Freakonomics

Last year, I said some nice

things about Steven Levitt and Stephen Dubner, or at least about an article

they wrote in the New York Times Magazine:

The best piece of all in the magazine, however, doesn’t look big, it looks

small. Stephen Dubner and Steven Levitt have found an absolute gold mine in

Paul F., a trained economist who now runs a bagels-and-doughnuts service for

local offices. His business runs on the honour system: throw a buck in the

box for a bagel, or 50 cents for a doughnut. And, of course, he’s kept detailed

data on delinquency rates, which go up when the weather is bad, or Christmas

is nigh, or even when the office exceeds a certain size. There are some wonderful

results…

The two Steves are very different individuals. Stephen

Dubner is a journalist and regular contributor to the New York Times Magazine

who wrote an article about Steven Levitt in 2003. From that article first sprang

the bagel story, and now a fully-fledged book, Freakonomics.

(In the book we get the bagel article all over again, except for now Paul F.

is graced with his full name: Paul Feldman.) The publishers liked my blog about

the article so much that they sent me an advance copy of the book; I liked the

article so much that I very much looked forward to reading it. A match made

in heaven, really – or at least in the blogosphere.

Steven Levitt is much

better known: mention his name to anybody even peripherally associated with

economics, and they have a tendency to get extremely excited. Levitt is not

a macroeconomist at all; rather, he’s an expert at microeconomics,

where he tries to find statistically interesting or important patterns in everyday

things. Just scrolling down his list

of recent publications is mouthwatering: whose interest wouldn’t be piqued by

a peer-reviewed article entitled "A Test of Mixed Strategy Equilibria:

Penalty Kicks in Soccer"?

In fact, Levitt has a strong interest in both sports and sports betting: he’s

shown that simply by betting on home underdogs in NFL games, people can break

even, and he has a secret plan (really!) to make money betting on horses. Unfortunately,

none of that material makes it into the book.

Rather, the aim of the book is to popularize Levitt’s work more generally,

and to introduce his brand of thinking to the general public in a format which

was slightly longer lasting than an article for the New York Times magazine.

Levitt would provide the ideas, and Dubner would provide the prose.

The book also, quite explicitly, aims to capitalize on the success of Malcom

Gladwell’s The Tipping Point, or Oliver Sacks’s The Man Who Mistook

His Wife For A Hat: books where anecdotal evidence is corralled in support

of broader, more empirical, and yet extremely original, ways of looking at the

world.

There’s a problem, however: it turns out that while Levitt does have a very

interesting way of looking at the world, he has very little in the way of broader

theses which he might wish to support. The authors make no bones about this:

Most books put forth a single theme, crisply expressed in a sentence or two,

and then tell the entire story of that theme… This book boasts no such unifying

theme. We did consider, for about six minutes, writing a book that would revolve

around a single theme – the theory and practice of applied microeconomics,

anyone? – but opted instead for a sort of treasure-hunt approach.

What that means, in practice, is a series of disjointed chapters, some of which

are much better than others. In fact, it’s the earlier ones which are better

than the later ones, which means that readers are likely to come away disappointed,

as though they were promised something which was never delivered. And due to

its disjointedness, if someone is asked what the book is about, they’re not

really going to be able to come up with an answer. The subtitle of the book

is "A Rogue Economist Explores the Hidden Side of Everything", but

that doesn’t really help us all that much – especially since Levitt, winner

in 2003 of the John Bates

Clark Medal (previous winners: everyone from Milton Friedman to Paul Krugman

and Larry Summers), is no one’s idea of a "rogue economist".

In fact, Levitt is entirely unthreatening to the economic establishment, which

is one reason why he and his co-author have to create a straw man, in the form

of something called "the conventional wisdom", against which Levitt

can valiantly fight. Yet after telling us in their introduction that "the

conventional wisdom is often wrong", the authors have no problem relying

on it whenever they feel like it.

The most egregious form of conventional wisdom is probably the urban myth:

something which millions of people believe, but which is entirely fictional.

Kidney harvesting,

that sort of thing. Once you know about urban myths, you generally know them

when you see them, and when my friend Paul told me a couple of years ago about

a friend of his who worked at a hospital and who witnessed an African-American

woman naming her daughter Shithead (pronounced "Shateed"), I didn’t

think it was the literal truth.

But here’s Levitt and Dubner:

Roland G Fryer Jr, while discussing his names research on a radio show, took

a call from a black woman who was upset with the name just given to her baby

niece. It was pronounced shuh-TEED but was in fact spelled "Shithead"…

OrangeJello, LemonJello and Shithead have yet to catch on among the masses,

but other names do… It would be an overstatement to suggest that all parents

are looking – whether consciously or not – for a "smart"

name or a "high-end" name. But they are all trying to signal something

with a name, whether the name is Winner or Loser, Madison or Amber, Shithead

or Sander.

In other words, when it suits them, Levitt and Dubner lap up the conventional

wisdom to the point at which they perpetuate something which has all the markings

of an urban myth. (Phone-in talk shows on the radio are one of the prime propagating

vectors of these things.) Most likely, the woman who phoned in genuinely believed

that at least one black woman (a "friend of a friend", no doubt) had

named her daugher Shithead, and she simply personalized the anecdote for the

sake of making it more immediate to the radio audience. That’s the way that

urban myths work: it’s always a friend of a friend, never a friend of a friend

of a friend. But Roland Fryer was simply laughing, so he didn’t check her claim

out, and Levitt and Dubner have now given a semblance of academic legitimacy

to what is essentially a racist stereotype.

In fact, there’s more than a little editorialising going on throughout the

book, often for no particular reason. In what I expect is going to be the jacket

copy on the hardback, we’re given a list of "provocative questions"

that Levitt asks, like, um, "Why do we spend more on chewing gum than on

campaign contributions?" In the event, that question is never really asked,

let alone answered. Rather, we get a section of the introduction which begins

like this:

Of all the truisms about politics, one is held to be truer than the rest:

money buys elections.

It ends like this:

What about the other half of the election truism – that the amount

of money spent on campaign finance is obscenely huge? In a typical election

period that includes campaigns for the presidency, the Senate, and the House

of Representatives, about $1 billion is spent per year – which sounds

like a lot of money, unless you care to measure it against something seemingly

less important than democratic elections.

It is the same amount, for instance, that Americans spend every year on chewing

gum.

Now it might well be true that "money buys elections" is conventional

wisdom. But I don’t believe that most people think that it is "truer"

than all other bits of political conventional wisdom, such as, say, the "divided

nation" hypothesis. And as for the chewing-gum factoid, a close reading

reveals that what the authors are doing is taking a whole election cycle –

four years, I would assume – and working out the annual spending per cycle.

In a presidential election year like 2004, it’s probably safe to say that Americans

spent much more on political donations than they did on chewing gum.

Normally, I would be much more forgiving of such rhetorical excesses than I

am here. But this is a book which claims to be solidly rooted in empirical and

indubitable data. The running theme of the book is "you might think

X, but in fact, Y". So lazy assumptions are more egregious here

than they are normally.

Levitt and Dubner like to get holier-than-thou when others make mistakes. At

one point, they eviscerate a homeless advocate named Mitch Snyder, for saying

that there were 3 million homeless Americans:

When Snyder was pressed on his figure of 3 million homeless, he admitted

that it was a fabrication… It may be sad but not surprising to learn that

experts like Snyder can be self-interested to the point of deceit. But they

cannot deceive on their own. Journalists need experts as much badly as experts

need journalists… Working together, journalists and experts are the architects

of much conventional wisdom.

So what happens when Dubner and Levitt – a classic pairing of a journalist

and an expert – get together? It may be sad but not surprising to learn

that even they can come up with decidedly dodgy numbers. Here’s one:

Economists have a curious habit of affixing numbers to complicated transactions.

Consider the effort to save the northern spotted owl from extinction. One

economic study found that in order to protect roughly five thousand owls,

the opportunity costs – that is, the income surrendered by the logging

industry and others – would be $46 billion, or just over $9 million

per owl.

When alarmist figures in the billions start getting quoted, I immediately start

getting suspicious. So I

went to the footnotes, which cited a paper by Jason Shogren from which, I believe,

this

is extracted. Here’s what Shogren actually writes:

Opportunity costs have been estimated for a few high-profile, regional ESA

conflicts such as the northern spotted owl. One study estimated that an owl

recovery plan that increased the survival odds to 91 percent for a population

of about 1,600 to 2,400 owl pairs would decrease economic welfare by $33 billion

(1990 dollars), with a disproportionate share of the losses borne by the regional

producers of intermediate wood products, a relatively small segment of the

population (Montgomery et al. 1994). If the recovery plan tried to push a

goal of 95 percent survival odds, costs increased to $46 billion. Another

study estimated the short-run and long-run opportunity costs to Washington

and Oregon of owl protection at $1.2 billion and $450 million (Rubin et al.

1991).

In other words, Levitt and Dubner have taken the very highest estimate from

Shogren’s paper, one which Shogren didn’t even come up with himself, and used

it uncritically. They could have used the $1.2 billion and $450 million estimates

instead, of course, but chose not to for reasons we can only guess at.

I also sent Shogren an email, asking him what he thought of this use of his

number. He said that the $46 billion was "an outside estimate," and

added:

We used the number to illustrate what little we do know about costs of the

Endangered Species Act. Other numbers we cite in the paper say that the ESA

is more about transfers of wealth (from agricultural to recreation) than about

the loss of wealth. 

The really weird thing is that the factoid aboout the spotted owl seems to

have been dropped into the book utterly randomly: it’s there only to illustrate

the broader point that economists try to measure all manner of different things.

But why would Levitt and Dubner concentrate only on the costs of saving the

spotted owl, while ignoring the benefits? And why would they pick a number which

seems designed to shock, rather than a much more reliable number which is less

shocking, like the cost per life saved of installing various safety features

on roads or subways? The broader context, after all, is that of abortion, and

whether it’s possible to quantify the costs and benefits of abortion, after

taking into account its role in lowering the crime rate. Saved lives, in this

context, seem far more germane than saved owls.

But throughout the book, the authors veer wildly between presenting Levitt’s

research and presenting striking information (Shithead! $46 billion! Chewing

gum!) seemingly just for the sake of showing readers how crazy this world is.

When Levitt and Dubner venture into the anecdotal, then, this is a weak book.

I’m sure that the decision to do so was based on conventional wisdom within

the publishing world: that if you want to write for a mass audience about empirical

ideas, then you have to boil everything down to anecdote. So much for ignoring

conventional wisdom.

The empirical parts of the book are much stronger. Chapter 1, for instance,

entitled "What Do Schoolteachers and Sumo Wrestlers Have in Common?",

gives a number of good examples of when people cheat, and how statisticians

like Levitt can catch them doing so. First are Chicago schoolteachers: by looking

at raw test results, Levitt could see where they had altered their pupils’ scores

before handing the tests in. Then there are the sumo wrestlers: it turns out

that pairs of them often engage in deals where one wrestler will win one match

and the other will win the next, when such a deal will keep the first wrestler

in the top leagues. Again, this is quite clear from the statistical data, if

you know where and how to look.

Even in this chapter, however, with three different examples of Levitt’s work

(here’s where we find the bagel guy), the authors aren’t happy unless they add

in some extra colour. So we get padding, too: apparently another teacher cheated,

at the University of Georgia, in 2001. There was no statistical analysis involved

in his capture, and his story doesn’t help the structure of the chapter at all,

but we’re told about it anyway: if we’re interested in cheating schoolteachers

in Chicago, might we not be interested in cheating university teachers in Georgia?

I think the inclusion of the story betrays a certain lack of faith in how compelling

Levitt’s story really is. While Levitt is interested in ways of catching cheats,

the chapter’s attention keeps wandering from that subject, which means we end

up learning about other forms of cheating, as opposed to other forms of detecting

cheating.

Elsewhere, we’re treated to a mildly diverting treatise on the economics of

fear, first introduced in Chapter 2, when the authors discuss how a very small

number of lynchings managed to cow an entire race into submission during the

1940s.

There are few incentives more powerful than the fear of random violence –

which, in essence, is why terrorism is so effective.

This is expanded upon in Chapter 5:

Fear best thrives in the present tense. That is why experts rely on it; in

a world that is increasingly impatient with long-term processes, fear is a

potent short-term play. Imagine that you are a government official charged

with procuring the funds to fight one of two proven killers: terrorist attacks

and heart disease. Which do you think the members of Congress will open up

the coffers for? The likelihood of any given person being killed in a terrorist

attack are infinitessimally smaller than the likelihood that the same person

will clog up his arteries with fatty food and die of heart disease. But…

Let’s put to one side the fact that "infinitessimally smaller" actually

means "of roughly the same size". This is all prefatory to Levitt’s

determination to teach parents that swimming pools are more dangerous than guns,

and that we ought to be more afraid of everyday killers than we are of rare

occurrences like terrorist attacks. The problem here isn’t that Levitt is wrong;

in fact, he’s absolutely right. But he’s hardly a lone warrior in this war.

Here’s

Senator Joseph Biden of Delaware, in this week’s New Yorker:

I would say to John [Kerry], ‘Let me put it to you this way. The Lord

Almighty, or Allah, whoever, if he came to every kitchen table in America

and said, “Look, I have a Faustian bargain for you, you choose. I will

guarantee to you that I will end all terror threats against the United States

within the year, but in return for that there will be no help for education,

no help for Social Security, no help for health care.” What do you do?’

“My answer,” Biden said, “is that seventy-five per cent

of the American people would buy that bargain.”

So Levitt gets it, and Biden gets it. But Biden puts it in a more arresting

way, and he doesn’t rely on vaguely inchoate notions like "a world that

is increasingly impatient with long-term processes". And he certainly

doesn’t provide, at the end of a list of "Suggested Interview Questions",

this:

14. You say your ultimate aim is to figure out a way to use economic data

to fight terrorism. How would you do it?

Levitt, it seems, wants to have his cake and eat it: on the one hand he tells

us that we shouldn’t be nearly as afraid of terrorism as we are, and then on

the other he (or his publicist) says that his "ultimate aim" is to

fight terrorism.

And just like the University of Georgia’s cheating professors, the stuff on

fear serves as extra padding. In the first chapter there are two full pages

of alphanumerical data, which we’re actually given, rather than simply told

about. The final chapter is much worse: it has no fewer than 26 different tables

listing various boys’ and girls’ names, sorted according to popularity, sex,

what they indicate about the race of the child, what they indicate about the

level of education of the child’s parents, and so forth. There’s even a table

telling us that the mother of the average Jasmine has 12.88 years of education,

compared to 11.94 years of education for the average Jazmine’s mother and 13.23

years of education for the average Jasmyn’s mother.

All of these tables do a great job at taking up space in this very short book,

but their dialectical purpose, I have to admit, defeats me. The beginning of

the chapter (subtitile: Would A Roshanda By Any Other Name Smell As Sweet?)

includes one marginally interesting empirical result: that a black child with

a distinctly black name does not suffer quantifiable economic disadvantage in

comparison with an identical black child with a distinctly white name. Once

we’ve discovered that, however, we then go on a veritable fun-ride of naming

conventions and correlations, to no obvious end. Here’s the final conclusion

of the final chapter (if you don’t include the Epilogue):

What the California names data suggest is that an overwhelming number

of parents use a name to signal their own expectations of

how successful their children will be. (Bold emphasis mine; italic emphasis

the authors.)

Nowhere in the chapter have we been told about the numbers of parents who choose

various different types of name, or the numbers who don’t. There have been lots

of lists of names, but no numbers at all: the whole chapter reads as though

if you pile up enough anecdote, you can generate empirical conclusions by sheer

mass alone.

It conceivable, although I doubt it, that there’s something in the data which

supports the authors’ conclusion. There’s certainly nothing in the book, however.

If they know how many parents use a name to signal their own expectations of

how successful their children will be, why don’t they tell us? And if they don’t

know what the number is, how do they know that the number is overwhelming?

One of the problems is that by this point in the book, the authors have seemingly

run out of Levitt studies to talk about. There were three in the first chapter,

you’ll recall; there are two in Chapter Two – a study of how estate agents

get higher prices for their houses, and another on discrimination in the TV

program The Weakest Link. In Chapter Three there’s one, on the economics

of a gang of crack dealers. Apparently it’s much the same as the economics of

McDonald’s.

Chapter Four brings together Levitt’s other studies on crime: how adding policemen

brings it down, and how it’s related to both the crack epidemic and to abortion

rates. Chapter Five barely touches on Levitt research; one study about the black-white

test score gap is mentioned. And Chapter Six, as we have seen, starts with Levitt

research on the consequences of having a distinctively black name, and then

sets off into uncharted territory.

As the amount of empirical research underpinning each chapter slowly ebbs away

over the course of the book, the authors are forced to cast their net ever wider

for interesting, if dubiously relevant, anecdotes. We’re given a potted history

of the Ku Klux Klan. We find which words correlate with high prices in real-estate

ads. We learn how to get a date from online dating sites. We’re asked what crack

cocaine has in common with nylon stockings.

And, at the beginning of each chapter, we get a little excerpt from Dubner’s

original profile of Levitt, including some extremely personal information which

felt to me at least rather gratuitous. By the end, we’ve learned not only that

Levitt lost his firstborn son to pneumococcal meningitis, but also that his

coauthor on one paper, Roland Fryer, was abandoned by his mother, beaten by

his alcoholic sex-criminal father, and became a gun-toting drug dealer before

turning his life around and ending up at Harvard.

This isn’t economics, and it isn’t freakonomics. It’s prurient biography masquerading

as illuminating anecdote.

Which brings me to the question of what, exactly, these anecdotes

are purportedly illuminating. The authors go to great pains to say that "there

is no unifying theme" to the book, but I’m not sure that’s true. Underneath

it all, I definitely detect a right-libertarian stance, which is all the more

noticeable for the authors’ protestations that it isn’t there. Here’s an excerpt

from the introduction to the abortion chapter:

Conservatives were enraged that abortion could be construed as a crime-fighting

tool. Liberals were aghast that poor and black women were singled out. Economists

grumbled that Levitt’s methodology was not sound. As the media gorged on the

abortion-crime story, Levitt came under direct assault. He was called an ideologue

(by conservatives and liberals alike), a eugenicist, a racist, and downright

evil.

In reality, he seems to be very much none of those.

That, I think, is what is known as setting the bar very low. I’m sure that

Levitt is not downright evil, nor is he racist, and nor is he an ideologue.

But over the course of the book, the authors do seem to have been spending quite

a bit of time in the shadow of Ayn Rand. (Levitt is at Chicago, don’t

forget.) From reading the book, we learn that:

• Big Government is bad, especially in its more lefty manifestations: look

  at those cheating Chicago public schoolteachers, or the insane cost of the

  Endangered Species Act. Left-wingers are really bad: look at the

  made-up numbers of that homeless advocate. Right-wingers are also bad, but

  maybe not as bad: the Trent Lott affair is referred to in the table

  of contents with the question "Is Trent Lott more racist than the average

  Weakest Link contestant?" (The answer, one assumes from the

  question, is no.) And if you’re worried about the influence of money in politics,

  don’t be: there’s barely any.

• If you’re relying on anybody else to make your life better, your faith is

  probably misplaced. Doctors, real-estate agents and other experts are basically

  self-interested. Even your parents might want to make your life better,

  but in fact they aren’t "likely to make a shard of difference,"

  whether they’re choosing schools, buying car seats, or choosing names. Our

  destiny is largely set at birth: who our biological parents are is much more

  of a determining factor than anything else. If your parents are poor and black,

  they’re very likely to give you a ridiculous name, and you are relatively

  likely to become a criminal.

• Some individuals, however, transcend their destiny. Steven Levitt "is

  the guy who, in the slapstick scenario, sees all the engineers futzing with

  a broken machine – and then realizes that no one has thought to plug

  it in." Stetson Kennedy had "a stroke of brilliance" when he

  leaked secret Klan information to The Adventures of Superman radio

  show and became "the single most important factor in preventing a postwar

  revival of the Ku Klux Klan in the North". Roland Fryer went from gangbanger

  to Harvard economist.

At heart, Freakonomics is not a book about economics at all: it’s

a book about a hero who can ask the right questions and uncover the truth. Once

you’ve read it, you’ll know lots of interesting facts you didn’t know before.

But it won’t make you stop and think (stopping and thinking is the job of the

hero), and it certainly won’t "literally redefine the way we view the modern

world," as the jacket copy has it. You know how that crack gang was just

like McDonald’s? Well, this book is too. You finish it off quickly, but end

up vaguely dissatisfied: all the added sweeteners and calories serve to mask

the fact that there’s very little protein or nutritional value.

If you’re interested in Steven Levitt the person, then by all means read Freakonomics:

you’ll learn a decent amount about him and his interests. If you’re interested

in his work, however, I’d advise waiting for his next book, or maybe trying

to track down his original papers. This short and hurried book is not the book

you’re looking for.