Economics comes to life: Not your ordinary freak show

Freakonomics: A Rogue Economist Explores the Hidden Side of Everything
Steven D. Levitt and Stephen J. Dubner
HarperCollins, 2005, 256 pages

Reviewed by Rachel Stern

Steven D. Levitt is no ordinary economist. After graduating from Harvard University in 1989, Levitt later received his Ph.D. from MIT in 1994 and then developed a reputation as a cutting-edge economist. In 2004, he won the prestigous John Bates Clark Medal, bestowed every two years to the best American economist under the age of forty.

Levitt is currently a member of the elite economics department at the University of Chicago. He has found success there in a stock of conventional economic analysis: "Projecting Bias in Predicting Future Utility" or "The Efficiency of Investment in the Presence of Aggregate Demand Spillovers." But what's drawn notice far and wide is Levitt's very unconventional analysis of applying research methods beyond the traditional scope of economics.

Out of the rarefied air of academia, Levitt taking center stage shows that economics is not a "fourth or fifth language" but an exciting tool that can be used to represent how the world actually works. With interests in cheating, corruption, and crime, Levitt explores the unasked questions of everyday life.

This is an approach that ultimately makes economics more newsworthy, particularly if it displaces what appears to be on the surface of common sense. To get the public to notice, Levitt found a midwife in journalist Stephen J. Dubner who profiled the iconoclastic economist for The New York Times. The end result of this collaboration is Freakonomics.

The scope of Levitt's exploration of "the hidden side of everything" appears endless. Considering the anxiety of parenting, Levitt reviews the near-endless techniques that are the obsessions of every parent. He concludes that most are misplaced and irrational. Levitt notes that parents are more worried about allowing their child to play in a gun-owner's home than in one that has a swimming pool. Levitt points out that a swimming pool is roughly 100 times more dangerous than a gun, yet few are calling for the abolition of swimming pools.

Using data from the Early Childhood Longitudinal Study, Levitt argues that certain factors are highly correlated with a student's test scores. For example, having highly educated parents with a high socioeconomic status is strongly correlated with having higher test scores. This is rather obvious, but it's worth restating considering that people are attracted to alternative explanations. Moreover, the outcomes here challenge our egalitarian instincts to improve the lives of individuals. Spanking or not spanking, television watching, bedtime reading and museum attendance-despite the best of intentions-are found not to correlate to better test scores. It appears that Levitt sides with the nature as opposed to nurture camp.

When experts sought to explain the dramatic drop in crime rates during the 1990s, it was the intrepid Levitt who provided the most intriguing and alarming answer.

During this period, crime fell in every category and in every part of the country. Within five years, the teen murder rate fell over 50 percent. Criminologists and social scientists were delighted at the unexpected decline in crime in the U.S. and offered many explanations. Experts came up with explanations such as the roaring economy, increased reliance on prisons, the abundance of gun control laws, and the inventive policing strategies. Levitt faults these reasons for their lack of explanatory power. The best reason, increased reliance on prisons, can only account for roughly one-third of the drop in crime. Setting aside the perceived wisdom, Levitt suggests a new answer that put him in the middle of controversy: the legalization of abortion.

Levitt suggests that the Supreme Court's 1973 ruling that legalized abortion in all 50 states was a dramatic factor in the decline of crime rates more than two decades later. According to Levitt, the spike in abortions for poor, un-married, teenage mothers precluded the births of children who were more likely to be criminals. As the crime rates began their decline in the mid 90s, Levitt says these unborn children would have entered the periods of their lives in which they were at risk of committing crimes. (To be fair, Levitt does not take a political or moral stance for or against abortion. That's not enough for some conservatives who question his morality and methodology. For a dissenting view on Levitt's abortion and crime study, see Steve Sailor in The American Conservative.)

Because Freakonomics has no one cohesive thesis, you might wonder where this text will leave you in the end. As the nominally two-handed economist, Levitt avoids taking political sides-opting instead to let the research speak for itself.

One may be infuriated by the claims that the establishment of the right to an abortion via Roe v. Wade reduced crime in the 1990s and that all the work you put into parenting is a waste of time. One may be shocked that teachers cheat (Levitt's research in Chicago led to the firing of 12 teachers) and that nature is a fierce determinant of one's lot in life. But in the end, this book will make you think, and very differently than ever before. Introducing one to new ways of thinking about complex problems is one of the virtues of this book. There's really nothing freaky about that.

Rachel Stern studies economics at Bates College. She served as a summer intern at BHI this past year.