What The Bagel Man Saw

By Stephen J. Dubner and Steven D. Levitt

Published: June 6, 2004

Once upon a time, Paul F. dreamed big dreams. While studying agricultural economics at Cornell, he wanted to end world hunger. Instead, after doctoral work at M.I.T., he wound up taking a job with a research institute in Washington, analyzing the weapons expenditures of the United States Navy. This was in 1962. After four years came more of the same: analyst jobs with the Bureau of the Budget, the Institute for Defense Analyses, the President's Commission on Federal Statistics. Still, he dreamed. He had ''potent research ideas,'' as he recalls them now, which the Environmental Protection Agency failed to appreciate. He developed a statistical means of predicting cancer clusters, but because he was an economist and not a doctor, he couldn't make headway with the National Cancer Institute. He still loved the art of economics -- the data-gathering, the statistical manipulation, the problem-solving -- but it had led him to a high-level dead end. He was well paid and unfulfilled. ''I'd go to the office Christmas party, and people would introduce me to their wives or husbands as the guy who brings in the bagels,'' he says. '''Oh! You're the guy who brings in the bagels!' Nobody ever said, 'This is the guy in charge of the public research group.'''

The bagels had begun as a casual gesture: a boss treating his employees whenever they won a new research contract. Then he made it a habit. Every Friday, he would bring half a dozen bagels, a serrated knife, some cream cheese. When employees from neighboring floors heard about the bagels, they wanted some, too. Eventually he was bringing in 15 dozen bagels a week. He set out a cash basket to recoup his costs. His collection rate was about 95 percent; he attributed the underpayment to oversight.

In 1984, when his research institute fell under new management, he took a look at his career and grimaced. ''I was sick of every aspect of the whole thing,'' he says. ''I was discouraged. I was tired of chasing contracts. So I said to management: 'I'm getting out of this. I'm going to sell bagels.'''

His economist friends thought he had lost his mind. They made oblique remarks (and some not so oblique) about ''a terrible waste of talent.'' But his wife supported his decision. They had retired their mortgage; the last of their three children was finishing college. Driving around the office parks that encircle Washington, he solicited customers with a simple pitch: early in the morning, he would deliver some bagels and a cash basket to a company's snack room; he would return before lunch to pick up the money and the leftovers. It was an honor-system commerce scheme, and it worked. Within a few years, he was delivering 700 dozen bagels a week to 140 companies and earning as much as he had ever made as a research analyst. He had thrown off the shackles of cubicle life and made himself happy.

He had also -- quite without meaning to -- designed a beautiful economic experiment. By measuring the money collected against the bagels taken, he could tell, down to the penny, just how honest his customers were. Did they steal from him? If so, what were the characteristics of a company that stole versus a company that did not? Under what circumstances did people tend to steal more, or less?

As it happens, his accidental study provides a window onto a subject that has long stymied academics: white-collar crime. (Yes, shorting the bagel man is white-collar crime, writ however small.) Despite all the attention paid to companies like Enron, academics know very little about the practicalities of white-collar crime. The reason? There aren't enough data.

A key fact of white-collar crime is that we hear about only the very slim fraction of people who are caught. Most embezzlers lead quiet and theoretically happy lives; employees who steal company property are rarely detected. With street crime, meanwhile, that is not the case. A mugging or a burglary or a murder is usually counted whether or not the criminal is caught. A street crime has a victim, who typically reports the crime to the police, which generates data, which in turn generate thousands of academic papers by criminologists, sociologists and economists. But white-collar crime presents no obvious victim. Whom, exactly, did the masters of Enron steal from? And how can you measure something if you don't know to whom it happened, or with what frequency, or in what magnitude?

Paul F.'s bagel business was different. It did present a victim. The victim was Paul F.

It is 3:32 a.m., and Paul F. is barreling down a dark Maryland road when he jams on the brakes and swears. ''I forgot my hearing aids,'' he mutters. He throws the gearshift into reverse and proceeds to drive backward nearly as fast as he had been driving forward.

He is 72, and his business is still thriving. (Thus his request to mask his full name and his customers' identities: he is wary of potential competitors poaching his clients.) His daughter, son-in-law and one other employee now make most of the deliveries. Today is a Friday, which is the only day Paul F. still drives. Semiretirement has left him more time to indulge his economist self and tally his data. He now knows, for instance, that in the past eight years he has delivered 1,375,103 bagels, of which 1,255,483 were eaten. (He has also delivered 648,341 doughnuts, of which 608,438 were eaten.)

Stephen J. Dubner, an author and journalist in New York City, and Steven D. Levitt, an economist at the University of Chicago, are writing a book about the economics of baby names, cheating, crack dealing and real estate.