Russ Roberts on how economics can help marketing and modern life lessons from historical economists – MAF167

On the show this week is my guest Russ Roberts, an economist, author and rapper.

We talk about how economic theory can help marketers simplify messages for their customers, writing fiction to teach economic theory and the modern life lessons we can learn from Adam Smith .

Welcome to episode 167  of the Marketing and Finance Podcast.

Russ Roberts on how economics can help marketing and modern life lessons from historical economists - MAF167

What you’ll hear about in this episode

  • How Russ became interested in economics
  • Why making assumptions can help marketers make things simpler
  • How economics influences the marketing process
  • What inspired Russ’s novels – fiction that teaches economic theory
  • What Adam Smith can teach us about living in the world today
  • Why empathy is important to humanity

Who is Russ Roberts?

Russ trained as an economist at University of Chicago. He’s always had an interest in non-economic stuff, which has led his career down varied paths. He’s created rap videos, an animated poem and written three novels that teach economics through fiction and dialogue.

Russ became a podcaster in 2006.  He says this is the most interesting thing he does with his time.

He’s now a Fellow at Stanford University’s Hoover Institution and has just written a book, “How Adam Smith can Change Your Life.”

He tries to make economics interesting and accessible to a non-academic audience.

Summary of our chat

Russ found he was good at economics. As he studied it became fascinated with its puzzle-like nature and the way pieces fit together. He says that when it’s properly taught, economics is less about mathematics and more about philosophy, psychology and human nature. The dryer side is less interesting and effective, even though it’s what serious economists do.

People make fun of economists because they make a lot of assumptions. But assumptions help us to understand the complex world and grapple with the richness of life. People aren’t all the same, but marketers can benefit from using assumptions to look at price and supply and demand. Marketers can learn from economic models to help them simplify the world.

Econometrics is the application of statistical methods to economic problems. There’s a lot of that in marketing, although it’s imperfect. It’s an attempt to hold certain things constant, such as in an advertising campaign or price changes. Despite the flaws, you can still learn from it and apply it to marketing for the benefit of customers.

In the early 1990s, Russ was worried about the trade situation in the US, particularly Japan taking over industries. He wanted to look at how trade allows us to flourish. This led to his first novel – a dialogue between an American executive and David Ricardo, the English economist. He wrote fiction to teach economic theory.

19th century economist Adam Smith is most famous for, “The Wealth of Nations”. But his other book, “The Theory of Moral Sentiments”, is more interesting for today’s audience. It’s an attempt to understand human nature, self-interest, and why we care about others. Russ’s book takes Smith’s view of humanity and spins out lessons for the 21st century.

Smith argues that trade encourages us to be empathetic, because if we want to be successful we have to put ourselves in our customers’ shoes. We care about how people perceive us and want to earn their respect. One application of this is how products make us feel a part of something and allow us to express status.

A marketing campaign or product that grabbed Russ’s attention

Russ says he has a handful of products which are so pleasant to interact with that they dwarf their equivalents from 10 and 20 years ago. For instance, Spotify gives access to incredible music in the car and at home, which is such a delight but something that’s not captured by its marketing campaigns.

Russ’s book recommendation

Russ doesn’t read a lot of business books, because most of them are telling us things we already know. Sometimes they can fool people into thinking they can’t learn from latest trends. This is a deep misunderstanding of why we read and take in the world. Sometimes reading about things we already know reminds us about them. otherwise we might forget when it matters most.

He’s a big fan of author Nasim Taleb, and Fooled by Randomness is an extended essay on how the world is random, and full of risks.

Links and contact details

Read Russ’s Book – How Adam Smith Can Change Your Life.

Watch Russ’s economics rap video

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