Freakonomics

by Steven D. Levitt & Stephen J. Dubner

Cover image

Publisher: William Morrow
Copyright: 2005, 2006
Printing: 2006
ISBN: 0-06-123400-1
Format: Hardcover
Pages: 284

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Freakonomics is, as it warns, a somewhat random grab bag of topics. It's largely a survey of the work of Steven D. Levitt, who uses the techniques of economics to answer questions other than the typical ones asked in the business report. He studies questions such as whether real estate agents work to sell your house for the best price or whether there's cheating in sumo tournaments. The other author, Stephen J. Dubner, is a journalist who started by writing a profile of Levitt for New York Times Magazine that they expanded into this book and now also a blog.

The unifying theme of this book for me was finding ways to ask questions so that one's available statistics and data can provide an answer, and then an exploration of the counterintuitive answers that can result. Some of these efforts were more successful than others. The revelation that real estate agents, when sellling their own houses, hold out longer and sell for a higher price I hope doesn't come as a surprise to anyone with a modicum of necessary cynicism, although the analysis of incentives that leads to that decision is a helpful reminder. Some of the questions Levitt and Dubner study felt trivial or uninteresting to me. But there are also some gems.

For me, the highlight was the analysis of why crime rates have dropped so dramatically in the last decade. Unlike some of the other questions, where the authors only discuss what they believe to be the best theory, here they also analyze all of the theories that were presented in the news media and either support or refute them, which adds a great deal of interesting meat to this section. Some of the results were intuitive: increased use of capital punishment made no difference, nor did stricter gun laws, but increased police on the street makes a significant difference. Some were more surprising: Levitt and Dubner also argue that the economy made little difference. They also directly disagree with the "broken windows" theory of policing, namely that increased attention to minor crimes in New York City led to its significant crime drop, a theory popularized by Malcolm Gladwell in The Tipping Point. It's a lovely theory that one would like to believe, but Levitt and Dubner show that its implementation coincided with a significant increase in the number of police, and similar increases in force staffing caused similar improvements in crime rates in other cities without applying the broken windows theory.

But this discussion is also a prelude to a rather uncomfortable and controversial theory. Levitt argues in academic papers that one of the most significant causes of the current decrease in crime in the United States is Roe v. Wade and legalized abortion. The statistical details of the argument are cited in footnotes and defended in a technical discussion as part of the supplemental material at the end of the edition that I read, and I'm not qualified to review it. But once one gets past the initial surprise (and a sense of moral unease that I think even strongly pro-choice people like myself will feel), the theory makes a great deal of intuitive sense. Babies who would have been aborted under legalized abortion are much more likely to have home lives if not aborted that we already know increase the chances of crime: drug-addicted mothers, single parents, uninvolved parents, poor economic circumstances, family histories of mental illness, etc. One would hope that increased access to birth control would have similar effects without the trauma of abortion, but that's not clear. One of the uncomfortable messages of Freakonomics is that sometimes the most effective causes are either things over which we have no control or things that have other significant negative effects, and that we can't get away from making hard tradeoff decisions by ignoring effective but unsavory measures. (Also in that vein, the authors present evidence that increased incarceration rates do significantly reduce crime.)

The other highlight of the book for me is the analysis of the economic structure of drug trafficking, based on the extensive investigative work of Sudhir Venkatesh, at the time a University of Chicago student in sociology. This is a great example of practical economics: demand and supply for jobs sets wages for low-level drug dealers incredibly low, the incentive structure is built around the lottery chance of moving up in the organization and making real money, and the people highest in the organization run the greatest legal risks and make correspondingly huge amounts of money. Levitt and Dubner lay out clearly and concisely why it makes economic sense that nearly all drug dealers are poor, why the money collects at the top of the hierarchy and creates huge inequality in compensation within a drug-dealing organization, and how the crime rates between drug dealers depend on market forces. I love places where economics refutes the idea that some group are inhuman monsters by laying out clearly why the incentives presented to them naturally lead to the choices they're making.

Other topics covered include teachers cheating on standardized tests on behalf of their students and the nature versus nurture argument over whether choices parents make after birth have that much effect on the lives of their kids (Levitt and Dubner argue no). Unfortunately, what felt like an excessively large portion of the book is devoted to a statistical analysis of baby names and some discussion of whether a name has an effect on a child's success in life, a topic that I found only mildly interesting at best and tedious at the length at which it was discussed. But that was the only complete miss for me; everything else was interesting, if not significant. All of these anecdotes are short, in some cases shorter than I would have preferred. Freakonomics is a bit more of a collection of trivia than an in-depth analysis of its case studies, although it does have extensive endnotes referencing the underlying economics papers.

The revised version that I read includs at the end the original New York Times Magazine profile of Levitt (which I found excessively fawning) and a collection of posts from the Freakonomics blog. The posts are, well, blog posts. They're rather random and hit-or-miss, and the only merit of having them in print is that it pads out an otherwise very short book and makes them a bit easier to read than dealing with web pages and microfonts on a computer screen.

Freakonomics is an unusual way of introducing economic and statistical thinking, and I think it's valuable in the way it shows how structured approaches to questions and reliance on data can lead to unintuitive but apparently more accurate results. I think it's better-supported than Gladwell's The Tipping Point, which is the book it reminds me of the most, but Gladwell is a somewhat better storyteller. It does suffer from the standard problem of economics, namely that controlled experiments are generally impossible and one therefore has to make up theories to fit the data. If that doesn't give you pause and lead you to take all conclusions here with a grain of salt, you should read Bad Science. But as such books go, it's reasonably well-defended.

I enjoyed this book, but I think I came away from it with little but random trivia, despite the effort to teach an economic way of thinking. It felt too short and insufficiently deep on the analysis side, and the baby names discussion and the appended blog posts felt like padding. I can see why the book turned into a successful blog full of five or six paragraphs on some unintuitive bit of economics. That's entertaining, but somehow unsatisfying. Recommended for what it is, but I still want the deeper and more challenging book that feels like it's lurking underneath.

Rating: 7 out of 10

Reviewed: 2009-08-24

Last modified and spun 2014-12-21