SAN ANTONIO – Steven Levitt, an economist with the University of Chicago and co-author of the best-sellers “Freakonomics” and “SuperFreakonomics”, believes in the value of data and especially in the value of studying it in new ways.
The award-winning academic told credit union executives attending the PSCU 2011 Leadership Workshop & Member Forum today that economists really have little to offer in the way of the understanding of macroeconomics, but comprehend both the impact of incentives and the importance of data very well.
He used as an example the story of an IRS employee in the mid 1980s who noticed that there were occasionally tax returns listing the names of children as things like “Fluffy.”
At the time, the agency did not require Social Security numbers for dependent children and the employee informed the agency that it might find requiring such numbers a useful way to detect tax cheats.
It turns out the employee had been correct. The IRS took the trouble to change the tax forms, millions of children appeared to have disappeared around the country, and the government realized an additional $3 billion in tax revenues.
“The problem is that we too often do not consider the impacts of incentives, or how incentives which might not be obvious are having an impact on our lives and businesses,” Levitt said.
Carefully studying data, such as the name of children on tax forms, and looking at it in new ways, such as asking why parents would name their child Fluffy, can lead to significant improvements in business processes, Levitt said.