 In a market so markets have always fascinated me things like how are prices determined in markets. 10 00:01:18,02 --> 00:01:24,37 You know when I was a little kid we would pay a quarter for a pack of baseball cards 11 00:01:24,37 --> 00:01:33,26 and I wondered why is it a quarter. Why isn't it. Fifty cents why isn't it a dime and those types of questions always. 12 00:01:34,23 --> 00:01:40,86 Peak my curiosity in thinking about how do markets not only price goods but how do they allocate goods 13 00:01:40,86 --> 00:01:41,57 and services to people. 14 00:01:42,00 --> 00:01:59,9 Yes So let's put it this way that I was unusual as a kid I think I had certain quirks that people might. Deny. 15 00:02:00,15 --> 00:02:06,24 It is peculiar or unusual on the one hand I was constantly playing sports 16 00:02:07,07 --> 00:02:16,16 and on the other I had the intellectual curiosity to think deeply about questions like allocations 17 00:02:16,16 --> 00:02:21,43 and markets without calling it that I thought about grocery stores 18 00:02:21,43 --> 00:02:27,54 and trading markets in ways I think that my colleagues when I was Little did not really have the same thoughts. 19 00:02:33,88 --> 00:02:36,06 Yeah I think that's right. I think in the end. 20 00:02:36,62 --> 00:02:38,94 We end up chasing our dreams 21 00:02:38,94 --> 00:02:59,86 and if we're good enough to do the things that we love then we can make that an occupation or a career. That's right. 22 00:02:59,93 --> 00:03:04,38 Is as I grew older through high school and when I was in college. 23 00:03:04,95 --> 00:03:11,87 I began to be a dealer in these markets so what a dealer does is a dealer brings his 24 00:03:11,87 --> 00:03:17,00 or her sports cards to the market in and sells them or trades them to people 25 00:03:17,00 --> 00:03:23,21 and what you could readily see is that not all people were getting the same deal. 26 00:03:23,33 --> 00:03:26,95 Some people would pay a lot more money than another person 27 00:03:26,95 --> 00:03:33,88 and even in those types of markets you could see the inequities that were arise in and I always thought. 28 00:03:34,5 --> 00:03:40,42 What are the factors that are causing those inequities and markets 29 00:03:40,42 --> 00:03:49,46 and what can we do within a free market system to lessen those in equities or make markets more fair. 30 00:03:49,65 --> 00:03:59,88 Well it could be a simple. Women tend to shy away from by. 31 00:04:00,76 --> 00:04:08,03 So what happens in these types of bargaining in markets is that the dealers understand that women shy away from bargain 32 00:04:08,03 --> 00:04:14,78 in so they charge some higher prices and it happens in the used car market it happens in the baseball card market. 33 00:04:15,18 --> 00:04:23,85 It happens in any market where you have bilateral exchange in you have people bargaining over the price that's a severe 34 00:04:23,85 --> 00:04:27,89 inequity that can determine consumption and in concert. 35 00:04:29,49 --> 00:04:44,42 Concerning outcomes of people that are really important like in the labor market. I was pretty good trader. 36 00:04:46,5 --> 00:04:48,18 So just about every weekend. 37 00:04:48,61 --> 00:04:52,76 My girlfriend at the time who became my wife she 38 00:04:52,76 --> 00:04:59,35 and I would go to these large sports car shows we would drive from Madison Wisconsin all the way down to Chicago. 39 00:05:00,03 --> 00:05:06,7 And we would buy sell and trade through time and through experimentation. 40 00:05:06,73 --> 00:05:13,21 I became pretty good at it and I understood kind of what people wanted and how they wanted to bargain 41 00:05:13,21 --> 00:05:16,2 and saw in the long run I think I did pretty well. 42 00:05:18,63 --> 00:05:23,22 I had my experiences so there were some occasions where I was taken advantage of. 43 00:05:24,96 --> 00:05:31,53 I can remember one case where I was trading in a very large trade for me at the time maybe a thousand 44 00:05:31,53 --> 00:05:39,08 or two thousand dollars and I got in return a bunch of counterfeit cards and that that's her bum me out. 45 00:05:39,32 --> 00:05:47,88 I think it's fair to say that I was taken a fool that particular day in the market. They were just fake cards. 46 00:05:48,05 --> 00:05:49,57 That's right. So I've never done that. 47 00:05:49,68 --> 00:05:56,18 Personally I went when I when I buy sell and trade I try to predict what will be good in the future. 48 00:05:56,35 --> 00:05:59,66 So what is a down sports card today. 49 00:06:00,01 --> 00:06:05,61 Hey that will have future value for people in that's the that's the game that I like to play. 50 00:06:05,64 --> 00:06:14,81 I like to play the trading game where I can predict the assets that will increase in value over time I will accumulate 51 00:06:14,81 --> 00:06:16,99 those in then trade them back later. 52 00:06:18,06 --> 00:06:25,53 What I do I see markets fundamentally as a game 53 00:06:25,56 --> 00:06:32,48 but a very important game not a game that is is meant to be nonsensical game 54 00:06:32,48 --> 00:06:40,68 or a trivial game markets tend to be two player games where there is a buyer and there is a seller 55 00:06:40,68 --> 00:06:48,03 or there is an exchange of information and once we understand the rules of this game this market transaction. 56 00:06:48,57 --> 00:06:55,51 Then we can try to optimize what we're trying to do many times people try to optimize their consumption. 57 00:06:56,43 --> 00:07:01,41 According to how much income they have that's a particular consumption game so to speak 58 00:07:01,41 --> 00:07:07,48 and then markets tend to be zero sum games where your gain is my loss 59 00:07:07,51 --> 00:07:12,4 and my gain is your loss in many times markets are set up like that. 60 00:07:14,61 --> 00:07:19,04 It's a very serious game in many cases it's a life or death game markets are 61 00:07:20,06 --> 00:07:24,59 but nevertheless if we think about it in the nomenclature of unknowing men 62 00:07:24,62 --> 00:07:32,12 or mash in many cases it can be modeled is a theory of games 63 00:07:32,34 --> 00:07:37,44 and those theories tell us what our optimal action should be in this market. 64 00:07:45,4 --> 00:07:49,83 A player in only the best sense that there's a negative connotation about a player 65 00:07:49,83 --> 00:07:54,96 but I'm certainly an active market participant and a player in these markets 66 00:07:55,56 --> 00:07:59,26 and I'd like to think of myself as an active participant in. 67 00:08:00,47 --> 00:08:07,24 In the creation of scientific knowledge and we're in a we're in a market constantly you 68 00:08:07,24 --> 00:08:12,04 and I are in a market right now where exchanging information science is also a market. 69 00:08:12,07 --> 00:08:19,43 It's also a game in the sense that there are suppliers and demanders of the scientific knowledge and. In that way. 70 00:08:19,47 --> 00:08:37,75 I consider myself a creator of knowledge and disseminate knowledge. She comes. She. I think that's right. 71 00:08:37,85 --> 00:08:46,85 I think that when markets are poorly constructed. You can think about the financial crisis of the last several years. 72 00:08:47,73 --> 00:08:57,16 There are moments that the market players who have market power tend to change the rules of the game 73 00:08:57,16 --> 00:08:59,6 and we have to be very careful that we don't do that. 74 00:08:59,77 --> 00:09:07,18 Otherwise people become distrustful of the game and distrustful of the market 75 00:09:07,18 --> 00:09:15,65 and that's a first step in the wrong direction because markets are beautiful markets create wealth they create 76 00:09:15,65 --> 00:09:17,67 knowledge they create information 77 00:09:17,67 --> 00:09:25,49 and we have to be careful that people trust market outcomes in people come to markets as active participants who will 78 00:09:25,49 --> 00:09:27,15 be happy about 79 00:09:27,15 --> 00:09:33,71 when someone loses they don't of a sudden change the rules of the game so they become winners I think we have to make 80 00:09:33,71 --> 00:09:43,58 sure as practitioners and as scientists that we don't allow this to happen. This is absolutely. 81 00:09:44,18 --> 00:09:52,16 I think in the end everyone deserves a chance through this market or through this game to succeed. You know as. 82 00:09:53,21 --> 00:09:59,77 As children. We don't choose our parents and if we don't set up the education game. 83 00:10:00,08 --> 00:10:06,52 For the education market in a fair way everyone doesn't have a fair chance to succeed 84 00:10:06,79 --> 00:10:12,03 and I'm fundamentally opposed to people not having a fair chance to succeed in life. 85 00:10:18,93 --> 00:10:19,86 Well 86 00:10:20,94 --> 00:10:31,67 when I first studied economics the very first book that I opened up was written by Paul Samuelson who is one of the most 87 00:10:31,67 --> 00:10:33,84 famous economist of the twentieth century 88 00:10:34,66 --> 00:10:41,28 and Bill Nordhaus who is one of the most famous economists working on Climate Change in 89 00:10:41,39 --> 00:10:53,21 and I was struck by a passage in that book. It said economists cannot run experiments because the world is dirty. 90 00:10:53,9 --> 00:11:00,76 They must therefore sit back like a meteorologist in allow the data to come to them. 91 00:11:01,77 --> 00:11:11,36 In then they can analyze the data using statistical techniques to try to say something causal about the data that's 92 00:11:11,36 --> 00:11:17,81 kind of the way the world was in the late eighty's and early ninety's when I was an undergraduate and graduate student. 93 00:11:19,19 --> 00:11:20,8 And I always thought that was wrong. 94 00:11:21,86 --> 00:11:29,91 Because it's not that I disagreed with them about the world being a very dirty place it is there are multiple markets 95 00:11:29,91 --> 00:11:34,86 there are millions and millions of people millions and millions of firms 96 00:11:34,86 --> 00:11:39,15 and prices in the world is very very Massey So it's not. 97 00:11:39,7 --> 00:11:48,33 It's not like that test tube that the chemist has I think that was their intuition is that the chemist needs a pristine 98 00:11:48,67 --> 00:11:54,07 test tube to run an experiment. So they said look is economist's the world isn't clean. 99 00:11:55,05 --> 00:11:59,92 It's not a sterile test tube so we can't run experiments. I came and I thought much to. 100 00:12:00,01 --> 00:12:09,89 Certainly than that I thought that the sports card markets where I see Konami accent work and I go in 101 00:12:09,98 --> 00:12:16,33 and test economic theory in those markets even though those markets are very dirty they're not clean test tubes. 102 00:12:17,42 --> 00:12:24,89 If I could use randomization Now what I mean by that is I put some people in a treatment group say they get the 103 00:12:24,89 --> 00:12:29,46 cholesterol pill and some people in the control group say they get the sugar pill. 104 00:12:30,18 --> 00:12:36,38 Now all of that dirt is balanced across the treatment of control groups I'm not getting rid of it 105 00:12:36,78 --> 00:12:44,05 but I'm balancing it across treatment control and that allows me to say something causal about the cholesterol pill. 106 00:12:44,34 --> 00:12:48,34 So in a way when I was a graduate student. Absolutely. 107 00:12:48,42 --> 00:12:52,29 I wanted to change the rules of the game I wanted to change the way. 108 00:12:52,39 --> 00:13:02,82 Economists to their empirical work instead of being passive observers have the data come to us and then beat it up 109 00:13:02,82 --> 00:13:11,06 and try to say something cause all I wanted to be an active participant in a market and go in generate my own data. 110 00:13:11,49 --> 00:13:18,87 In generate my own data for a reason to test economic theory and then to change the world about a specific policy 111 00:13:18,87 --> 00:13:25,96 and why do people discriminate Why do people give to charitable causes. Why do inner city schools continue to fail. 112 00:13:26,15 --> 00:13:33,52 These big scientific and social questions are what I want to go after and I want to change the rules of the game 113 00:13:33,52 --> 00:13:46,99 and collect my own data and generate my own data to answer these questions. Thinking. Absolutely. 114 00:13:47,07 --> 00:13:49,98 I mean the the traditional way in which economist 115 00:13:49,98 --> 00:13:57,18 and social scientists more generally think about doing empirical work is they have an idea. 116 00:14:00,38 --> 00:14:07,15 Might be ways in which we can increase people's effort in labor markets. 117 00:14:08,00 --> 00:14:14,22 Then they raced back to their office and they write down a theoretical model and it's a beautiful theoretical model. 118 00:14:15,02 --> 00:14:20,9 In then they say to themselves. How can I test that model many times they don't even test it. 119 00:14:20,92 --> 00:14:24,29 They just write it down and send it out to the world. It's beautiful. 120 00:14:24,65 --> 00:14:28,58 Sometimes they say I want to test the implications of that model. 121 00:14:28,85 --> 00:14:34,83 So what they do is they download mounds and mounds of dad say from the Internet 122 00:14:34,83 --> 00:14:41,05 and then they beat that data up until the Submit since says here's what I say 123 00:14:41,05 --> 00:14:47,9 but they have to impose a lot of statistical assumptions on those data. 124 00:14:48,23 --> 00:14:56,27 To go from a correlation to something that's causal that's the typical way in which scientists have traditionally done 125 00:14:56,27 --> 00:15:02,47 research it down a model go get mounds and mounds of data that somebody else has collected 126 00:15:02,47 --> 00:15:10,36 or the world gives to them beat it up say something about the model. No I do things a little bit differently. 127 00:15:10,49 --> 00:15:18,54 I write down a theory but then I go out in generate data that are meant to test set theory. 128 00:15:18,56 --> 00:15:26,24 So it's a very good fit with the theory itself rather than a misfit rather than put in a square peg where around 129 00:15:26,24 --> 00:15:31,73 when should be which is many times what you're doing when you go out and get the data that the world has given you. 130 00:15:31,82 --> 00:15:41,5 It sounds like science. I think that field experiments have the promise to make. 131 00:15:42,03 --> 00:15:48,43 Economics into what some people would say is a proper science I think for years. 132 00:15:49,15 --> 00:15:57,71 Not only myself but other social scientists have been deemed as soft as a not doing real science. 133 00:16:00,29 --> 00:16:06,89 I think it's fair to say that with field experiments economists now have their full fledged scientific cards. 134 00:16:08,95 --> 00:16:14,89 There are absolutely. Absolutely. 135 00:16:23,48 --> 00:16:35,76 Yeah I think on the one hand behavioral economics might be thought of as a great marketing tool because for decades. 136 00:16:35,91 --> 00:16:44,31 Economists have been interested in behavioral economics you can go all the way back to Adam Smith who talked about. 137 00:16:45,28 --> 00:16:49,79 The moral Hector on the shoulder and doing the right thing. 138 00:16:50,71 --> 00:16:55,84 People don't get that from his most popular book but he has a second book that is very behavioral. 139 00:16:56,58 --> 00:17:02,93 You can go all the way through the twentieth century you had John Maynard Keynes who's very behavioral you had Gary 140 00:17:02,93 --> 00:17:10,09 Becker one of my heroes at the University of Chicago who was very behavioral he was talking about why people 141 00:17:10,09 --> 00:17:11,1 discriminate. 142 00:17:11,93 --> 00:17:14,56 Why do people have Ultra Stick preferences 143 00:17:15,23 --> 00:17:24,73 but then there was this explosion with the work of Danny condom in in Amos Tversky in the seventy's in Dick Thaler in 144 00:17:24,73 --> 00:17:32,91 the eighty's in economics where. We didn't need to invent behavioral economics again because after these pioneers. 145 00:17:32,96 --> 00:17:39,4 Everyone knew what behavioral economics was what which essentially is now to add in psychology 146 00:17:39,4 --> 00:17:43,22 or insights from another discipline into the economic model. 147 00:17:43,79 --> 00:17:46,56 I think you could view it is 148 00:17:47,47 --> 00:17:56,98 and in some humanity to the economics man which I think is right in the moment that you add behavioral economics 149 00:17:56,98 --> 00:17:59,95 or psychology or or let's just say. 150 00:18:00,04 --> 00:18:08,53 Common sense to the economics man we can understand her a little bit more than we could with with the straight sterile 151 00:18:08,53 --> 00:18:17,32 model of neoclassical economics because you know that's right. 152 00:18:17,38 --> 00:18:26,19 I think that was a mistake for many years and in which many people did separate the model from the person and. 153 00:18:26,73 --> 00:18:38,22 People became not very interested in questions about why people did things I think the moment you start to economic 154 00:18:38,22 --> 00:18:41,2 science many times people simply want to measure. 155 00:18:41,44 --> 00:18:49,94 So they measure how much discrimination there is on a market where they measure. What is what is the. 156 00:18:50,28 --> 00:18:55,66 Gender pay gap or the difference between men and women in markets 157 00:18:55,66 --> 00:19:03,24 and then they stop where I think behavioral economics and field experiments allows you to go to the next level 158 00:19:03,24 --> 00:19:06,84 and say why do people discriminate. 159 00:19:06,93 --> 00:19:10,68 Why do women earn less money than men in markets 160 00:19:10,68 --> 00:19:18,69 and it's only after we answer the why's can we first of all know what model is at work and secondly. 161 00:19:19,53 --> 00:19:28,12 We can then put forward public policies to combat the injustices that are done in the world. Only after we know why. 162 00:19:28,37 --> 00:19:42,26 I think by doing field experiments it's the best possible way to not only measure. 163 00:19:42,79 --> 00:19:52,14 For example does discrimination exist in a market but also to distinguish wide as discrimination occur in the market. 164 00:19:52,15 --> 00:19:59,35 I can think of no other tool. That is better than running a field experiment to figure out why. 165 00:20:00,2 --> 00:20:08,15 People are doing what they're doing. You know well let's talk a little bit about that. 166 00:20:08,3 --> 00:20:15,04 So let's let's use the example of discrimination. So in the late one nine hundred fifty S. 167 00:20:15,04 --> 00:20:22,01 An economist named Gary Bakker at the University of Chicago did a dissertation on the economics of discrimination 168 00:20:22,01 --> 00:20:30,25 and his model was based on the simple premise that some people have a preference for discrimination 169 00:20:30,25 --> 00:20:37,04 and what that means is they derive satisfaction of harming another group. 170 00:20:37,25 --> 00:20:41,4 So for example they might not like women or they might not like man 171 00:20:41,4 --> 00:20:44,06 or they might not like old gray haired people like me 172 00:20:44,06 --> 00:20:54,01 or they might not like people of certain races so they treat them poorly they don't hire them for jobs they give them 173 00:20:54,01 --> 00:20:57,97 higher price quotes in used car markets for example 174 00:20:57,97 --> 00:21:02,31 and his model was basically one of people had a taste for discrimination. 175 00:21:02,84 --> 00:21:11,38 So that's one kind of discrimination that's of course abysmal we don't want that another kind of discrimination is what 176 00:21:11,38 --> 00:21:18,49 put goo in all the economist called Third Degree price discrimination in what that was. 177 00:21:19,67 --> 00:21:27,81 Was People discriminate in markets. Not because they dislike the other person but because they want to make more money. 178 00:21:28,08 --> 00:21:36,17 So for example. I might charge women more money in a market because I know they don't like to bargain. 179 00:21:36,41 --> 00:21:41,22 It's not that I dislike women. I just like money and I want to make money for myself. 180 00:21:41,57 --> 00:21:46,94 So now these two theories are very different on the one hand you have backer who says. 181 00:21:47,78 --> 00:21:55,88 People discriminate because they want to cater their prejudice in fact they will give up money to harm another group 182 00:21:55,88 --> 00:22:05,4 and you have another theory that says whoa whoa whoa. Wait a moment people discriminate been effort to make more money. 183 00:22:06,93 --> 00:22:13,88 Very different very different implications in the public policy is to take on these two are very different. 184 00:22:14,26 --> 00:22:18,69 You can think of quotas and the like over here to take on better type discrimination. 185 00:22:19,1 --> 00:22:28,42 Now with poor good type discrimination can take of education and giving people the right tools and bargaining in or 186 00:22:28,47 --> 00:22:34,35 or in information or education to take on that two very different types of discrimination in till we know. 187 00:22:35,02 --> 00:22:42,76 What is happening in markets we cannot even begin to put forward a public policy to take on those bits of 188 00:22:42,76 --> 00:22:49,56 discrimination and that's why field experiments are so important because they tell us the whys whos right back 189 00:22:49,56 --> 00:22:54,67 or most of my data would suggest be good is right. But. 190 00:22:55,65 --> 00:23:23,23 Nevertheless now we know and we can take that on with public policies. Yeah. Let me ask you have salute Lisa this this. 191 00:23:23,91 --> 00:23:27,38 This research we should kind of back ourselves up and ask. 192 00:23:29,23 --> 00:23:38,91 Let's look at the data from labor markets and compare men and women in when we do that all around the globe. 193 00:23:39,44 --> 00:23:46,02 You have men making in say between ten and forty percent more than women. 194 00:23:46,96 --> 00:23:54,3 And then you start to control for things like occupation. Human capital. 195 00:23:54,95 --> 00:23:59,99 Time out of the labor force and you still have a significant difference say now. 196 00:24:00,01 --> 00:24:07,12 It's five to fifteen percent and then we must ask ourselves what is causing that difference. 197 00:24:07,5 --> 00:24:11,7 And what can we do to get rid of that difference. Now. 198 00:24:12,37 --> 00:24:18,57 There were some researchers called early Guinea's E N L though Rusty Keeney and Marian need early 199 00:24:18,57 --> 00:24:26,43 and Lisa Vester the one who started to do lab experiments to explore what could underlie these differences 200 00:24:26,48 --> 00:24:36,84 and they were beginning to find that men were more competitive than women. So this is where I step in ask. 201 00:24:37,9 --> 00:24:44,88 And we generalize those insights into the field and explore what are the implications. 202 00:24:45,68 --> 00:24:50,7 In the field in real markets for this difference in preferences. 203 00:24:51,48 --> 00:25:01,45 OK so where I started was I said why do men and women have different preferences for being competitive. 204 00:25:03,52 --> 00:25:07,46 So I looked all around the globe and this is where the early going. 205 00:25:07,53 --> 00:25:09,63 Izzie and cannot in my two co-authors 206 00:25:09,63 --> 00:25:19,24 and we said can we find two societies that are diametrically opposed in terms of the power that the woman has in the 207 00:25:19,24 --> 00:25:22,79 household and in the society. And we came pretty close. 208 00:25:23,12 --> 00:25:29,53 We found one very patriarchal society in Tanzania called the Messiah tribe. 209 00:25:30,14 --> 00:25:36,58 And under close to the other end of the spectrum was a major lineal society called the Cassy society 210 00:25:36,58 --> 00:25:44,96 and what we did is we simply went out to those two societies and took the simple experiments from the lab 211 00:25:44,96 --> 00:25:50,58 and tried to replicate those in the field and our first result is. 212 00:25:51,52 --> 00:25:58,74 The differences across the societies were really enormous when you talk to people in the Messiah tribe in Tanzania. 213 00:26:00,52 --> 00:26:04,38 In you ask a messiah man. What is your wealth. 214 00:26:04,69 --> 00:26:10,86 What he'll tell you is I have fourteen head of cattle three donkey two sheep and four wives. 215 00:26:11,76 --> 00:26:18,47 And he says if I want another wife I have to trade seven head of cattle because that's a current price. 216 00:26:19,39 --> 00:26:27,68 While only right that women have as their husband has to visit them for fifteen minutes every morning in their tent. 217 00:26:28,62 --> 00:26:36,26 That's the rights that women have really really a terrible society for with no one near the other end of the spectrum 218 00:26:36,29 --> 00:26:37,68 are the Cassie's who. 219 00:26:39,25 --> 00:26:48,05 When you when you jump in a cab from the airport and go out to the villages in in red outside a show long. 220 00:26:48,42 --> 00:26:56,06 You see these billboards that they keep saying the same thing in the taxi cab driver after you ask the taxi cab driver 221 00:26:56,06 --> 00:27:03,63 what. What do these billboards say he says of. It's those men again they're asking for equal rights. 222 00:27:04,06 --> 00:27:11,42 So you have close to the other side of society where if you knock on the door of a Cassie a met the man will answer 223 00:27:11,42 --> 00:27:15,35 and he will take you back to the woman of the house. 224 00:27:15,99 --> 00:27:22,07 And then you will talk to the woman about the issues of the day the woman who will make market decisions 225 00:27:22,07 --> 00:27:23,92 and will make decisions for the family. 226 00:27:25,38 --> 00:27:32,83 You know it's gotten to the point where many Cassy men will say something like we're sick of playing the role of 227 00:27:32,89 --> 00:27:34,74 breeding bulls and babysitters. 228 00:27:35,06 --> 00:27:37,63 So these are these are very different societies 229 00:27:38,09 --> 00:27:46,4 and what we do is we run the simple experiments in these two societies in what we find is that the Tanzanians are a lot 230 00:27:46,4 --> 00:27:52,86 like us in the U.S. and In Western Europe the men compete a lot more than the women compete. 231 00:27:54,07 --> 00:27:59,98 Now when we go to the Cassie's what happens is that reverses the Cassy women compete. 232 00:28:00,01 --> 00:28:06,81 Eat like our man and the Cassie man compete roughly about like our women. 233 00:28:07,26 --> 00:28:11,01 So this gives you a sense it's a beginning first step. 234 00:28:11,05 --> 00:28:13,58 It's certainly not the final word 235 00:28:13,58 --> 00:28:21,45 but it's a beginning first step to get to the point of what causes these differences and preferences 236 00:28:21,45 --> 00:28:26,11 and I think this literature in our study is point to the power of socialization. 237 00:28:27,45 --> 00:28:31,06 And when we raise our little boys 238 00:28:31,06 --> 00:28:40,06 and girls what subtle words that we say to them subtle gifts that we give them have lasting impacts into the future. 239 00:28:40,41 --> 00:28:44,21 I can still remember. When I was in second or third grade. 240 00:28:44,94 --> 00:28:46,42 I was feeling ill one day 241 00:28:46,42 --> 00:28:53,84 and I wasn't performing in my physical education class in my gym class I wasn't doing as well is what I usually do. 242 00:28:53,97 --> 00:29:00,24 Do you know what the teacher yells out to me Hey John. Hey John. 243 00:29:00,26 --> 00:29:03,79 Quit playing like a sissy you're playing like a girl today. 244 00:29:04,7 --> 00:29:10,14 He had in his mind that girl should play a certain way in boys should play a certain way 245 00:29:10,14 --> 00:29:16,64 and that's exactly how we're typically socialized and I think that importantly determines our long run outcomes. 246 00:29:16,86 --> 00:29:23,65 Now our next step in this research agenda was to create a firm and hire workers 247 00:29:23,65 --> 00:29:32,2 and actually put out ads across United States to hire IT Ministry of assistance this is work with Andres labor and 248 00:29:32,2 --> 00:29:38,01 and what we explored is if we change the incentive scheme. 249 00:29:38,68 --> 00:29:47,31 From one where we tell people wages are negotiable to another one where we have the exact same ad. 250 00:29:47,79 --> 00:29:52,56 But we don't say wages are negotiable. And then we look at whether men and women. 251 00:29:52,58 --> 00:30:01,1 First of all apply in then whether they negotiate and what we find is that when we say Wade. Edges are negotiable. 252 00:30:01,96 --> 00:30:11,36 Many many women apply and they negotiate as much as men. Now when we leave that sentence out of the job description. 253 00:30:12,66 --> 00:30:19,79 What happens is women shy away from applying and they shy away from negotiating 254 00:30:20,1 --> 00:30:26,78 and in fact the men negotiate a lot more than the women when that aspect is ambiguous 255 00:30:26,87 --> 00:30:29,78 and what that tells us is that in these M. 256 00:30:29,78 --> 00:30:38,42 Big us who vegs settings women are taught to shy away from asking because they don't know if it's appropriate where men 257 00:30:38,66 --> 00:30:45,68 in our experiment was actually the low quality men who came forward in the bargain the most so men are taught to be 258 00:30:45,68 --> 00:30:52,64 aggressive as boys and go after what you deserve. So then they do it in markets and you have these inequities. 259 00:30:53,52 --> 00:30:59,38 But I think that's right. 260 00:30:59,48 --> 00:31:08,44 When you look at the way our economy is set up the the highest pain jobs are the ones that are the most competitive. 261 00:31:08,74 --> 00:31:14,99 They're the ones that you build your way up the pyramid in then when you're at the top. 262 00:31:15,02 --> 00:31:20,21 It's highly competitive because your firm is competing against another firm that is altered competitive 263 00:31:20,21 --> 00:31:27,44 and the world is a place of competition but my argument is that. If we can set up. 264 00:31:28,27 --> 00:31:36,62 The wage schemes in the rules of the game in a way in which we recognize that society is handicapped in certain types 265 00:31:36,62 --> 00:31:39,98 of people. If we set up the rules of the game at the entry level. 266 00:31:40,96 --> 00:31:46,48 This can systematically affect where these two types of people go in the long run and market. 267 00:31:51,13 --> 00:31:59,88 It's look many things are extremely competitive The question is should we set up our wages in our house. 268 00:32:00,01 --> 00:32:02,00 We pay people in a competitive way. 269 00:32:02,45 --> 00:32:10,25 Or are there ways in which we can set up wage contracts that get people to perform at their highest levels 270 00:32:10,91 --> 00:32:12,67 but they're not cutthroat wages. 271 00:32:13,08 --> 00:32:16,51 You see and and I don't think is economists 272 00:32:16,51 --> 00:32:24,21 or policy makers we have thought hard about setting up the rules of the game in a way that will give everyone a fair 273 00:32:24,21 --> 00:32:27,57 chance but will still lead to really good outcomes. 274 00:32:28,26 --> 00:32:35,01 Because right now you have a lot of lost human talent because women shy away from the set ins 275 00:32:35,01 --> 00:32:42,07 or a lot of women who are very very talented who shy away from settings that are too competitive so we're essentially 276 00:32:42,07 --> 00:32:48,22 wasting their human capital because of the manner in which our wage contracts are set up that's what I'm saying. 277 00:32:50,4 --> 00:32:51,34 I think something can be done. 278 00:32:51,49 --> 00:32:57,06 One example is my study that I just talked about where if we're very clear about the rules of the game 279 00:32:57,06 --> 00:33:01,66 and how people should negotiate they will then negotiate as hard is they should 280 00:33:01,66 --> 00:33:06,29 and they will start out with wages that are much more equal than they otherwise would be. 281 00:33:07,29 --> 00:33:21,32 Women should just negotiate say that you know some of the implications from our studies when we go overseas 282 00:33:21,32 --> 00:33:34,09 and look at behavior in major lineal societies what you have is women are much gentle or with the resources. 283 00:33:34,52 --> 00:33:36,18 We've been given here on Earth. 284 00:33:36,77 --> 00:33:46,53 For example when we look at men and women farm in a run in in Iran Chalong what you see is that 285 00:33:46,53 --> 00:33:57,24 when women have the choices about what crops to plant and how to rotate their crops they tend to be much kinder 286 00:33:57,24 --> 00:34:06,2 and gentler to the soil. Than what. The men will be so in this way you have some indications that on some dimensions. 287 00:34:07,18 --> 00:34:14,35 We would be much better off having the gentle touch of a woman. Absolutely. If. 288 00:34:15,41 --> 00:34:22,42 I think they are playing very different games I think men are playing name a much shorter run game over there in women 289 00:34:22,42 --> 00:34:31,22 are playing in the long run game that we need to continue to that say nurture this land 290 00:34:31,34 --> 00:34:39,00 and it's going to be ours for a long time in we want to live in a symbiotic way where the man might just discount the 291 00:34:39,00 --> 00:34:45,6 future a little bit more than women and they're playing a different fundamental market game in 292 00:34:45,63 --> 00:35:06,14 and in this case farming game than women are. Yes that's right that's right. That's right. 293 00:35:06,21 --> 00:35:09,39 So my work in education started about a decade ago. 294 00:35:09,61 --> 00:35:18,98 There's a local community around Chicago called Chicago Heights and they came to me with a plea. 295 00:35:19,44 --> 00:35:25,39 They had read about some of my work in the New York Times magazine on charitable giving. 296 00:35:25,59 --> 00:35:30,58 So I work a little bit on the economics of charity why people give to charitable causes 297 00:35:30,58 --> 00:35:36,74 and they wondered if I could come into their school district and help them 298 00:35:36,74 --> 00:35:43,87 and I visited the school district a few days later and what I found was. 299 00:35:45,39 --> 00:35:49,64 A school district that was in very difficult shape. 300 00:35:50,16 --> 00:35:59,9 They were they had two high schools and they had about a thousand kids entering the ninth grade each year and all. 301 00:36:00,01 --> 00:36:04,51 The About four hundred seventy of them were graduating from high school. 302 00:36:05,34 --> 00:36:10,86 So you had this community that was largely in trouble with its public education. 303 00:36:12,04 --> 00:36:20,12 So we began to use field experiments to try to learn about why that inner city school was failing. 304 00:36:20,55 --> 00:36:27,74 And in the last ten years. I have been thinking hard about using Chicago Heights is my laboratory. 305 00:36:28,77 --> 00:36:35,41 And in this sense it's a field experimental laboratory that is meant first of all to test economic theory. 306 00:36:35,75 --> 00:36:39,71 So we have different theories about what's called the Education production function. 307 00:36:40,63 --> 00:36:49,61 You know how do the inputs such as children's effort parents Safford in teacher effort map into outcomes that we care 308 00:36:49,61 --> 00:37:01,38 about outcomes like finishing high school outcomes like going to college outcomes like it in a high paying job outcomes 309 00:37:01,38 --> 00:37:06,47 like. Being a better citizen. In our global community. 310 00:37:07,21 --> 00:37:13,9 So we started thinking hard about how those inputs affected the outputs that we cared about 311 00:37:14,7 --> 00:37:17,46 and then also how can we change those inputs. 312 00:37:18,09 --> 00:37:22,74 How can we fundamentally change the effort levels of parents 313 00:37:22,9 --> 00:37:33,61 or how can we fundamentally change the effort levels of children or or teachers or administrators. Absolutely. 314 00:37:33,68 --> 00:37:39,00 So this is markets now again. Now when I started this research. 315 00:37:39,1 --> 00:37:45,78 I thought hard about what do we know in public education because in the US We've been at public education for over one 316 00:37:45,78 --> 00:37:52,2 hundred years you should say we should know a lot but I think public education got caught in this rut. 317 00:37:52,79 --> 00:37:59,63 Whereby they more or less took this Mark Twain quote is once you have. 318 00:38:00,34 --> 00:38:06,17 Ignorance and confidence then success is insured so I think people were ignorant 319 00:38:06,17 --> 00:38:08,65 and confident that they knew what was happening. 320 00:38:09,02 --> 00:38:14,17 And then for years here in the States especially our public education system was broken 321 00:38:15,22 --> 00:38:23,97 and I think it's fundamentally because we use our classrooms to simply teach our kids. 322 00:38:24,42 --> 00:38:29,57 We don't use our classrooms to teach our kids and teach ourselves what works and why. 323 00:38:30,14 --> 00:38:36,97 And I think we need to change that mentality because this is life or death. Much like medicines. 324 00:38:37,52 --> 00:38:46,53 You know in the medical community we figure out which drugs work by testing them by using science in testing whether a 325 00:38:46,53 --> 00:38:53,24 heart medication works better than another heart medication better than the control group which receives a sugar pill. 326 00:38:53,86 --> 00:38:59,53 I fundamentally don't understand why we don't take that mentality to the classroom 327 00:38:59,53 --> 00:39:09,08 and all around the world we should be using our classrooms as laboratories laboratories of innovation to figure out 328 00:39:09,08 --> 00:39:16,24 what works. Why does it work and how can we make the world a better place through education because fundamentally. 329 00:39:16,97 --> 00:39:22,00 You know it is I said before we don't choose parents. 330 00:39:22,18 --> 00:39:29,53 We don't choose a community in which we're born into and if we don't give these kids in equal chance to succeed. 331 00:39:30,21 --> 00:39:36,79 We are leaving so much human potential on the table. We've talked a lot about equity here. 332 00:39:37,22 --> 00:39:43,48 Equity is giving everyone a fair chance in life and that's important but you can also talk about efficiency. 333 00:39:43,58 --> 00:39:46,91 I don't think we've wasted. 334 00:39:47,73 --> 00:39:51,07 This much human potential since the Dark Ages 335 00:39:51,07 --> 00:39:58,92 when you look at our technology that we have in place around the world in you look at all of the human potential that 336 00:39:58,92 --> 00:40:03,89 we're wasting. Because kids are not receiving proper education. That's a crime. 337 00:40:04,34 --> 00:40:05,18 That's a real crime 338 00:40:05,18 --> 00:40:11,56 and it's because we have not been serious about using field experiments in the classroom to learn about what works 339 00:40:11,56 --> 00:40:14,97 and why. So what kind of the. 340 00:40:16,29 --> 00:40:22,64 Yes So in Chicago Heights in the last decade we've been running in a number of field experiments 341 00:40:22,64 --> 00:40:27,00 and let me tell you about one with teachers so. For decades. 342 00:40:27,48 --> 00:40:33,7 People have argued about whether teachers should be paid for their performance so. 343 00:40:35,02 --> 00:40:41,21 Some people say if a teacher does a really good job with her students. 344 00:40:41,26 --> 00:40:48,59 Then she should get paid a bonus but there are people say. No no no we don't want to add money. 345 00:40:49,11 --> 00:40:57,45 To this equation because great teachers. Don't value money they value teaching per se. 346 00:40:57,5 --> 00:41:01,07 So some people have gone out 347 00:41:01,07 --> 00:41:08,54 and they've explored a typical way in which to pay a teacher a bonus what they've said is in September. 348 00:41:08,82 --> 00:41:11,91 They tell teachers that if you do a good job. 349 00:41:12,71 --> 00:41:18,75 You will be paid a bonus next June at the end of the school year and by and large they haven't really found. 350 00:41:19,54 --> 00:41:23,15 Very promising results and they have been small 351 00:41:23,15 --> 00:41:29,17 and in consequential So that's a place where we started we said Can we start there 352 00:41:29,17 --> 00:41:34,86 and use behavioral economics to make the incentive better. 353 00:41:35,1 --> 00:41:43,97 So our idea was what if we took a group of teachers in in September we actually gave them the bonus upfront 354 00:41:43,97 --> 00:41:45,38 and told them. 355 00:41:46,07 --> 00:41:54,38 We will take the bonus away from you in less your students achieve if your students achieve you can keep the bonus if 356 00:41:54,38 --> 00:41:59,61 they don't achieve. We will take it away from you and what happens is that incentive scheme. 357 00:42:00,35 --> 00:42:11,45 Works in a brilliant way is an example if your child was placed in the classroom of a teacher who received that claw 358 00:42:11,45 --> 00:42:16,53 back incentive scheme. They their test scores. 359 00:42:16,65 --> 00:42:24,51 Actually it Vance by about what's called Point two standard deviations above the control group which turned out to be 360 00:42:24,54 --> 00:42:27,38 several months of education. 361 00:42:27,41 --> 00:42:36,52 So you're basically getting several months of extra education because the teacher is in this claw back incentive scheme. 362 00:42:36,59 --> 00:42:40,31 Now you might ask yourself why does that club back incentive scheme work. 363 00:42:41,45 --> 00:42:47,21 We can go back to the days of Dan economy and Amos to versity they wrote about something called loss aversion 364 00:42:47,77 --> 00:42:55,9 and what that means is that people value losses much more than they value comparable gains. 365 00:42:56,66 --> 00:43:03,33 So a dollar loss is felt much more acutely than a dollar again. So we're leveraging that insight if you use it. 366 00:43:03,33 --> 00:43:10,84 Introspection and say. I'm I like that many of us are like that we really do not like losses. 367 00:43:12,43 --> 00:43:22,11 So can we leverage that is a public policy tool we found we can we found that teachers will work a lot harder if you 368 00:43:22,11 --> 00:43:25,9 leverage loss aversion. Now we've done this. Also in other venues too. 369 00:43:26,25 --> 00:43:34,58 We've gone to China and we've looked at Chinese manufacturing workers in we've used the exact same incentive scheme. 370 00:43:34,85 --> 00:43:41,39 We've said at the beginning of the week. Here's a bonus. And if you work hard on Friday. 371 00:43:41,41 --> 00:43:49,57 You can keep that bonus in we compare that to the idea that work hard all week will give you a bonus on Friday loss 372 00:43:49,57 --> 00:43:51,25 aversion one works a lot better 373 00:43:51,25 --> 00:43:59,87 and in fact we did the one in China over a six month period over all six months the manufacturing workers worked hard. 374 00:44:00,07 --> 00:44:00,32 Or 375 00:44:00,46 --> 00:44:06,79 when they were getting the bonus Up front this is a useful way to leverage behavioral economics to make the world a better 376 00:44:06,79 --> 00:44:11,98 place. Yes We actually did the same with students as well. 377 00:44:12,34 --> 00:44:19,88 So you might ask yourself how can I make my child work hard for experiments with students is the morning of the test 378 00:44:19,88 --> 00:44:23,41 when they enter the room where they take the test. We announce to them. 379 00:44:23,9 --> 00:44:32,4 Here's twenty dollars if you perform better than you did on your last test you can keep the twenty dollars if you don't 380 00:44:32,4 --> 00:44:33,24 perform better. 381 00:44:33,27 --> 00:44:35,13 We will take the twenty dollars away 382 00:44:35,73 --> 00:44:42,85 and what happens is those students significantly increase their test scores in an amount that you cannot even imagine 383 00:44:43,07 --> 00:44:47,54 compared to people who we tell them we will give you twenty dollars if you perform well. 384 00:44:48,21 --> 00:44:52,68 Those people perform much worse than people who you give the twenty dollars to. 385 00:44:54,76 --> 00:44:58,67 We did we then saw the teacher results and we said. 386 00:44:58,72 --> 00:45:02,45 Will that work with students we did a little bit differently with students. 387 00:45:03,31 --> 00:45:09,09 We had them and to the test room and then after they entered the test room. 388 00:45:09,12 --> 00:45:12,73 We announced our incentives so they did not have time to prepare. 389 00:45:13,13 --> 00:45:20,49 We were just looking at the morning of the test can we give them incentives in leverage loss aversion 390 00:45:20,56 --> 00:45:23,53 and get them to try harder and perform better on the test. 391 00:45:23,7 --> 00:45:27,63 So what we did is we gave a big group of students twenty dollars 392 00:45:27,66 --> 00:45:34,77 and said If you perform better than you did on the last test you can keep the twenty dollars in we compared their test 393 00:45:34,77 --> 00:45:40,78 scores to people who we said if you improve on your test score from last time you will receive twenty dollars. 394 00:45:41,78 --> 00:45:42,58 What happens is 395 00:45:42,58 --> 00:45:50,14 when you give students twenty dollars they perform much much better than if you tell them you'll receive twenty dollars 396 00:45:50,14 --> 00:45:50,87 in the future. 397 00:45:51,33 --> 00:45:56,41 That's of I think it's a very important insight about what our task measure when you 398 00:45:56,57 --> 00:45:59,99 when you look at these standardized tests they're not only measuring in name. 399 00:46:00,01 --> 00:46:08,63 Debility they're also measuring in effort. Oh or how hard students try on these tests. Why. 400 00:46:12,71 --> 00:46:21,21 Yeah I think the underlying reason why loss aversion works is because people develop a deep pain 401 00:46:21,84 --> 00:46:25,42 or a distaste for something that they have to give up. 402 00:46:25,45 --> 00:46:30,25 So my own research that started back in two thousand and three in the sports card market. 403 00:46:30,48 --> 00:46:35,23 I tried to explore why do people not like to trade. 404 00:46:35,61 --> 00:46:43,38 Why do people not like to give something up in what I found back then was it looked like it was a pain of giving 405 00:46:43,38 --> 00:46:49,29 something up. That's why people did not like to give up or trade what they owned. 406 00:46:49,97 --> 00:46:56,17 So now recently what we've done is we've placed people in F. M.R.I. 407 00:46:56,17 --> 00:46:58,92 Tubes and we've looked at their brain activity 408 00:46:58,92 --> 00:47:06,44 and we've explored really inexperienced people in what their brain activity looks like compared to people who have a 409 00:47:06,44 --> 00:47:10,04 lot of experience in trading in people who trade a lot. 410 00:47:10,09 --> 00:47:17,86 They tend to code trades in a different part of the brain than people who are inexperienced traders in particular the 411 00:47:17,86 --> 00:47:32,14 people who are experienced Do not go to the last part of the brain in people who are inexperienced go to the last part. 412 00:47:24,75 --> 00:47:32,14 when they have to give something up. So it's sort of uncovers through the market and through F. M.R.I. 413 00:47:33,07 --> 00:47:46,01 Or imaging of the brain. It tells you why people when they gain experience why they can trademark. It. Absolutely. 414 00:47:46,07 --> 00:47:51,92 I think the major reason why markets work is because people trade. 415 00:47:52,05 --> 00:47:59,91 You have people who trade by definition the seller gains in the buyer gains through a trade. 416 00:48:00,74 --> 00:48:10,88 So if we can contemplate why there's a lack of trading and markets we can figure out why doesn't the market. 417 00:48:10,89 --> 00:48:16,46 Work the way it should we can then design incentives to get people to trade more in markets. 418 00:48:16,6 --> 00:48:20,3 What we find is that there is not enough trade in in markets 419 00:48:20,3 --> 00:48:23,63 or the market gains are smaller than they should be because of loss aversion. 420 00:48:23,98 --> 00:48:28,8 So what can we do to make the market function more appropriately. 421 00:48:28,96 --> 00:48:34,13 My argument is you have to give them a sense of overcoming loss aversion 422 00:48:34,13 --> 00:48:40,14 and that's through market experience so you have to give them trades and give them. Let's say free trade. 423 00:48:40,16 --> 00:48:45,41 So to speak and once people trade in trade in trade. They don't have loss of us preferences anymore. 424 00:48:45,71 --> 00:48:49,05 That's how we can use it to make markets better. Yes. 425 00:48:50,49 --> 00:48:55,15 I think if we somehow change the rules to make people want to trade more 426 00:48:55,15 --> 00:49:00,00 when they're first enter a market the market can be more efficient in the end that's right.