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Book Review - Freakonomics by Steven D. Levitt and Stephen J. Dubner

Unconventional Wisdom

Freakonomics: A Rogue Economist Explores the Hidden Side of Everything
by
Steven D. Levitt and Stephen J. Dubner

Published by William Morrow

Review by W. R. Greer


Steven D. Levitt is an unusual economist. He doesn't particularly enjoy the math involved, and he doesn't involve himself in global macroeconomic projections. Instead, he is intrigued by the stories that data can tell, and how they can contradict conventional wisdom and show us insights that we would have ignored. He's intrigued by anomalies and unusual patterns of data and the truths that might be hidden behind them. Stephen J. Dubner is a writer for the New York Times Magazine, and had met Levitt while researching a book. When it was suggested to Levitt that he write a book about his approach to economics, he thought that Dubner might be the man to do it for him. Together they've created a book about the different questions and answers that Levitt has encountered in his research, and explain their choice of its title:

Most books put forth a single theme, crisply expressed in a sentence or two, and then tell the entire story of that theme: the history of salt; the fragility of democracy; and the use and misuse of punctuation. 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. Yes, this approach employs the best analytical tools that economics can offer, but it also allows us to follow whatever freakish curiosities may occur to us. Thus our invented field of study: Freakonomics. The sort of stories told in this book are not often covered in Econ. 101, but that may change. Since the science of economics is primarily a set of tools, as opposed to a subject matter, then no subject, however offbeat, need be beyond its reach.
True to their word, the chapters in Freakonomics have no unifying theme, although it is obvious that Levitt loves to sift through data to uncover lies and cheating. He approaches the subject in his chapter about teachers and sumo wrestlers. Working with the Chicago public school system, he was able to analyze its standardized test data and uncover a pattern of cheating by the teachers. Looking at sumo wrestling tournament scores, he also suggests a pattern of cheating there, although it's firmly denied by the Japanese Sumo Federation. The point that Levitt makes in this chapter is that incentives provide temptation for cheating, and also for understanding the rationale behind someone's behavior. Is there an incentive for real estate agents to sell their own homes for more than they sell their clients' homes? How would parents react if child care centers started charging fees when they pick up their children after closing time after it had been previously free? Who is most likely to cheat when bagels are paid for on an honor system?

Some of these answers might seem obvious and some might surprise you. When Levitt has access to detailed data over a course of time, he can explain in it a way that makes it seem obvious. Is your child safer being sent to a friend's house who has a pool or a friend's house who has a gun? Does reading to children make them more successful at school? Why does the candidate who raises more money become more likely to win the election? Why do so many drug dealers still live with their moms? Is there anything that can be learned from the popularity of baby names over different years? As you can see, Levitt and Dubner indulge any curiosity where the analysis of data appears to lead to an interesting conclusion. They are quick to point out, though, that there is a distinction between causal relationships between data and the correlations found within this data. If the most doctors can be found in a geographical area where the most disease is found, can you deduce that doctors cause disease? Of course not, but when noticing any correlation between data, caution must be taken not to jump to those type of conclusions.

They also take on the idea of conventional wisdom. Conventional wisdom usually comes from self-interest or convenience. If someone can propose a theory to explain certain "truths," too often this theory is just the most palatable or serves to fill an underlying need. Once conventional wisdom on any topic is accepted, it becomes difficult to prove otherwise. Undaunted, Levitt isn't afraid to take on some sacred cows. His most controversial topic concerns the sharp reduction in the crime rate in the 1990s. After expert upon expert warned of a crime rate that could exponentially increase and consume our society, it suddenly began dropping dramatically in all areas of the country. Many reasons were suggested for this decrease, and Levitt gives some of these ideas credit for some of the drop in crime. Levitt's theory for the decrease is unique. He credits the legalization of abortion. This assertion may astound you, offend you, and tempt you to toss the book aside. Levitt, though, makes an interesting and credible case for his theory.

What if Levitt has it all wrong in Freakonomics? What if he analyzed the data incorrectly or the data was incomplete or corrupted in any way? Why should any reader trust Levitt's theories and analyses? The answer is that you shouldn't. Despite the authors claim about the lack of a unifying theme, perhaps if one exists, it's to not take everything you read or are told at face value. Question the conventional wisdom, analyze whether someone has an incentive to lie or cheat about something, examine any data, and draw your own conclusions.

With Freakonomics, Levitt and Dubner have given us a new way to look at our world. This is a short book, about 200 pages, and reads very quickly. As each story gleaned from the data unfolds, you'll find yourself surprised, laughing, and reading passages aloud to someone else. It is like a treasure hunt, with little secrets unearthed that were there in plain sight much of the time. The authors have created a book that is both entertaining and educational. The last thing you should do, though, is take my word for it. Get a copy and find out for yourself.

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