Is San Francisco a Failed State? (And Other Questions You Shouldn’t Ask the Mayor)

Summary

Freakonomics Radio: "Is San Francisco a Failed State? (And Other Questions You Shouldn’t Ask the Mayor)"

Released January 22, 2025

In this compelling episode of Freakonomics Radio, host Stephen Dubner delves into the intricate dynamics of San Francisco's governance, economic challenges, and the broader implications of technology on society. The live recording at the historic Sidney Goldstein Theater features insightful conversations with San Francisco Mayor London Breed and esteemed economists Coleman Strumpf and Eric Brynjolfsson. This summary captures the essence of their discussions, highlighting key points, notable quotes, and profound insights.

---

1. Assessing San Francisco’s Status with Mayor London Breed

Media Perception vs. Reality

Mayor London Breed confronts the pervasive narrative portraying San Francisco as a "failed state." She emphasizes that while media often showcases the city's most challenging aspects, the reality is far more nuanced.

[08:38] Mayor Breed: "A lot of people think of San Francisco as kind of a failed state. Not quite Haiti or Libya, but the stuff they see, they see the worst of the worst. That's what the media does."

City’s Recovery and Initiatives

Breed highlights the city's proactive measures post-COVID, including closing down streets for night markets and creating entertainment zones to rejuvenate community spirit. She proudly states the success in reducing homelessness by over 20,000 and achieving one of the lowest homicide rates since the 1960s.

[08:46] Mayor Breed: "This city has been more fun than it has been in a long time... We have helped over 20,000 people exit homelessness... one of the lowest homicide rates since the 1960s."

Challenges and Perception Management

Despite tangible progress, Breed acknowledges ongoing challenges and the struggle against negative perceptions. She urges both residents and visitors to share their positive experiences to counterbalance the media’s focus on adversity.

[09:40] Mayor Breed: "The biggest thing that we do struggle with is the perception. So we need people to come to San Francisco or people who live here to tell their own story of San Francisco."

Economic Resilience Amidst Population Changes

Addressing concerns about population decline, Breed asserts that venture capital investment remains robust, with significant funding flowing into AI companies within the city. This influx underscores San Francisco's enduring appeal as a hub for innovation and success.

[14:19] Mayor Breed: "70% of the new office space is by new companies. And AI people are coming back to San Francisco because they know this is where they're going to be successful."

Leadership and Political Challenges

In reflecting on her tenure, Breed discusses the financial and bureaucratic hurdles she faced, including substantial campaign spending aimed at unseating her. She takes responsibility for slower-than-desired policy implementations post-pandemic but remains optimistic about future advancements.

[10:39] Mayor Breed: "Things were not happening as quickly as people wanted to see them happen. And that is something I take full responsibility for."

---

2. Exploring Illicit Markets with Economist Coleman Strumpf

Investigating Illegal Activities

Economist Coleman Strumpf provides a deep dive into the economics of illicit markets, particularly focusing on sports betting and the cannabis industry. His research uncovers the prevalence and operational strategies of illegal weed shops in major cities like Los Angeles and San Francisco.

[28:06] Strumpf: "I've done some work on cannabis... How can you tell an illegal from a legal weed shop, let's say, in California?"

Data Collection on Illicit Operations

Strumpf explains his methodology for differentiating between legal and illegal cannabis stores, utilizing platforms like Weedmaps and public records to identify discrepancies in licensing and operational legitimacy.

[29:22] Strumpf: "They either make up a number, go down the street, look at the legal store, take a picture of that and use that number. Or sometimes they just put up stuff that isn't even a valid number."

Economic Implications of Legalization

Discussing why illegal shops persist despite legalization, Strumpf attributes it to insufficient political will for stringent enforcement and the complexity of differentiating legal from illegal operations amidst growing demand and social acceptance.

[31:22] Strumpf: "The illegal people are pretty sophisticated. So... demand is probably much higher."

Historical Context of Illicit Markets

Strumpf draws parallels between current illicit operations and historical examples like Prohibition-era alcohol smuggling, highlighting the enduring nature of black markets despite regulatory efforts.

[32:40] Strumpf: "The wake of Prohibition? Actually, you did see things like that for 15 years through the 1950s."

Impact of Social Norms and Demand

Strumpf emphasizes that evolving social norms and increasing demand for cannabis contribute to the resilience of illegal markets, even as legal avenues expand.

[34:14] Strumpf: "There's the social norm... demand is probably much higher."

---

3. Rethinking Economic Measures with Eric Brynjolfsson

Introducing Human-Centered AI

Eric Brynjolfsson, Senior Fellow at the Stanford Institute for Human-Centered AI, discusses the paradigm shift from viewing AI as mere imitations of human intelligence to leveraging it as a complement that enhances human capabilities.

[44:07] Brynjolfsson: "We want to look for ways that machines can complement humans, not simply imitate or replace them."

Critique of Traditional GDP and Introducing GDPB

Brynjolfsson critiques Gross Domestic Product (GDP) as an incomplete measure of economic welfare, advocating for GDPB (Gross Domestic Product Benefit) which accounts for consumer surplus—the value consumers derive beyond what they pay for goods and services.

[50:11] Brynjolfsson: "GDP measures basically everything that's bought and sold in the economy... a lot of household productions aren't there."

Methodology of GDPB

He outlines the methodology of GDPB, which involves surveying consumers about their willingness to forego certain goods and services, thereby quantifying the consumer surplus. This approach aims to provide a more accurate representation of economic well-being.

[53:21] Brynjolfsson: "If I were to do a survey... the area under that curve, we call that consumer surplus."

Implications for Policy and Regulation

Brynjolfsson connects GDPB to regulatory frameworks, particularly antitrust legislation, suggesting that a more nuanced understanding of consumer value could influence how mergers and acquisitions are assessed.

[55:13] Brynjolfsson: "The GDPB gives us a set of measures... if you measure the value that people are getting, there's far more value that French citizens are getting from these services than what they're paying."

Human-Centered AI and Economic Innovation

Discussing the global influence of Silicon Valley, Brynjolfsson underscores the cultural and economic significance of the Bay Area's innovation ecosystem. He advocates for policies that enhance economic efficiency, such as congestion pricing and targeted taxation, to address systemic issues like housing affordability.

[60:30] Brynjolfsson: "I'm a huge fan of congestion pricing... why not tax pollution. Why not tax congestion."

Balancing Innovation with Social Responsibility

Brynjolfsson emphasizes the importance of balancing technological advancements with social accountability, ensuring that innovation translates into tangible benefits for society at large.

[59:02] Brynjolfsson: "There's just a whole wave of innovations... It's been a tremendous engine of creativity and wealth creation."

---

4. Concluding Insights

This episode of Freakonomics Radio offers a multifaceted exploration of San Francisco's current state, the persistence of illicit markets, and the necessity for evolving economic measures. Mayor London Breed provides a grounded perspective on the city's recovery and resilience, countering negative media portrayals with concrete achievements and ongoing challenges. Economists Coleman Strumpf and Eric Brynjolfsson broaden the discussion to include the complexities of illicit economies and the imperative to refine economic metrics to better capture societal well-being. Together, these conversations illuminate the hidden layers of urban governance, economic innovation, and the evolving impact of technology on human life.

---

Notable Quotes:

• Mayor London Breed at [08:46]: "This city has been more fun than it has been in a long time... We have helped over 20,000 people exit homelessness... one of the lowest homicide rates since the 1960s."

• Coleman Strumpf at [31:11]: "They either make up a number, go down the street, look at the legal store, take a picture of that and use that number."

• Eric Brynjolfsson at [50:11]: "GDP measures basically everything that's bought and sold in the economy... a lot of household productions aren't there."

• Eric Brynjolfsson at [53:21]: "If I were to do a survey... the area under that curve, we call that consumer surplus."

• Eric Brynjolfsson at [60:30]: "I'm a huge fan of congestion pricing... why not tax pollution. Why not tax congestion."

---

This episode provides listeners with a deep understanding of the socio-economic fabric of San Francisco, the enduring nature of black markets, and the critical need for more comprehensive economic indicators. Through expert interviews and candid discussions, Freakonomics Radio unpacks the hidden sides of complex urban and economic issues, offering valuable insights for policymakers, economists, and engaged citizens alike.

Transcript

[Stephen Dubner]

Freakonomics Radio is sponsored by Amica Insurance. At Amica, you will receive coverage with compassion. When you choose Amica, they'll take the time to explain your options for auto, home and life insurance. You can feel confident knowing that they'll protect what matters most to you. Amica will provide you with peace of mind. Go to amica.com and get a quote. Today Freakonomics Radio is sponsored by Mint Mobile. Start saving on your mobile wireless plan. With Mint Mobile, plans start at $15 a when you purchase a 3 month plan. To get this new customer offer, go to mintmobile.com freak $45 upfront payment required. Equivalent to $15 per month. New customers on first 3 month plan only speeds slower above 40gb on unlimited plan. Additional taxes, fees and restrictions apply. See Mint Mobile for details.

[London Breed]

Hey there, Stephen Dubner.

[Stephen Dubner]

Every once in a while we get out of our recording studio and take Freakonomics Radio on the road. We recently put on a live show in San Francisco at the historic Sidney Goldstein Theater. If you were in the audience that night, thank you. We had a blast. Hope you did too. If you were not there, this bonus episode is for you. It is a recording of that show edited down to podcast length. We have got another live show coming up in Los Angeles on February 13th. LA has been through so much with the wildfires. So much destruction and death and fear. All of us who love that place are eager for its recovery and we are hoping to do our tiny part.

[London Breed]

Just by showing up.

[Stephen Dubner]

A portion of our ticket sales will go to relief efforts. I hope you'll join us if you can. You can get [e-mail] liveshows one word. That's Thursday, February 13th, in Los Angeles. One of our guests will be the inimitable Ari Emanuel. Okay, here now is what happened in San Francisco. As always, thanks for listening.

[London Breed]

There are so many of you. This does not seem like a fair fight. There's one of me and all of you. I'm sure it'll work out okay, but you're smart. Okay. Yeah. The hecklers begin. Okay, so in case it's not clear, this is not what we typically do. I assume most of you know Freakonomics Radio. You wouldn't be here otherwise. The show that we make is the opposite of a live show.

[Coleman Strumpf]

Show.

[London Breed]

Okay. The show we make is really. I'm a writer and it's a writer's show. We come up with an idea, we do a bunch of research, we figure out what kind of people to interview, then we prepare for the interviews. We Do a lot of interviews. We start to put together a script, a draft script. We rewrite it, we start to mix. The tape takes many, many, many, many hours to make one episode. And, you know, that's the way we like it. Tonight we've got like an hour and a half or two hours. That's it. We have no pause button. We have no reconsideration. It's just us here together. So if you're up for that, I think we're going to have a very good time together. That's the intention, at least. When I was a kid, I was very shy. I still am, truthfully. I had another problem in addition to shyness, which was that I really was curious. I wanted to find out stuff. In the old days, it took a lot of effort to find out stuff. You'd have to go to the library or you would have to ask an adult. And when you're shy, asking a stranger questions was not so easy. My solution to all of that was to become a journalist where you're okay. I've never heard journalism applauded before, so thank you. So, you know, becoming a writer, becoming a journalist really solved both problems. Because all of a sudden you have permission to ask anybody any question and you're getting to find out stuff all the time now. In the old days, writing for newspapers and magazines and I wrote books for a while. It was old fashioned, fun, physical analog labor. You'd go out with people, might be writing a piece about one person over many weeks or months. You'd follow them around, might be a whole scene, and you'd come back after those weeks or months with a whole bunch of cassette tapes that you would then transcribe yourself as a writer. That's how you got to really know the material. You'd come back with all these notebooks full of stuff, and then you would sit down to sift it and sort and write. And I loved it. I loved every single piece of it. I still have all my notebooks. I still have all those cassette tapes. It was very, very labor intensive, but it was wonderful labor. And my favorite part of it was always just the hanging out with the people. A lot of it honestly was really boring. But the parts that were exciting were so exciting. When you really learn something, it makes me think of what the physicist Richard Feynman, who's been a hero of mine for a long time, what Feynman called the pleasure of finding things out. And it was just so pleasurable that I never stopped. What we do now with the radio show may Seem different because it's audio and yada yada, but it's really the same thing. Coming up with ideas, putting yourself in position to have interesting conversations with people who are smart or weird or maybe all of the above. You know, I think if we were to go back 20 or 30 years to when digital everything was really starting to explode, I don't know if any of us would have thought that we'd have so much communication as we do and so little conversation. I feel like because everyone is able to publish and be their own bullhorn, that in a way, we've sort of forgotten how to talk to each other by now. I've probably interviewed, I don't know, 5,000, 10,000 people in my life, and I can't think of a single one where afterward I didn't feel like my brain grew a little bit or my heart grew a little bit. It's an unbelievably valuable human trait that we overlook this ability of ours to have language and have a conversation where we can learn about each other, move each other and so on. And so really, tonight, that's what I want to do. I just want to have some good conversations. We've lined up some people I think are going to be excellent for you and me to hear about. So we'll get started. Does anyone have any complaints before we begin? I get your emails. I know who you are. All right, so we're gonna have some good conversations. Our first one I think you will enjoy quite a bit. Would you please welcome our first guest. She is the mayor of San Francisco, London Breed. How's things?

[Eric Brynjolfsson]

Well, freedom is fast approaching right now, so it's almost like I dropped thousands of pounds.

[London Breed]

So you call it freedom for those who don't know, you've got just a few days left.

[Eric Brynjolfsson]

Yes.

[London Breed]

You must have some wild planned.

[Eric Brynjolfsson]

Oh, oh, yes. Pull out those phones because you guys are going to see a different mayor breed.

[London Breed]

Let me start with. I mean, I hate to say it, A lot of people think of San Francisco as kind of a failed state. Not quite Haiti or Libya, but the stuff they see, they see the worst of the worst. That's what the media does. The media's really good at that. And then it becomes a political weapon as well. I mean, Covid was really hard. You personally seem to have done, you know, the shutdown, handled that really well, aggressively early and so on. But tell me how the city is recovering.

[Eric Brynjolfsson]

Well, it has been a rough ride, but I'm really excited about where we are now as a city. This city has been more fun than it has been in a long time.

[London Breed]

More fun.

[Eric Brynjolfsson]

More fun. We have closed down streets to have night markets, first Thursdays events, entertainment zones, because we need some joy. This city has been a place of, no, you can't do fun things. And we turned it into a city of yes. We have helped over 20,000 people exit homelessness. We have had a significant decline in our crime rate and one of the lowest homicide rates since the 1960s. I mean, this is the work that we're doing, but we also know there's more to be done. It's a major city. Cities have challenges, but we are finally in a place where we build the capacity. We changed the laws, we made the hard decisions. And I just believe that the best is yet to come. The biggest thing that we do struggle with is the perception. So we need people to come to San Francisco or people who live here to tell their own story of San Francisco.

[London Breed]

So driving in, I mean, it's a cliche. Like, you know, you talk to a taxi driver, Uber driver, you drive in from the airport, and I realize I'm not really seeing you didn't take a.

[Eric Brynjolfsson]

Waymo where you didn't have anybody to talk to.

[London Breed]

I have to say, I'm a little bit scared of the waymos so far. How do you feel about them?

[Eric Brynjolfsson]

Well, it's interesting. They become a tourist attraction in our city. But you just said people do a lot of communication but not conversation. So I don't know if I'm gonna take away mo because you want someone.

[London Breed]

To talk to you.

[Eric Brynjolfsson]

I want somebody to talk to.

[London Breed]

All right, well, stick with me. Okay. I will say, driving in from the airport, what I saw mostly were billboards for AI companies, which I don't see in New York. And then I get to the Tenderloin, and I feel like I'm in a Hieronymous Bosch painting. It is wild, and it's heartbreaking. I know it's been there forever, and I know it predated you, but, you know, I just wonder how much the perception hurt you running. Okay, let me just ask the question I really want to ask. Why'd you lose? You stood for re election.

[Eric Brynjolfsson]

I'm gonna say this with a lot of pride. There was over $20 million spent on my race to unseat me.

[London Breed]

Is this all Levi's money?

[Eric Brynjolfsson]

I don't know where the money came from, but there was a lot of money. I think that things were not happening as quickly as people wanted to see them happen. And that is something I take full Responsibility for. Because this government and how bureaucracy works, it is not designed to make things move quickly.

[London Breed]

When you say bureaucracy, do you mean mostly the board of Supervisors?

[Eric Brynjolfsson]

I think I do mean a lot of the board of Supervisors. And now this new mayor's getting a good. I'm just so mad about it. People say, oh my goodness, your response to the pandemic was amazing. And yeah, it's because we cut bureaucracy. We had emergency authority to make decisions without the bull crap that gets in the way of trying to make things move. And then we go back to, you know, a post pandemic world after we come out of that. We needed to be able to act quickly. Dealing with the rise in fentanyl overdose deaths and the emptying of our shelter beds and the need to build more hous. All these things we needed to do and could not move fast enough. And the good news is we work very hard to build our capacity to make the necessary changes, to use technology and to really help combat these issues. And think about it. Our crime rates have consistently been dropping. I mean even car break ins are lower than 10,000. And this is a major city. It hasn't been that low since 2015.

[London Breed]

Let's talk about the major city thing because I come from New York and.

[Eric Brynjolfsson]

And things, things happen in all major cities.

[London Breed]

But that's my problem is I don't think of you as a major city. I think of you as a very, very nice. Now you understand why I don't do this live thing.

[Eric Brynjolfsson]

But don't you think of San Francisco as a major city? Okay, Stephen, you better watch out what restaurant you eat in. Somebody might put something in your food.

[London Breed]

Well, that's not a nice way to make friends for the out of towners. But. No, but where was I now? Major city. I'm going to skip that question. You lost some population during COVID I did read you say something about how you had fewer people die here per capita than any other big city in America. But I was wondering. Okay, but wait a minute, wait. Save your applause because you'll boo me in a second. But I wondered if that's just because everybody left.

[Eric Brynjolfsson]

No.

[London Breed]

And they were dying elsewhere.

[Eric Brynjolfsson]

Listen, listen, let me just say this. We shut down early. We made really hard decisions. It was not easy. And the people in San Francisco really came together to try and save lives. I was really proud of how people went grocery shopping for folks. Folks showed up to work in the hospitals and people sacrificed to make that happen. And so I'm very proud of that. But a lot of people did leave and they were talking a lot of crap when they were leaving San Francisco. But you know what? Many of those people are back because this is $34 billion in venture capitalist investment. Of the top 20 AI artificial intelligence companies in the world, eight are right here in San Francisco. 5 million square feet of officely sign in San Francisco. 70% of the new office space is by new companies. And AI people are coming back to San Francisco because they know this is where they're going to be successful. Despite what people try to say about this city, it is still where people want to be.

[London Breed]

Yeah, I'm really glad to hear that. I do love your city by saying I didn't think it was a major city. Mean to imply that I didn't love.

[Eric Brynjolfsson]

It, but it has less than a million people, so I totally understand that.

[London Breed]

This makes me think I live in New York and we live there during the 911 attack and it was scary. Very different event obviously than Covid. And I have a sister who lives in Buffalo who called us up and she was very worried about our family. She said, steve, you know, you should really pick up and my kids are very young. Pick up and move to Buffalo. And I didn't even think it was so terrible what I said. I said, beth, you know, I'd rather die in New York than live in Buffalo. And to be fair, Buffalo's a wonderful major city. So let me ask about you. You grew up hard in public housing, raised by your grandmother. All kinds of stuff around. There was crime, there was drugs. Your own family suffered from all that. And the thing that I really want to know about you, you know, we have this idea when there are people in the public eye, we just think they're invincible. Everybody always has challenges, and it's how they overcome them that really defines us. So with you, I can't fig how you got to where you got with the odds that you faced. I'm not asking you for advice necessarily, or if you have a superpower, but can you just describe what it took not just to survive, but to thrive with those barriers?

[Eric Brynjolfsson]

There are so many different things that happen. Last time when we talked on the podcast, I talked about my brother who's incarcerated and how we both went to the public school system. He didn't even graduate from high school, and I did. It's hard to finger point where the issue happen, but I feel really honored and grateful to God for just the strength to overcome so many of those obstacles and to get my education and to want to go back to the community and Make a difference.

[London Breed]

Obviously you worked hard. Obviously you were disciplined and all that. But how much do you think is just temperament?

[Eric Brynjolfsson]

I don't know if I would say that I have the best temperament because I have a temper. But I will say that I have remained true to who I am as a person. But the whole reason why I got involved in public service in the first place is because of violent crime in my community, where people were dying, where our homicide rates were significant in the 90s. And it is just amazing to see us in a better place than we've ever been before. And I have always said it is always the will of the voters that I'm going to respect and be grateful that I had the opportunity to serve.

[London Breed]

Do you feel that you were treated differently than the mayors who came before you, who came from more traditional backgrounds?

[Eric Brynjolfsson]

I think so, A little bit, yeah. I didn't talk about it much, but when the mayor calls you, and to not return the mayor's call, that was pretty offensive. Or to sit in a meeting with me and to look at my chief of staff and talk to him and not talk to me directly.

[London Breed]

How do you handle that in the moment?

[Eric Brynjolfsson]

In the moment, I'm like, hi, I'm right here. Nice smile. And I'm the one who makes the decision. And then I move on from it. I didn't come from money. I come from the hood. I didn't have built in relationships with a lot of these people. But I did do what I could to try and reach out to people and develop those relationships and make sure that my door was always open. So even if someone opposed me, which, you know, I had a member on the Board of Supervisors who was just the worst person to work with.

[London Breed]

That person's name was what again?

[Eric Brynjolfsson]

Well, here's the interesting part is somehow once that person decided they wanted to work with me, we developed a tight, really good working relationship. And so what I've always said is, look, I may not like you, I don't have to like you, but I will work with you.

[London Breed]

I've heard you say that. I really like that. I want to steal that. Because I think most of us. It's hard to do when you don't like someone, but you need to work productively with them. So what do you do? Do you picture him naked? What do you do?

[Eric Brynjolfsson]

No, I just think when I wake up in the morning, I'm the mayor of San Francisco. Like, I'm the mayor of San Francisco. So come right in. Look, sometimes it shows on my face, but. But I'M a grown up here and I have to be better than somebody who's petty because you don't particularly care for someone. I mean, you know what's in your head. But the business of the people is the most important. I can't just support or work with the people who voted for me. I can't just talk to the people that I want to talk to. And it's what anybody in elected office should be. If you are here for the right reasons to get the business done for the people. And I've been able to accomplish a lot because I've always kept the door open.

[London Breed]

As we speak. You have a few days left in office and I want to know what you're planning next, if you have plans. And I also want to know. The Democrats got crushed this year coast to coast and there's an election in about a month from now for DNC chair. Is that something that you've poked around at by any chance?

[Eric Brynjolfsson]

So under the law, I can't look at other opportunities until I actually leave office. And so I will be having a lot of meetings once I leave office because I need a job.

[London Breed]

Let's just pretend that you're elected DNC chair in a month, whatever it is. What would you say, considering the shellacking that the party had, what's a thing or two that you think the Dems need to do to put themselves in position to win some more elections?

[Eric Brynjolfsson]

I think that the biggest thing we need to do is cultivate young new talent. I mean, my race is a perfect example. I am a perfectly capable, qualified Democrat who runs a major city. And when you have young Democrats. You guys like that, huh? When you have people in these various positions, whether it's mayor or Board of Supervisors or other places, we have to invest the resources into helping to grow our talent pool to ensure that. But we have a pipeline.

[London Breed]

Do you think the Republicans have done that well, or do you think that they're cuz. Look, Trump is no one's idea of an ideal candidate and yet won by a lot. You could read that a few ways. A lot of people like Trump a lot. Which is plainly the case and. Or the Democrats were really unpopular. I'm just curious and I know you faced it yourself. Your far left hit you very, very hard. You had to deal with a lot of things as ultimately a centrist stem. So I'm just wondering if the big tent needs to be reconfigured.

[Eric Brynjolfsson]

I think that the tent needs to be open again. I come from nothing, so I've only mostly volunteered and helped people in their campaign. So it's significant that I'm mayor. So how do we capitalize on that in order to ensure that people like me don't get lost by the party? It really does start with how do you get more people choosing to register as a Democrat rather than decline to state?

[London Breed]

How do you feel about open primaries?

[Eric Brynjolfsson]

I would be open to it, but I'm not 100% sure that that's the right route to go.

[London Breed]

Because why? What's the advantage? I mean, there are a lot of good arguments for why a two party system is not as bad as we always say it is. Because when you look at the alternatives, there are many countries with, you know, five, ten parties and they're in worse chaos. Honestly.

[Eric Brynjolfsson]

I mean, it's politics. And you got to remember politics is never going to be nice and wrapped into a neat little bowl. It's going to be something you have to fight for. The reason why I struggle with the open primary has a lot to do with I want to see the Democrats united and I want us to do the work to get behind the candidate, whether we agree with that person or not, to really fight for that candidate and also to listen to people as to why they might want something different. We may see something or hear something and we say, oh, they don't know what they're talking about. But you know what, if you listen closely and you hear what they're saying, you have to think about, well, how do we appeal to the people who we believe may not know what they're talking about? I just think you have to be a little bit more open minded and not just toss someone to the side just because their beliefs aren't 100% of what you think our value system should be. Because clearly we got a lot of work to do and we have to understand all those different states differently than we have in the past.

[London Breed]

That's really, really nicely said. Congratulations on your career, everything. Thank you for coming out tonight.

[Stephen Dubner]

We will be back with more from our live show in San Francisco right after this. Freakonomics Radio is sponsored by NerdWallet. When it comes to finding the best financial product, have you ever wished someone would do the heavy lifting for you with NerdWallet's 2025 Best of Awards? That wish has come true. The nerds already did the work for you, reviewing over 1100 financial products like credit cards, savings accounts and more to bring you only the best of the best. Check out the 2025 Best of Awards today at NerdWallet.com awards Freakonomics Radio is sponsored by Amazon. Sometimes the most painful part of getting sick is the getting better part. Waiting on hold for an appointment, sitting in crowded waiting rooms, standing in line at the pharmac that's painful. Amazon One Medical and Amazon Pharmacy remove these painful parts of getting better with things like 24. 7 virtual visits and prescriptions delivered to your door. Thanks to Amazon One Medical and Amazon Pharmacy healthcare just got less painful.

[London Breed]

T Mobile 5G home Internet keeps getting better get our fastest connection loaded with benefits. Get T Mobile's best home Internet starting at 55 bucks a month with autopay and any voice line plus priceless we won't raise your rate on Internet. Check availability@t mobile.com homeinternet exclusions like taxes and fees apply. Guarantees regular monthly rate plan price of fixed wireless 5G Internet data with qualifying.

[Coleman Strumpf]

Service after $15 bill credit with postpaid.

[London Breed]

Voiceline plus $5 a month without auto.

[Coleman Strumpf]

Pay with debit or bank account.

[London Breed]

Regulatory fees included for qualifying accounts. $35 connection charge applies.

[Coleman Strumpf]

Speeds vary due to factors affecting cellular networks.

[Stephen Dubner]

Okay, back now to our recent live show in San.

[London Breed]

All right, I'm having a good time. Are you? Are we okay? You may be wondering why we are here at this big theater in San Francisco on this rather awkward date. It's January 3rd. I guess nobody does events this week, the week of New Year's. But we're here because this week in San Francisco is the annual meeting of the American Economics Association. The AEA is, as you can imagine, it's a huge gathering of economists from all over the world. And it really is, as exciting as that sounds. But then you ask, well, why would they hold it now in the week of New Year's when everything is dead, everybody's traveling and so on. And the reason is because economists are really cheap. And when they're booking these conferences every year in a different city, they want the cheapest week for the hotels and the conference center. And therefore they hold it immediately after New Year's. And so when we heard it was coming to San Francisco this year, major city, we decided we go to these AEA conferences to scout stories and to see our economist friends and to look for new economist friends for the sake of Freakonomics radio and so on. But then we also decided this year, because we would be in a major city, that we would put on this live show at the same time. So we had the mayor, which is, you know, fantastic, but we have another couple guests that we were able to wrangle because the AEA was here. We've got two more economists to come. Let's welcome the first one. Please give a A warm hand to Mr. Coleman Strumpf. Coleman, come on out. Coleman. Here are a few things I know about you. As a kid, you got into trouble bringing candy bought at retail to school and selling it at a very high markup. Correct?

[Coleman Strumpf]

Yep. My Introduction to Cross.

[London Breed]

Introduction to Crime, or Introduction to Thinking like an Economist.

[Coleman Strumpf]

Maybe they're not so different, but maybe.

[London Breed]

They'Re not so different. I've been saying that a long time. Nobody believed me. I also know that as a child, you appeared in a TV commercial for Tang the Astronaut beverage. Is that true?

[Coleman Strumpf]

I, in fact did with the rest of my family. And I will only say if you spend a whole day drinking Tang, if you even know what that is, you will not feel so good the next week.

[London Breed]

All right. You're now an economist at Wake Forest. And most. Most of your research that I'm familiar with at least, has been about what I would characterize as illicit and taboo activities. Would you name a few that you've looked into over the years?

[Coleman Strumpf]

Yeah, sports betting. Not the stuff you do on your phone, but the guy in the corner. I've done some work on cannabis, which we might talk a little bit more about file sharing. File sharing, like stealing digital products?

[London Breed]

You're an empirical economist. You work with data. How do you get the data when you're dealing with illicit goods?

[Coleman Strumpf]

It's not as hard as you'd think. I'll tell you about sports betting. I was very interested in sports betting, and I one time went to Las Vegas, which was about the only place you could do sports betting, and I tried to wrangle up with one of the bookmakers. I was like, can you give me some information about what you guys do? And he laughed at me. So maybe kind of as a way of getting revenge on the guy, I ended up making a friend in Brooklyn's District Attorney's office. And now I have a bunch of records on illegal bookmakers. So I still don't know a lot about what the guys in Las Vegas do, but I can tell you about a lot of guys in New York.

[London Breed]

So you blackmail people? Essentially, yeah.

[Coleman Strumpf]

I get a little revenge.

[London Breed]

The reason I wanted to have you on the show tonight is you appeared in an episode we made back in, I guess, the fall, not long before the election, talking about betting markets, prediction markets, which are sometimes the same as betting markets, some legal, but mostly kind of illegal. Also, you helped us out with A later episode, we did a series on the economics of cannabis, and you had a lot of data that nobody else had about legal and illegal weed shops. How can you tell an illegal from a legal weed shop, let's say, in California, other than maybe you go sample door to door? I don't know how that works.

[Coleman Strumpf]

Those of you who in the audience who are interested in cannabis might know a website.

[Stephen Dubner]

Should we turn the house lights on.

[London Breed]

And have a show of hands or something?

[Coleman Strumpf]

You might know an app called. You might know an app called weedmaps. Those of you who have never used it, it's maybe like Yelp for pot, fired up on your phone, put on the gps, tells you all the stores near you. So I saw this app and I said it'd be kind of cool if you could just get everything that's on that site and stockpile it. And if you spend a little time kicking around in the background, you can figure out a way of doing that. So I, you know, I always have a lot of computers running and a bunch of computers for. For several years just pulling stuff off this site. So I have a list of all the stores. Now, how do I know who's legal and how do I know who's illegal? So the state of California publishes a list of the legal stores. So I could start using that, but the information's a little bit incomplete. So I had to look at different online sources, including Google Maps, to see stores magically turning from a kid store into a weed store in Los Angeles. And you can kind of figure out through a lot of sweat which ones are legal and which ones are not.

[London Breed]

Now, when they're listed on the site, whether it's the weed map site or the California data, there's a license number, I assume, right? That's what makes a legal shop legal. Do the illegal shops just make up a number?

[Coleman Strumpf]

Yeah, they either make up a number, go down the street, look at the legal store, take a picture of that and use that number. Or sometimes they just put up stuff that isn't even a valid number.

[London Breed]

Now, the thing that blows me away is when in a place like California. Let's take LA versus San Francisco. In LA, you told us something like 70% of the weed shops are illegal. So can you explain how the economics of that works? Why do they proliferate? Obviously it's cheaper because you're unlicensed. But why are they allowed to proliferate?

[Coleman Strumpf]

Yeah, that's a great question. There's not a lot of, I guess, will among policymakers to do it. The people who would be doing the enforcement, the police. Think about how hard this job is. If I say arrest people who are doing some activity, Well, I just see as somebody doing this activity. Now you need to say, not just is somebody selling cannabis, but is it somebody who's licensed or unlicensed? They're literally doing the exact same thing. Some people are doing it legally, some people are not doing it. It's not so easy.

[London Breed]

But I would imagine that. Let's say you and I teamed up and we said, you know what? Alcohol is pretty cheap to make if you think about it. Just ferment some stuff and you put it in a bottle and then you brand it, and then you can sell it for like 20, 30, 80, $100. And we know there's a lot of tax associated with that. So let's say that you and I could either fake it or get the real stuff a little bit cheaper and just open a liquor store without having to pay any of the taxes and regulation stuff. Why do we never see that in.

[Coleman Strumpf]

The wake of Prohibition? Actually, you did see things like that for 15 years through the 1950s. You would have lots of arrests and people having illicit stills and things of that sort. Today in cannabis, the. The illegal people are pretty sophisticated. So one of the things in this weed map state I have is I have a list of all the products.

[London Breed]

What are some of your favorites?

[Coleman Strumpf]

Yeah, well, I like to observe. Honestly, I'm a little out of date on.

[London Breed]

Is that true?

[Coleman Strumpf]

Yes.

[London Breed]

You're not a big. I took you for a big.

[Coleman Strumpf]

Yeah, I definitely have that. Yeah. But at any rate, so I am familiar with some of the big brands.

[London Breed]

The good news is, apparently Tang is not a gateway drug then.

[Coleman Strumpf]

Yeah. Right. Well, maybe it's a gateway drug to being an economist. I don't really know. But at any rate, if you're wanting to sort of pretend you're running a legitimate place, you'll take a name brand and you'll just switch a letter and they literally get old containers or wrappers from legal stuff and they'll put it around the legal stuff.

[London Breed]

Also, one thing you told us was that in San Francisco there are many fewer illegal shops, which has to do with the way that they run their program. So I don't know if Mayor Breed had anything to do with setting up that program. We actually interviewed the guy who did that. Something like 20% of the shops here are illegal versus LA.

[Stephen Dubner]

About 70.

[London Breed]

Right? That's what your data. Yeah.

[Coleman Strumpf]

And these are from a few years back. But I would say the Numbers, probably.

[London Breed]

Still, I would think that the illegal shops benefit further by having legality because that drives the price up with the licensing and it makes their stuff, which might be identical, much cheaper. Yeah.

[Coleman Strumpf]

And on top of that, there's the social norm. I live in North Carolina, where it's not so different from what I remember growing up, up in New York, in San Francisco, all California, the norm about how acceptable is cannabis as a thing to be using, much more accepted today than it used to be. And it's going to spill over to the illicit side as well. So I would, I would argue demand is probably much higher.

[London Breed]

We could talk a long time about cannabis. It's a very interesting economy. Also, the elections this year were interesting. It got voted down in Florida, I think, north and South Dakota. But it's interesting that, you know, we're talking about what people used to call vices, right? Sports betting, but it's now mostly legal in the U.S. cannabis, mostly legal in the U.S. what about betting on elections? You know a lot about that. Do you think that will become fully legal in the US in the next, you know, five, ten years?

[Coleman Strumpf]

I usually, when I try to make a forecast, I look at these markets to answer the question rather than try to answer it on my own. Things look pretty promising, but everything is going to be governed by what a judge would, Will maybe say about these things. There was a lot of enthusiasm about these markets this time. They did a pretty good job at forecasting the election.

[London Breed]

You argue they do, on average, better than polling. Yes.

[Coleman Strumpf]

Yeah, definitely. There's a fundamental difference between polls and these markets. The way a poll works, which is probably what most people in the audience are familiar with, is you talk to a bunch of people, the representative of all voters, and you see what they're thinking. These markets are supposed to work in a totally different way. You step outside your own experience and say, look, my goal, presumably, is to make some money at forecasting the election. Well, that has nothing to do with what I think in terms of who I like. I'm trying to guess what other people like.

[London Breed]

Where's the information coming from?

[Coleman Strumpf]

Everywhere and anywhere.

[London Breed]

Right. So why would it, on average be more accurate than polling? Look, we've learned this election in past elections that many pollsters are just not very good. Let's be honest. Right. It's not a particularly scientific science, if you want to call it that, but still, why would they, who are setting out to do one thing in a very binary way? I ask a bunch of people, this candidate, that candidate, why would they not be better than a group of people who are looking to profit from feeling they know a piece of information.

[Coleman Strumpf]

This election was probably the best case example I could give of that. So when people are polled about certain candidates, they tend not to always say who they support. So traditionally, Donald Trump underperforms in polls.

[London Breed]

David Dinkins, I don't know if you remember this. In New York City, the first black mayor of New York City, he overpolled by a lot. A lot of people wanted to be seen saying that, yes, I will vote for the first African American mayor.

[Coleman Strumpf]

Right. So let me tell you about the person who was the most successful, better in 2024, who was a French citizen. He had a very similar view. He said, I don't think these polls are working very well. Well, but I'm going to run my own poll. And so he asked a slightly different question, which was not, who do you support? Who do you think your neighbors support? There's a little bit of work that suggests that people are a little bit more realistic about thinking about that question than what they themselves think. Anyway, he was so confident in what he found from this poll that he put down $80 million on Donald Trump to win. And, yeah, he made $80 million.

[London Breed]

Does this suggest that pollsters next time around will basically emulate that methodology of asking a question? That's not so binary. It's not. So what are you going to do?

[Coleman Strumpf]

I'm pretty skeptical of pollsters getting into the 21st century. Like, the writing's been on the wall. Like, forget about what I've just been saying. Being a pollster is infinitely more difficult today than it was 40 years ago.

[London Breed]

Absence of landlines.

[Coleman Strumpf]

Yeah, you know, and I know who's calling, and my phone doesn't equate to where I physically am. It's just very hard to do polls. The kind of advancements that they've made are relatively marginal, in my opinion.

[London Breed]

The thing that most surprised me about your work, talking to you was how the betting markets on elections have been around for a long time and have been accurate for a long time and have been robust for a long time. Do you know anything about San Francisco Francisco history?

[Coleman Strumpf]

San Francisco definitely had their own markets, many of which were relatively big money, millions of dollars in today's dollars. They would take place in, like, cigar stores and things like that. We're talking 1900, long time ago. Some people had money, but a lot of people didn't have money. But there were fewer things to bet on back then. So people were really into betting on elections. And so they would do these non monetary bets if you didn't have the cash to do. They call them freak bets. I don't really.

[Stephen Dubner]

Freak.

[Coleman Strumpf]

Freak bets as in F R E A K, as in a certain book that I'm familiar with.

[London Breed]

Yes, I like the sound of that.

[Coleman Strumpf]

At any rate, they did all sorts of crazy things. It was, I won't shave for the next 20 years. I'll walk halfway across the country.

[London Breed]

And these are documented somewhere?

[Coleman Strumpf]

Yeah, these are all at least newspaper stories. And my favorite San Francisco story that I saw was in 1916, which was a very tightly contested election. Two people met.

[London Breed]

1916.

[Coleman Strumpf]

1916. So this is Woodrow Wilson getting reelected. And two people were betting and the loser had to get dressed as a woman.

[London Breed]

These are two men in public and private.

[Coleman Strumpf]

In public within a mile of here.

[London Breed]

And go out and parade around.

[Coleman Strumpf]

And they would parade around. And so this one guy did. Apparently it was not legal to dress as a woman at that point in time. This guy got arrested and then his friends came and bailed him out, apparently.

[London Breed]

So for losing the bet, he had to dress as a woman. And because it was illegal to dress as a woman, he was arrested.

[Coleman Strumpf]

He was arrested.

[London Breed]

Wow. Wow. Crime really does not pay.

[Coleman Strumpf]

That's not.

[London Breed]

When was cross dressing illegal until in.

[Coleman Strumpf]

San Francisco, I think 40 years ago.

[London Breed]

Really? And that's San Francisco? Yeah, yeah. Major city. All right, well, Coleman, thank you. It's always great to talk to you.

[Coleman Strumpf]

Great, thanks.

[Stephen Dubner]

This is Stephen Dubner and you are listening to a Freakonomics radio show we recorded live in San Francisco on January 3rd. We will be right back with our final guest. Freakonomics radio is sponsored by Mint Mobile. Get a head start on your financial goals for the new year with the help of Mint Mobile. Mint Mobile lets you maximize your savings with plans starting at $15 a month. When you purchase a three month plan, all plans come with high speed data and unlimited talk and text delivered on the nation's largest 5G network. Use your own phone with any Mint Mobile plan and bring your phone number along with all your existing contacts. To get this new customer offer, go to mintmobile.com freak that's mintmobile.com freak $45 upfront payment required, equivalent to $15 per month. Month new customers on first 3 month plan. Only speeds slower above 40gb on unlimited plan. Additional taxes, fees and restrictions apply. See Mint Mobile for details. Freakonomics Radio is sponsored by Range Rover Sport. What makes a leader? It's a tough question, but one thing is for sure. True leaders lead by example. Example and take risks, they plunge into life with determination. For those who lead by example and who approach life with palpable passion, there's the Range Rover Sport. A new dimension of sporting luxury. Elevate your desires with the visceral, dramatic and uncompromising Range Rover Sport. Experience its world renowned off road capability with adaptive off road cruise control which monitors ground conditions and acclimates to the present terrain. Agility, control and composure are achieved with dynamic air suspension, while adaptive dynamics reduce unwanted body movements to deliver smooth and composed handling for focused on road performance. Rise to every occasion in the Range Rover Sport where sophisticated refinement meets visceral power. Build your Range rover [e-mail] that's land.

[London Breed]

Roverusa.Com.

[Stephen Dubner]

Freakonomics radio is sponsored by Amazon. Sometimes the most painful part of getting sick is the getting better part. Waiting on hold for an appointment, sitting in crowded waiting rooms, standing in line at the pharmacy. That's painful. AmazonOne Medical and Amazon Pharmacy remove these painful parts of getting better with things like 247 virtual visits and prescriptions delivered to your door. Thanks to Amazon One Medical and Amazon Pharmacy Healthcare just got less painful.

[London Breed]

We have one more guest tonight. He is an economist at a nearby school called Stanford, I believe it's pronounced. Would you please welcome Eric Brynjolfsson. Okay. I'm very fond of this man. Very, very interesting and bright fellow. So, Eric, it says that you are a senior fellow at the Stanford Institute for Human Centered AI. Is that correct? So far?

[E]

So far, so good.

[London Breed]

And you're also director of the Stanford Digital Economy Lab. So I just want to know what both of those are. I want to know what human centered AI is, honestly.

[E]

Well, that's a good question. Fei. Fei Li started it along with John Etchemendi, and they recruited me out to Stanford.

[London Breed]

You were mit?

[E]

Yeah, I was at a major city in Massachusetts.

[London Breed]

You're picking bones with me because that is the other city that thinks it's a major city.

[E]

Well, I'm sorry, it keeps. It's too bad. We keep beating New York in all the sports, but that's just the way it goes.

[London Breed]

Here's the thing about New York and sports. When you're a major city, the sports don't really matter that much.

[E]

Good. Yeah, you can cope. So the idea is that, you know, AI is doing these amazing things, but we want to do it in service of humans and make sure that we keep humans at the center of all of that. A lot of technologists are very focused on the technology, but I'm an economist as you mentioned, and they're political scientists, sociologists, artists, and we're all working to use AI to help lots of the other parts of the world and of academia.

[London Breed]

When you talk about human centered, I mean, one thing that comes to my mind is labor. Right, yes. You and I have had this conversation on the show for probably 8 or 10 years now about to what degree does automation and AI mean job replacement? And if so, how big a problem is that? But you're talking about more than just machines doing human jobs. You're talking about having AI or having technologies that let humans be human in their most essential way or what?

[E]

Totally. Too many people think of machines as just sort of trying to imitate humans. There's this iconic test of artificial intelligence called the Turing Test that many people are familiar with, which is, how much can you make a machine mimic a human to the point where you can't tell which is which? And that was, I think, a visionary idea when Alan Turing proposed it in 1950. But in a way, it's a very constraining idea because machines can help us do new things we never could have done before. And that's a much higher ceiling. And so we want to look for ways that machines can complement humans, not simply imitate or replace them. And so I wrote a paper recently called the Turing Trap, trying to steer people away from this idea idea of just imitating humans.

[London Breed]

If we were having this conversation a year ago about AI, generally, the first five questions would be, so, are the machines going to wipe out humanity? Now? It's not that nobody's thinking about that and concerned about it anymore, but it's no longer the conversation. Why is that?

[E]

I think it's still part of the conversation. I don't know. Maybe in the press. There's things that go up and down in cycles. To some extent, AI is becoming much more powerful. There continues to be rapid progress. And the good news is we can have tremendously higher productivity and wealth and have medical solutions addressing poverty, the environment. But it also raises a number of risks. Misinformation or people using it in a way that creates weird interpersonal dynamics. AI, boyfriends and girlfriends, you know, maybe millions of those that people have as their primary relationship. Pathogens and even catastrophic risks.

[London Breed]

Wait, say more about pathogens. Pathogens in AI.

[E]

Well, the great thing is AI can help us discover new drugs as well as medicines, new materials. There's just a study from a grad student at MIT describing how researchers using AI were able to discover 44% more materials than a randomly assigned Group that didn't have access to the technology. So, big difference. But some of those new materials could. Lots of them could do good things. You could also create dangerous ones. You can flip the bit on, on a drug that's meant to make you healthier, and it could make you much less healthy to the point of killing you.

[London Breed]

So you know a lot more about this than most of us do. You've come at it from a variety of angles. We'll talk about the economic angle in a little bit. But would you call yourself generally a techno optimist?

[E]

I'd say I'm a mindful optimist. What I mean by that is that they're sort of blind optimists. And I run into a lot of those in Silicon Valley who just like, hey, don't worry, just chill. It always works out in the past. You know, it's going to be great. Just sit back and we're going to have a great time. And there's a lot of pessimists who basically say the opposite. And they both make the same mistake, I think, which is they take the agency away from us. It's like this technology is going to do stuff to us. And whatever it is is what it is. I think that we have a lot of choices. One of the reasons I came to Stanford, the Center for Human Centered AI, is that I think we can help steer the technology in ways. And if we do it right, we could have the best decade we've ever seen. But it's not inevitable.

[London Breed]

Okay, but we'll call you a mindful optimist is what you say. Do you know much about what they call nominative determinism? You ever heard that phrase?

[E]

No.

[London Breed]

It's the idea that your name, your very name, has some effect.

[E]

That sounds like a good Freakonomics chapter.

[London Breed]

You know? Okay, we wrote a chapter about names that almost everybody remembers wrong. Like we wrote that there is no such a thing.

[E]

Mr. Baker is a baker.

[London Breed]

Yeah, exactly. My name is Stephen Baker and I open a bakery. Or my name is Dennis and I become a dentist and so on. But there are people who believe that. But with you, I got to thinking. I looked up the etymology of your name, Eric Brynjolfsson. The Internet tells me the last name is an Icelandic patronymic.

[E]

Correct.

[London Breed]

Son of Brynjolf, with Brynjolf broken into Bryn, which means armor.

[E]

Yes.

[London Breed]

And yulf, meaning wolf. So son of the armored wolf.

[E]

That is exactly right.

[London Breed]

And Eric usually translates to eternal ruler or ever powerful. So you are the ever powerful son of the armored Wolf, do you think that's why you're an optimist?

[E]

That would make sense. That's what people. When I go to Iceland, that's how people know me. It's true.

[London Breed]

I've heard you talk in the past about, as I understand it, essentially a new way of measuring our economy. You call it GDP B. So I want you to tell us about that. I want you to tell us what the B stands for. But I want you to start at the beginning because. Because many people, even people who have nothing to do with economics, think GDP is a highly imperfect measure of what we want it to measure. And if I recall correctly, I don't know much about this, but I'm sure you do. But the inventor Simon Kuznets, when he created gdp, warned that it should not be used for essentially what we're using it for.

[E]

That's exactly right. Simon Kuznets, with his team in the 1930s, basically developed what we now use as our national accounts, gdp. Productivity is all based on this system of accounts. Paul Samuels called it one of the greatest inventions of the 20th century, but has also been massively abused and misused. Nowadays, if you see a headline economy grew by 3.2%. They mean GDP increased by 3.2%.

[London Breed]

And why is that an imprecise or not useful measurement?

[E]

Well, GDP measures basically everything that's bought and sold in the economy. What that means, with few exceptions, if something doesn't have a price, it's not counted in gdp. So we're missing a lot of important stuff. Clean air. A classic problem is if I cook a meal for myself, that's not part of gdp. But if I hire somebody to cook it, or if somebody pays me to cook it, then it is part of gdp. So you have a lot of little weirdnesses like that. A lot of household productions aren't there. And one of the biggest ones, I'm the director of the Stanford Digital Economy Lab, is all these digital goods that are often free. Wikipedia, search, Facebook, texting, email. If they have zero price other than the electricity and a few other things, they're basically not coming in gdp. Yet people get a lot of value from them. Right now, the average American spends a little over eight hours per day looking at a screen of some sort, tv, computer, whatever, that means they're spending slightly more than half their waking hours interacting with bits, not with all the other things. And that means a big part of our lived experience is these things that are not being well measured by traditional gdp.

[London Breed]

So it's interesting because where you're heading here plainly is, is that we are richer than we appear because how we're counting wealth is imprecise and incomplete. On the other hand, if we're even richer than the numbers say, why are so many people so miserable?

[E]

Well, you're absolutely right. We have a lot more wealth than we had before. But we also did before as well. I mean, there's, you know, television and penicillin. Things were also not counted very well. But wealth is not the same as happiness as we know. And so it doesn't automatically translate one for one. But it doesn't mean we have an imperfect measure of the value that our economy is creating for us.

[London Breed]

There is this famous in economics idea of basically diminishing return on wealth and happiness that was argued by Danny Kahneman and someone else, I can't remember who wrote that original paper.

[E]

Easterlin. It's called the Easterlin Paradox. That what you just said, that as people got richer, they didn't seem to get happier. More recent research found that actually it just sort of is diminishing returns. Like you're saying it's not that it's actually stops.

[London Breed]

Yeah. And I guess this is what gets us to gdp B. So tell us what the B stands for.

[E]

Yeah.

[London Breed]

Who are you working with or for? And what is the intention of invoking this new measure?

[E]

So the B stands for the benefit. As I said earlier, GDP is basically a measure of production, what it costs to produce things. The GDP is trying to capture the consumer surplus. It's the value between what the most you would have paid and what you actually have to pay. So with Wikipedia, if you would have been willing to pay $15 a month and you pay zero, you're getting $15 of consumer service and you're trying to measure that? Yes, we are.

[London Breed]

How do you do that?

[E]

So if I were to do a survey and say, okay, I'll give you $500 to stop using the Internet or stop using email, more realistically, for 30 days, some of you would raise your hands and some of you wouldn't. If I said, okay, what if I gave you $50? What if I gave you $5, you get fewer and fewer people being willing to give it up. And that gives you a downward sloping demand curve. A lot of people think it's worth at least 500, not so many think it's only worth $5. And the area under that curve, we call that consumer surplus. And if you do that for lots of different goods, you start getting a sense of how much value all these different goods are.

[London Breed]

Creating and is this a government project?

[E]

No, it's something I came up with on my own where we decided that we should measure consumer surplus and not just cost. And so we started doing some small scale surveys and we got some money from different groups at National Science foundation, the Sloan Foundation. So I guess part of it is a government project and we'd love to get more support to do it at a larger scale. We're doing about 250 goods right now, including digital goods, non digital goods. We ultimately want to get a representative basket of several thousand goods that we can track periodically alongside traditional GDP and see how they compare.

[London Breed]

The thing that's so interesting to me, I mean, the whole thing is fascinating. I'm curious to know what the ramifications would be if your measure were to become widely embraced. But one consequence that I could imagine is that the way that our government currently looks at regulation and antitrust especially, which is going to change with the new administration for sure. But when you're talking about basically the hidden or uncounted benefits of many, many, many firms that are the targets of regulators now, it could be that those benefits that are not being counted should be reason for antitrust legislation to be considered very differently. Would you say that's the case?

[E]

Yeah, I mean, I think already there is a standard among many antitrust experts. It came out of Chicago, actually, that, you know, we should look at consumer welfare as the ultimate metric.

[London Breed]

But that was a few decades ago. I feel like we moved past that.

[E]

Well, that's the concept, but in terms of measuring. So Lina Khan has a different measure and there's an ongoing debate, but I like the consumer welfare standard, which is, is. Is this concentration, this merger, the spinoff, whatever, is it making consumers better off or worse off? And that's hard to measure. But our tool GDPB gives us a set of measures for that. And you're right. In many cases there's a tremendous amount of value from Google search or from email. One of my students was over in the European Commission and they were upset about all the money that the big companies based here in San Francisco and around the United States States were making on European consumers and saying, oh, this is a very unbalanced thing where there's a lot of money going in this direction. And he pointed out, well, actually if you measure the value that people are getting, there's far more value that French citizens are getting from these services than what they're paying. So the net gain is in the other direction.

[London Breed]

That's really interesting. I mean, I'm guessing that the way that European regulators think about American tech firms, that argument, as true as it might be, is probably not going to change. Change the regulatory position.

[E]

Not as much as them having their own tech firms. And so when they have companies like Mistral. I met with the finance minister in France and he was coming around to the view that, well, actually, maybe tech companies can create some value now that we have one of our own. He didn't quite say it that way.

[London Breed]

I would argue that Silicon Valley, Northern California generally have created an innovation economy that is now global and just massively large and massively influential in many ways. In a way, I feel like the global economy kind of is at root the Silicon Valley economy. I know we still do a lot of other stuff in this country and it's not the majority of the economy by any stretch, but it's such a fundamental part, and more so it has such sway in our daily lives, in our political lives and so on. And when I hear you talk about gdp, I think, if anything, we are underweighting the leverage of this economy here. So I'm curious to know if you think I'm medium wrong, Totally wrong, Only a little bit wrong or maybe a little bit right.

[E]

I agree. I mean, look, I moved out here four years ago from Boston, another pretty innovative place, but I really underestimated how amazing the culture is out here. I am constantly meeting people doing startup things. They have these grand visions and dreams, and I think they're mostly pretty sincere about wanting to change the world for the better. I moved here in summer of 2020. I remember it was Covid. We had this garden party and I sort of half jokingly, nervously said, hey, are you guys all going to be moving to like, Austin or Miami or something? Did I kind of miss the party? And they laughed at, oh, don't worry, because it kind of seems like San Francisco and the Bay Area is going downhill. They said, don't worry, there'll be something. And we didn't know about ChatGPT at that point. Maybe a few of the people in the room might have been working on it for all I know. But then of course, there's this explosion and if anything, I think the tech innovation scene is even more concentrated in the Bay Area now than it was when I came in 2020. And there's just a whole wave of innovations. People talk about it, but in an economist I don't really fully appreciate until I'm here. There's a cultural element to it, an attitude. It partly attracts people from around the world who have this mindset of wanting to change the world. People help each other to do it. And like you said, it's been a tremendous engine of creativity and wealth creation.

[London Breed]

And what about the. I mean, I said it derisively and half jokingly, but what about the failed state feel that San Francisco has projected to the world at least? How do you reconcile the, you know, the epicenter of the global tech machine and economy with the fact that this is a city that has repelled people?

[E]

Yeah, it's a tragedy. Part of it, to be fair. I think it's overrated. Like London Reed was saying. I heard her. You know, apparently it has the lowest murder rate in 60 years. And, you know, I come up to San Francisco a fair number of times. I don't think it's like what is described by Elon Musk or other others on Twitter. Well, there's a good timing.

[London Breed]

But part.

[E]

Of it is real. I just walked over from Union Square and there were definitely some homeless people on the street in the Green Room. I gave London Breed a little bit of a hard time, you know, about why do we allow this? I think in some ways, I'm not like a sociologist, but maybe all the wealth and success, success allows a lot of sort of slack and allows them to get away with a lot of mismanagement. I'm not singling out her or anybody in particular, but I do think a lot of that government is not managed as well as it could be. They can get away with it because there's just so much innovation and wealth being created that you can have a lot of slack. I'm hoping that will get tightened up a bit because it doesn't reflect well on California or on San Francisco. And with all the money being poured in to try to support San Francisco and the Bay Area, we should have the cleanest streets, the best police force, the safest neighborhoods, and we don't.

[London Breed]

So if you were mayor for, you.

[E]

Know, a month, I think I'd be a terrible mayor.

[London Breed]

Economists do think differently about problem solving, right?

[E]

Well, a lot of them are probably just common sense, but a few of them, you know, where economists maybe differ, Like, I'm a huge fan of congestion pricing. Almost everyone who I know who is not an economist doesn't think that's a good idea, but. Well, I guess some of these guys may be economists. One of the first rules of taxation is you tend to get less of what you tax. So if you're taxing work and investment, you're going to get less of that. Why not tax pollution. Why not tax congestion. I also sometimes advise Singapore and they've put in place all these rules that economists have.

[London Breed]

You sometimes advise Singapore?

[E]

No, no.

[London Breed]

Well, on Thursdays or what?

[E]

I've been there and met with senior officials, just like I meet with senior officials in lots of different places. I mean, not like an official advisor or anything.

[London Breed]

Do you have a badge of some kind?

[E]

A badge?

[London Breed]

You have a cape?

[E]

No, no. I am just a professor. But what I like about Singapore is they listen to professors and they don't listen to professors in the U.S. congress. And that's one of the reasons that they're successful over there. I think I'm biased. And one of the reasons so many people are leaving California is because it's so expensive here and it doesn't need to be. And the reason it's so expensive is because a lot of people would love to live here, but the housing prices are insanely high. Because. Because it's supply and demand. It's elementary. It's Economics 101. These are things that are actually really easy to fix and we could do a lot better.

[London Breed]

I see why they call you the ever powerful son of the armored wolf. That was fantastic. Eric Brynjolfsson, thank you so much.

[Stephen Dubner]

I would like to thank Eric Brynjolfsson, Coleman Strumpf and Mayor London Breed for joining us on stage in San Francisco. And I would especially like to thank the 1500 folks who bought a ticket and came to hang out with us. If you want to see Freakonomics Radio live, we have an upcoming show on February 13th in Los Angeles with Ari Emanuel and other special guests. Tickets [e-mail] one word and if you liked hearing what Eric Brynjolfsson had to say about the impact of AI, be sure to catch the next episode of Freakonomics Radio where we will hear about a new technology designed to thwart AI that's right here in your podcast feed at our new time Friday morning. Until then, take care of yourself and if you can, someone else too. Freakonomics Radio is produced by Stitcher and Renbud Radio Radio. This episode was produced by Abigail Lowenthal, Ellen Frankman, Morgan Levy and Zach Lipinski, with research help from Dalvin Abuaji. Special thanks to Jesse McDaniel with Fresh AV, all the folks at Another Planet Entertainment, the crew at the Sidney Goldstein Theater, and our partners SiriusXM and KQED live. The Freakonomics Radio Network staff also includes Alina Coleman, Augusta Chapman. Chapman, Eleanor Osborne, Elsa Hernandez, Gabriel Roth, Greg Rippon, Jasmine Klinger, Jeremy Johnston, John Schnarz, Neal Carruth, Sarah Lilly and Teo Jacobs. Our theme song is Mr. Fortune by the Hitchhikers. Our composer is Luis Guerra. Once again, thanks for listening.

[Eric Brynjolfsson]

I was able to get the Chinese government to commit to allowing San Francisco to host pandas.

[London Breed]

You went to China to.

[Eric Brynjolfsson]

I went to China to get some panda bears. It's called Panda Diplomacy. The Freakonomics Radio Network the Hidden side of Everything Stitcher.

[Stephen Dubner]

Freeconomics Radio is sponsored by the State Department's Bureau of Consular Affairs.

[London Breed]

Maybe your idea of a trip abroad.

[Stephen Dubner]

Is is an all inclusive cruise or exploring museums and local delicacies, or climbing the planet's tallest peaks. There's a whole world of wonder out there and you need a valid passport to go.

[London Breed]

So check.

[Stephen Dubner]

Apply for or renew yours at least six months before you travel. And visit travel.state.gov for State Department guidance on passports, country specific safety info and more.

[F]

Spectrum Business knows that small business owners put in the work. It's unlimited hours, unlimited effort and unlimited passion all to unlock the unlimited potential of your business. Get fast reliable Internet, advanced WI fi with security shield and an unlimited mobile line, all only $49.99 a month. Learn how Spectrum Business can connect your business to unlimited [e-mail] business. It's your business made limitless. That's Life Unlimited. That's Spectrum Business. Restrictions apply often not available in all areas.

[London Breed]

Hey, this is Jeff Lewis from Radio Andy Live and Uncensored.

[Coleman Strumpf]

Catch me talking with my friends about.

[London Breed]

My latest obsessions, relationship issues and bodily ailments. With that kind of drama that seems to follow me, you never know what's going to happen.

[Eric Brynjolfsson]

You can listen to Jeff Lewis live at home or anywhere you are. Download the SiriusXM app for over 425 channels of AD, free music, sports, entertainment and more. Subscribe now and get 3 months free. Offer details apply.