
Capitalisn’t: Why This Nobel Economist Thinks Bitcoin Is Going to Zero
Chicago Booth’s Eugene F. Fama explains his skepticism about the world’s biggest cryptocurrency.
Capitalisn’t: Why This Nobel Economist Thinks Bitcoin Is Going to Zero
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Matt Chase
Fintech may be generating unintended consequences for consumers and the industry.
Banking Is Getting Easier, but Is It Riskier?Hal Weitzman: The US murder rate is around five per 100,000 people, lower than a recent COVID era spike, but nonetheless, much higher than most other developed countries. In the UK, France and Germany, it's about one per 100,000. In Canada, it's about two. In Japan, it's about 0.7. Gun control legislation has not made a big difference, nor has having one of the world's highest prison population rates. Many Americans have concluded that either they need a gun to protect themselves or that the problem is just too big to address. But is there a low-cost way to bring down the US murder rate?
Welcome to the Chicago Booth Review Podcast, where we bring you groundbreaking academic research in a clear and straightforward way. I'm Hal Weitzman, and today we're bringing you the second episode in which I'm talking with Jens Ludwig, a professor at the Harris School of Public Policy, director of the University of Chicago's Crime Lab and author of the new book, Unforgiving Places: the Unexpected Origins of American Gun Violence. Ludwig thinks that small and cheap interventions can make a big difference in how we tackle homicides. Jens Ludwig, welcome back to the Chicago Booth Review Podcast.
Jens Ludwig: Thanks so much for having me on.
Hal Weitzman: We are delighted to have you back to talk about your book, Unforgiving Places: The Unexpected Origins of American Gun Violence, which I heartily recommend. And I mean, last time we talked about misconceptions that people have about gun violence, that there's a cost-benefit analysis. People really think about it, that it's premeditated, that it's all mass shootings. And this time I want to talk to you about what we can actually do about it. So let's go back to those incorrect dominant narratives, the bad hombres, as we call it, that some people are just bad and they'll always do bad things. And then the other idea that people do bad things, because they're in poor social conditions and they have nothing to lose. What policies have flowed from those incorrect assumptions?
Jens Ludwig: So those two incorrect assumptions have led us to focus either on making the criminal justice system much harsher. Turns out the United States is very good at doing that. So for many years we had the highest incarceration rate in the world by a lot and increasing dramatically since the 1970s and the-
Hal Weitzman: Do we not now because of El Salvador?
Jens Ludwig: I think El Salvador has challenged our primacy in this area. Another sign of American decline, I guess. And the alternative has been, you hear people saying things like, "We just need to end poverty and racial segregation, and social isolation in our cities."
Stepping back from a 30,000-foot view, what you can see is toggling back and forth between those two approaches has been sort of a path to nowhere. The murder rate in America today is almost exactly the same as it was in 1900. Unlike most other leading causes of death, which have plummeted over time, we have not made long-term progress on the murder problem. I think that's because we've just been toggling back and forth between the wrong sorts of policies. The rise in the prison population has helped to some degree in reducing crime and violence in America, but at huge cost. At huge cost. And on the other side, you can see mayors of American cities consistently get elected on the promise to end poverty and segregation in their city, and then quickly realize how in the world do we do that?
Hal Weitzman: You mean it's just too big?
Jens Ludwig: It's just too, these problems are deeply, deeply entrenched and really, really hard to change. And they're so hard to change that when people from that perspective say, "Look, we're never going to solve the gun violence problem unless we end poverty and racial segregation, social isolation."
Lots of people hear that and think, "It's too big to fix. Let's just give up and move on to the next problem then." So those are the policies that we've been focused on and they just haven't had anything like the results-
Hal Weitzman: But it also sounds like you're saying they're not necessarily wrong, they're just small, incremental.
Jens Ludwig: I mean, I would put the root cause argument in some ways into the same category as gun control, where it's like, if I did have a button to push that would end poverty and racial segregation in America, I would push it. You would push it, right? But nobody has that button. The mayor of Chicago doesn't have the button, the mayor of New York, there's no button like that to fix our cities. And so, then from the perspective of pragmatism, it's like if we can't do that, what could we actually do?
Hal Weitzman: And last time we talked in the last episode about gun control and I asked you why availability of guns, which seems to any non-American like me, see that seems like obviously a big deal. And you said, "Yes, it is a big deal, but we haven't really made any progress on it."
So you're not going to bang your head against a wall trying to do something that hasn't been done before. But to hear you talk about it sounds like those tackling availability and tackling policy would make a difference. I guess I could throw it back to you and say, if you say to people, "Well, it's too big," just to say, "Well, once we solve all our social problems, then we'll have low gun crime." I get that. But if we do nothing about our social problems and we do nothing about availability, it's not going to get any better.
Jens Ludwig: Yeah, well, it turns out that there are, as we can talk about, so maybe I'll just say two things. One is that there, I think that the book is fundamentally an optimistic book, and it does point out that this sort of new behavioral economics perspective on the problem of gun violence does highlight a number of things that cities could do, even resource-constrained cities can do to very pragmatically make the problem better. We have lots of very good data to suggest that. But the other thing that I just wanted to add is very understandably there has been a lot of attention about the causal arrow from root causes to gun violence. I think there hasn't been nearly enough attention on the causal arrow from gun violence to root causes. If you are trying to do economic development in a south side Chicago neighborhood, gun violence is a massive headwind to that effort. I don't know when you got to Chicago yourself, but I remember when the city of Chicago announced that they were going to give millions of dollars to subsidize Whole Foods to go in Englewood.
Hal Weitzman: With Englewood being a very poor neighborhood in South Side, yeah.
Jens Ludwig: Exactly. Englewood, one of the poorest neighborhoods here on the south side of Chicago and also one of the most violent neighborhoods when you look at the gun violence data, is super well-intentioned policy. And then, recently Whole Foods announced that they were closing that store. And why? Because people from around the south side were afraid to drive into Englewood to go grocery shopping. Now imagine that you had solved the gun violence problem in Englewood. All of a sudden the economic prospects for that Whole Foods looks fundamentally different. And so, I think doing pragmatic things that you could do in the short term to improve the gun violence situation can create a huge tailwind for community development, economic development, and a bunch of these-
Hal Weitzman: That's fascinating-
Jens Ludwig: ... really distressing neighborhoods.
Hal Weitzman: ... so you're saying not only could we address the gun crisis, but we could also address some of the economic-
Jens Ludwig: The root cause problem. Exactly.
Hal Weitzman: That's fascinating. Okay. Just before we get on to talking about the details of what you actually recommend, I agree it is a very positive book and you have have a lot of bit interesting perspective about the different kinds of solutions you would have to break out of this cycle of the arguments that we've been having for the past a hundred years. But I do want to talk, you talked in the last episode about Jane Jacobs and this idea of informal social control, which is kind of the eyes on the street and the interrupters, other good projects, and you talk about things like better street lighting, just basic stuff, dealing with vacant lots and abandoned houses. I've even heard, this wasn't in your book, I think, but I've heard people talk about trees. You just get fewer trees in poorer neighborhoods, so it's hotter, just less pleasant environment. But these are about poor social conditions as well, aren't they? How is that different from what people have been saying? These sound like very practical ways of dealing with what are basically poor social condition.
Jens Ludwig: Yeah. Maybe here's another way to, well maybe there's a two-part answer to this, right? One is trying to really understanding the problem that you're trying to solve. Is the problem that people are committing violence for reasons of economic desperation, or is the problem that people are engaging in violence and there's no one around to interrupt and de-escalate it? The latter is the problem that we're trying to solve, not the former.
And the presence or absence of someone to step in and intervene is correlated with poverty, but it's not the same thing as poverty. And the reason that that's important is like, you're right that these are all social conditions in a way. One way to think about it is, the book is arguing that the list of root causes that are relevant for gun violence is much longer than we normally think, and many of those are much easier to change than poverty and racial segregation, and social isolation. And so, in some ways, what the book is arguing for is like let's change the root causes that matter that are easiest to change. Then as I said, that helps us also solve the root causes that are hardest to change.
Hal Weitzman: If you're enjoying this podcast, there's another University of Chicago Podcast Network show that you should check out. It's called Nine Questions. Join professor Eric Oliver as he poses the nine most essential questions for knowing yourself to some of humanity's wisest and most interesting people. Nine Questions with Eric Oliver, part of the University of Chicago Podcast Network. So, Jens, I do want to get onto your solutions now. And there's a lot of, as you say, it's optimistic, because a lot of good stuff has been tried and shown to work. And at Chicago Booth Review, we actually covered some of this stuff, the work of Anna Shah and others about interventions that will help people to tap into that system two type thinking. Tell us about those interventions, what's happened, what's been done, and what's been shown to be successful.
Jens Ludwig: So maybe at a high level, for starters, I think this is a problem that's been so persistent and so terrible in America for so long. It's very easy to conclude that there's just nothing that can be done. And so, I think it's really encouraging that we're accumulating a bunch of data and evidence to suggest that it might be much more preventable than we've thought. And I think the other thing that's really encouraging is in an environment in which American cities are going to be incredibly budget constrained for the next several years at least, there are a bunch of things that we can do that don't take much money. If I go back to I think what I described in the previous episode as somebody in the juvenile detention center described to me like he's saying to the kids, "If I could give you back 10 minutes of your lives, none of you would be here."
So just to start with the Jane Jacobs eyes on the street idea, if you think for a second about conventional wisdom, right? It's bad hombres or bad economic conditions, eyes on the street makes no sense through that perspective. It's like it's not dealing with bad hombres, it's not ending poverty. What does eyes on the street do? Eyes on the street makes sense from the perspective of these 10 minute window, this behavioral economics perspective, that even the most insanely serious crime that you could imagine is actually due to motivation that is surprisingly fleeting. It's a very radical idea in many ways, but that idea then helps you see why having someone around is willing to step in and deescalate conflict can be so transformative. So there are a bunch of things that cities can do that can change the presence or absence of eyes on the street that don't take much money.
And there's a big discussion in America now around abundance, making it easier to do economic development in American cities. Like anything that we could do to prioritize these zoning and other sorts of changes in the most underserved neighborhoods would have a huge, not just benefits on the economic side, but also big benefits. Surprisingly big benefits on the public safety side, there's a great study in from LA that shows that when you open or close a retail establishment in a neighborhood, that affects foot traffic and can change rates of violent crime by 10 or 20%. Just from something as seemingly, it's a huge change from doing something that seems very divorced on its face from the problem of gun violence. Another example is Chicago, like most American cities, we've been losing people. And so, we have thousands and thousands of vacant lots. You walk around the southwest sides of Chicago and you see unkempt grass, beer cans, trash, old couches, little heroin baggies, used condoms, like you name it.
These are not inviting places to spend time. There was a great randomized control trial just like we have in medicine out of the University of Pennsylvania, where they convinced the city of Philadelphia to let them randomly pick some vacant lots to turn into pocket parks and others would stay as they are. And then they looked at what happened. And you can see that when you turn one of these abandoned lots that's not inviting into a pocket park that is inviting, more people spend time in public outside their homes and shooting rates in low income neighborhoods can go down by 10, 20, 30%. So you can see, just stores and parks alone-
Hal Weitzman: It gets people out onto the streets.
Jens Ludwig: Yeah, 10, 20, 30% changes. These are not small changes. And then you stack these things one on top of each, and this doesn't take a lot of money, make it easier to zone in stores in these neighborhoods, clean up vacant lots. That's very practical stuff. Doesn't take a lot of money.
Hal Weitzman: It's counter narrative, because in Chicago at least a lot of the shootings seem to happen in playgrounds, areas where kids are gathering. You're saying actually the data is that the more you create those public spaces, the fewer shootings you get.
Jens Ludwig: One of the things that I've learned from talking to people in LAPD, where they've spent a lot of time thinking about this too, is the huge value in not just creating the public spaces, but doing things to entice people out. Forrest Claypool's got a wonderful book called The Daily Show about when he was, he talks about when he was chief of staff and parks director, and whatever. And he was trying to clean up, there was a super violent park in the city when he was parks director, and he asked the police commander, "How many cops do you need to end crime in the park or reduce crime in the park?"
And the police commander said, "None. All we have to do is for you to get more neighborhood residents into the park."
And so, it suggests something that you wouldn't think of as being relevant for gun violence is what is the parks district doing to generate, to make the park as inviting as possible for neighbors? Turns out to be super important. And this is not like liberal wishful thinking or something. This is the police commander in the Chicago Police Department saying this to the parks commissioner.
Hal Weitzman: Tell us about some of the interventions though that the interrupted type interventions.
Jens Ludwig: Yeah. And so, one thing that we can do, urban planning and built environment turns out to be so much more important than you would've appreciated. The other thing that we can do, and one way to think about that is we're making these 10 minute windows in unforgiving neighborhoods, more forgiving by increasing the chance that someone-
Hal Weitzman: That's the 10 minutes you say, between someone committing a gun crime or not.
Jens Ludwig: Yeah, and we're increasing the chances that someone is around to diffuse that critical 10 minute window. The other thing that we can do is we've learned a lot through behavioral economics and psychology about how to change what people bring with them into those 10 minute windows. And so, one way to think about this is when you talk to poker players. Poker players talk about, they're normally trying to think very rationally and strategically when they're at the poker table. And Hal's got to tell and how many cards have been dealt, and what's going on?
Hal Weitzman: Don't use me as an example. I'm terrible at poker.
Jens Ludwig: I'm the worst person in the world at poker. I would stand by that. But poker players talk about when they're playing poker and they get frustrated, they no longer start to think deliberately and rationally, and they start to play emotionally. The term for that in poker is going on tilt, named after what happens when you smack a pinball machine. It gives you an on tilt error message. And poker players will say one of the ways in which they quickly get better at poker, is they learn to recognize when they're going on tilt and how to get themselves out of it.
Because in poker, you have lots of opportunities for learning through trial and error. If you're a 16-year-old kid growing up in a very violent neighborhood on the south side of Chicago, trial and error is a super costly way to figure that out. And so, we've been working with a bunch of nonprofits and government agencies to think about what sorts of social programs could help the kids who really need to learn this, kids growing up in very violent neighborhoods, how to recognize when they're going to go on tilt and get themselves off it in these 10 minute windows to reduce the risk that something bad happens.
And so, a few years ago when we were partnering with the juvenile detention center here in Chicago, and the kids would go to school in the morning and then in the afternoon they would sit in the common area watching TV for six hours, while the guard stood against the wall watching the kids watching TV. And so, we worked with the administrator there. The administrator was saying, "I don't have any money to do anything, but surely we can do something more developmentally productive than six hours of TV."
And so, we worked with him to train the guards to basically deliver one of these programs that helps kids be less likely to go on tilt in these 10 minute windows in the afternoon instead of having the kids watch TV, basically free. Our data shows, we'd structure that a randomized trial in medicine as well. And the data shows that reduces recidivism by something like 20%.
Hal Weitzman: And what were they actually doing?
Jens Ludwig: This is exercises like, Hal, describe to me the last time, the last fight that you got into. And you're like, "Well, I was walking down the street and this guy gave me a really crummy look, and it just made me feel super insulted."
And then what they would do, and they would say, "Hal, imagine that a camera was observing the interaction. Describe what the camera would see."
And so, you would say, "Well, the guy was walking down the street and he gave me a super crummy look, like I wasn't even worth whatever."
And then they would stop and say, "What did the camera literally see? The camera literally saw the guy making a face. How do you know that has anything to do with you? You don't know what in the world is going on with this guy. You are layering on, this is your fast thinking, layering on a bunch of interpretation onto an intrinsically ambiguous situation. And sometimes you're right, that look really was directed at you, but sometimes you're not right. That look was not directed at you. And that latter case leads to a lot of avoidable conflict, which leads to a lot of avoidable deaths in a world in which we've got 400 million guns for 330 million people." Just to illustrate the kind of thing that they do.
Hal Weitzman: So try and take them out of the situation, and be a little bit more objective than be a participant.
Jens Ludwig: Yeah. And another way to sort of say it is in a moment where your fast thinking is layering on a ton of interpretation below the level of consciousness that you don't even recognize. It's like, before you do something that you might regret, like engage in violence, just take that extra half second to use your slow thinking self to kind of fact check what your fast thinking self has construed about the situation.
Hal Weitzman: What's fascinating about that is it's to go back to Gary Becker, who we talked about in the last episode, is it's not a Gary Becker analysis where you get them to sit down and say, "Is it worth it to take this person out?" You're just asking them to take themselves out the situation.
Jens Ludwig: Yeah, it's much more of a Richard Thaler way of looking at the world, right?
Hal Weitzman: Our Chicago Booth colleague and Nobel laureate, of course. Yeah, absolutely.
Jens Ludwig: For behavioral economics, yes.
Hal Weitzman: Yeah, absolutely. Okay, so I'm interested how this works. I guess my question is, if you go through one of these trainings, does it actually reduce the demand for guns? Are people walking around with fewer guns or does it just change their behavior, so they still have a gun but they're just not going to use it as freely?
Jens Ludwig: The way that I think about what these programs are doing in some sense is making people a little bit more skeptical of their own minds, is one sort of high level way to think about it. And in the data, the question that you're asking is, it's an empirical question. What do the data tell us about how it's changing people? It's not like a... And the data suggests that when the most successful implementations of these programs that we've looked at ourselves can reduce rates of violent crime arrests for people by up to 50%, that already tells you that conventional wisdom has to be wrong. Because it's like, those programs are, I just described what these programs are doing. They're not threatening people with stiffer prison sentences. They're not ending poverty and racial segregation and social isolation, but they are generating massive changes in violence involvement.
And interestingly, the other thing that you can see when these programs are successful as they can be is reductions. We seem to be seeing reductions in illegal gun carrying as well. And I don't know exactly what's going on there, but in a world in which people, I would never carry a gun myself, for all the reasons that you see in the book. I can see myself in high stake situations where I have not, my slow thinking self afterwards was thinking, "Oh my God, what in the world was I doing?" I would never want to have a gun with me in those moments for fear that I might do something in the moment that would be life altering for me and for somebody else. So I just wouldn't want any part of it. It's possible that these programs are generating a similar feeling among some of these kids as well.
Hal Weitzman: I do want to ask you about the scale of this. Obviously the problem is national, it's international, but the problem is very, very severe in the US and the projects you described seem so small, like embarrassing. Are they really scalable?
Jens Ludwig: Yeah. So I think anything to do with the built environment is super scalable. I mean, this is what cities are, right? Cities are built environment, and we know how to do built environment at scale. It's just a question of priorities and exactly what we're going to do. And so, that's super scalable. I think the way to scale the social programs that change what kids bring with them into these 10 minute windows, I think in a very resource constrained sort of world, the way to do it is to look at institutions that already are working with young people that have low value time baked in, that we could capture for something like this instead.
And so, I mentioned the juvenile detention, you can train the guard. Why don't we do that in every detention facility in the country? It's super cheap, would be super helpful. Let me give you one other example from the perspective of scaling in a world in which we don't have any money, is I went to Lenape High School in Medford, New Jersey. And the state of New Jersey and its wisdom made me take four years of health education, which was basically eat more broccoli, sleep eight hours a night, don't drink alcohol, and here's where babies come from.
But when you look at what actually the leading causes of death are American teenagers, it is homicide, especially in low-income minority communities, it is suicide, it is drug overdoses and it's car crashes. Those are basically deaths of decision making, right? And these sorts of programs that get people off tilt, take something like 15 to 20 hours on average per person. That's like three or four weeks out of a four-year health curriculum. You've got the teacher, you've got the kids, you've got the physical plant. The marginal cost of doing that would be insanely low. And that is something we've built a public school system at scale that serves 50 million kids a year. If detention staff can deliver this sort of programming in a helpful way, I cannot believe that our health teachers can't do that too.
Hal Weitzman: Fascinating. Well, Jens Ludwig, thank you so much for coming on the podcast to talk about your book Unforgiving Places. I do recommend it heartily to our listeners, and I appreciate your time. Good luck with the book.
Jens Ludwig: Thank you. Thanks so much for having me on.
Hal Weitzman: That's it for this episode of the Chicago Booth Review Podcast, part of the University of Chicago Podcast Network. For more research, analysis, and insights, visit our website at chicagobooth.edu/review. When you're there, sign up for our weekly newsletter so you never miss the latest in business-focused academic research.
This episode was produced by Josh Stunkel. If you enjoyed it, please subscribe, and please do leave us a five-star review. Until next time, I'm Hal Weitzman. Thanks for listening.
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