The Why Axis: Hidden Motives and the Undiscovered Economics of Everyday Life (22 page)

What happened? The first guy wanted to charge $790 because he saw that Uri was clueless. The last salesman understood that Uri knew what he was doing, so he gave him a much lower price. The bad treatment from the first salesman had nothing to do with his disliking Uri: he simply categorized Uri as an uninformed customer and tried to get the most money out of him.

The moral of this story is simple: If you want to reduce economic discrimination when shopping, make sure that you are armed with enough information about going rates and product information to counter it. When you do, and you signal this to the other side, you dramatically change the salesperson’s incentives to discriminate.

If we could wave a magic wand over policy makers so that they would put our findings to work, they would focus less on animus,
and more on policies that help those subjected to economic discrimination. To do this, they would need to run more field experiments to tease out the various forms of economic discrimination in their markets of interest. Based on this research, they could then do a better job of ensuring that workers have equal access to jobs. They could work to see that consumers have equal access to products. When buyers try to get a home loan, they should be able to signal their credit-worthiness on a level playing field. And law-makers could ensure that as more commerce goes online, prices are fair and transparent for everyone.

Our friend at the University of Chicago, Richard Thaler, had a good idea how to implement this. In his column in the
New York Times
called “Show Us the Data. (It’s Ours, After All.),” he wrote, “Companies are accumulating vast amounts of information about your likes and dislikes. But they are doing this not only because you’re interesting. The more they know, the more money they can make.”
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This may still be fine—why shouldn’t they collect information and make money out of it? What isn’t fine is for companies to abuse consumers by using this information. Thaler’s solution is for Congress to pass a law requiring the companies to give you access to these data. Once you get them, you can see what’s working against you, and you can find a product or service that better fits your needs. If the companies have to share your data with you, they will have a much harder time using it against you. Thaler argues that these companies are making our choices so complicated that we cannot be educated consumers without their data.

Thaler’s solution is a good start. But if you really want to stop such discrimination, you need to not only have access to your data, but also understand how these companies are making use of them.

Ultimately, a deeper understanding of the workings of discrimination cannot help but make the world a better place. As Gary Becker noted in his 1992 Nobel banquet speech, “Economics surely does not provide a romantic vision of life. But the widespread poverty, misery, and crises in many parts of the world, much of it unnecessary, are strong reminders that understanding economic and social laws can make an enormous contribution to the welfare of people.” We hope that you now have a better understanding of discrimination, and how incentives are critically linked to prejudicial behavior.

In the next chapter, we’ll explain other ways in which public policy efforts to improve society can be more intelligently applied.

          
CHAPTER EIGHT

       
How Can We Save Ourselves from Ourselves?

          
Using Field Experiments to Inform Life and Death Situations

It’s a late-September afternoon in 2009, and the students of Fenger High School on Chicago’s South Side are crossing a vacant concrete lot on the way home from school. Some live in the Altgeld Gardens housing project. Others live in a part of Chicago’s rough Roseland neighborhood (a.k.a. “The Ville.”) Some of the students from these two different areas have developed fierce antipathies toward each other, though the groups are more like cliques than gangs.

As the teenagers cross the lot, a fight breaks out. Kids from the two groups, as well as other student passersby, get caught up in the scrum. Someone pulls out a cell phone and starts recording a video of fifteen to twenty kids going at each other. There are no clear sides, and the altercation seems to be no different than the hormone-induced brawls that occur at high schools all over America. Around a minute into the video, someone discovers a couple of
two-by-fours lying in the empty lot. Eugene Riley, sporting a red motorcycle jacket, takes one of the big pieces of wood from a pal and swings it like a baseball bat into the back of sixteen-year-old honor student Derrion Albert’s head.

“Dannnggg!” someone exclaims. Screaming and shouting, the kids start running—some toward the shouting, others away from it. Derrion tries to get to his feet but he is punched and kicked as someone shouts, “Oh my god, you guys!” Derrion attempts to protect his head.

The camera pans away from the empty lot and back to the street. A shirtless man in his early thirties faces down a much younger adversary who threatens to hit him with a two-by-four. The older man has arms like tree trunks. The kid does a quick calculation and decides to just throw the wood at the man and run for it. The camera pans back toward the lot. Derrion is still on the ground, defenseless, staring blankly at the camera. His attackers renew their beatings for ten more seconds and then run away. The cameraman and others run up to Derrion. Someone says, “Get up, son.” His friends pick him up and bring him into a community center adjacent to the empty lot. His friends scream his name, desperate for him to respond. Two minutes into the video, you finally hear a siren.
¹
Derrion died hours later.

The brutal death of Derrion, replayed thousands of times on YouTube, was one more awful example of the violence that continues to threaten inner-city youth, along with high rates of drug use, unemployment, teenage pregnancy, school dropout, and obesity. For decades now, policy makers have tried nearly everything to address these problems, but even when crime rates drop, it’s never been clear which policies help and which ones are just a waste of money.

Desperate to try new things, policy makers such as then-Chicago Mayor Richard Daley and Ron Huberman turned to us. “Why don’t
we know what works?” Ron asked us. Our answer was simple: we have not experimented enough in this area to understand what works and why.

There is, however, an antecedent for such large-scale social experiments that Ron had in mind for us to do. Many took place in the 1960s, especially from 1963 to 1968 when President Lyndon Baines Johnson was president. During the LBJ era, social scientists sought answers to questions like “What is the ideal way to provide health insurance?”
²
The studies that resulted were incredibly influential, but when federal support for them dried up, researchers were much more likely to turn to their computers and their labs, leaving big social experiments behind. Only recently have academics again teamed up
en force
with policy makers to test the impact of large-scale policy interventions on behavior.

It didn’t take long for the three-minute video of Derrion’s murder to reach the public. It aired on news stations in Chicago; the video was embedded in just about every online news story related to the killing. Voyeurism? Sure. But the video helped identify the perpetrators, and prosecutors won convictions in five cases. The defendants were slapped with sentences ranging from seven to thirty years in prison. Even with good behavior, Eugene Riley is likely to spend the majority of his life behind bars. Five convictions are also a major cost to society. In Illinois, the per-person cost of incarceration hovers around $40,000 a year, and it is estimated that the cost of a homicide to society is well over a million dollars in medical costs, investigations, legal fees, and incarcerations.

How can we spend our taxpayer dollars to most effectively lower teen gun violence?

The Data Driller

Ron Huberman has served as one of the most brilliant public servants in Chicago (or perhaps anywhere). A handsome, deep-voiced, openly gay ex-cop, Huberman was born in Tel Aviv in 1971, the second son of two Holocaust survivors who went to Israel as tiny children after most of their own families had perished. His parents moved him and his older brother to Oak Ridge, Tennessee, when Huberman was five years old. His mother, a onetime concert pianist and linguist, went to work for the local high school, where she taught foreign languages. His father, a brilliant and prolific cell biologist, accepted a job working for the government doing cancer research. “My dad had tons of offers to work for pharmaceutical companies,” Huberman recalls, “but he chose to do medical research for the government, earning less than he would have otherwise because he felt that he could make a difference for people. I think his decision led me to have my own sense of public service and a desire to give back.”

In elementary and middle school, Huberman was not a very serious student, but he did manage to get good grades in high school and entered the University of Wisconsin, where he studied English and psychology. After he graduated, he went to the police academy, became a cop in 1995, and went to work on Chicago’s graveyard shift. Being on the police force, he recalls, gave him a front-row seat to observe what works and what doesn’t in a big, violence-prone city.

Murders in Chicago had been steadily rising over the years; the 1990s proved to be one of the worst decades for homicides in the city. In 1992, there were 943 murders in a city of fewer than three million people, resulting in a murder rate of 34 per 100,000. In 1999, 6,000 people in the city of Chicago got shot. Of those, 1,000 died. Answering calls about shootings in public housing projects, Huberman
says, “taught me about the degree to which people simply become resigned to horror. There wasn’t a night when someone wasn’t shot or killed. The community’s sense of moral outrage disappeared beneath a kind of fatigue as the shootings went on and on.”