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Motley Fool audio interview with economist Steven Levitt
Interviewed by David Gardner
Posted 6/20/2006 on NPR Motley Fool profiles

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economics, freakonomics, market efficiency, drug dealers, realtors

Summary: Key Points in the Article

This audio clip features an interview with one of the authors of the best selling book “Freakonomics.” Economist Steven Levitt answers a host of questions typically not tackled by most economists. One of the questions related to realtors and agency relationships. In other words, do realtors really work for real estate sellers?

According to Levitt, it is in the best interest of the realtor to convince sellers to take an offer lower than they would receive if the property remained on the market. Since the percentage of the sales price that real estate sales persons receive from selling a house is a very small fraction, a $10,000 increase in sales price might net a real estate professional another $150 commission for a tremendous amount of additional work. Therefore, it is in a real estate salespersons best interest to convince the seller to make the quick sale and take the first reasonable offer. Levitt points toward evidence that real estate professionals tend to leave their own properties on the market longer and receive 2-3% more in sales price.

Levitt addresses many other issues including market efficiency, horse racing, and drug dealing in this interview. Listen to the clip for Levitt’s economic explanation of numerous topics.

Analyzing the News

Levitt’s primary contribution is his application of economic thought to a number of topics typically not addressed by economics. As you will hear, economics is truly a social science that can be used to explain quite a bit of human behavior.

Thinking Critically Questions

  1. What is “freakonomics?”
  2. Why would the illustration of “realtors” and not maximizing sales price for sellers be an economic topic?
  3. Are the stock markets efficient according to Levitt?

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