Freakonomics

Freakonomics:
A Rogue Economist Explores
the Hidden Side of Everything

Hardcover edition
Author	Steven D. Levitt Stephen J. Dubner
Country	United States
Language	English
Subject	Economics, Sociology
Genre	Non-fiction
Publisher	William Morrow
Publication date	April 12, 2005
Media type	Hardback & Paperback
Pages	336 pp (hardback edition)
ISBN	0-06-123400-1 (Hardback), ISBN 0-06-089637-X (large print paperback)
OCLC	73307236
Followed by	SuperFreakonomics

Freakonomics: A Rogue Economist Explores the Hidden Side of Everything is the debut non-fiction book by University of Chicago economist Steven Levitt and New York Times journalist Stephen J. Dubner. It was published on April 12, 2005 by William Morrow. The book has been described as melding pop culture with economics.^[1] By late 2009, the book had sold over 4 million copies worldwide.^[2]

Overview

The book is a collection of 'economic' articles written by Levitt, an expert who has already gained a reputation for applying economic theory to diverse subjects not usually covered by "traditional" economists; he does, however, accept the standard neoclassical microeconomic model of rational utility-maximization. In Freakonomics, Levitt and Dubner argue that economics is, at root, the study of incentives. The book's chapters cover:

• Chapter 1: Discovering cheating as applied to teachers and sumo wrestlers, as well as a typical Washington DC area bagel business and its customers
• Chapter 2: Information control as applied to the Ku Klux Klan and real-estate agents
• Chapter 3: The economics of drug dealing, including the surprisingly low earnings and abject working conditions of crack cocaine dealers
• Chapter 4: The role legalized abortion has played in reducing crime, contrasted with the policies and downfall of Romanian dictator Nicolae Ceauşescu (Levitt explored this topic in an earlier paper entitled "The Impact of Legalized Abortion on Crime," written with John Donohue.)
• Chapter 5: The negligible effects of good parenting on education
• Chapter 6: The socioeconomic patterns of naming children (nominative determinism)

One example of the authors' use of economic theory involves demonstrating the existence of cheating among sumo wrestlers. In a sumo tournament, all wrestlers in the top division compete in 15 matches and face demotion if they do not win at least eight of them. The sumo community is very close-knit, and the wrestlers at the top levels tend to know each other well. The authors looked at the final match, and considered the case of a wrestler with seven wins, seven losses, and one fight to go, fighting against an 8-6 wrestler. Statistically, the 7-7 wrestler should have a slightly below even chance, since the 8-6 wrestler is slightly better. However, the 7-7 wrestler actually wins around 80% of the time. Levitt uses this statistic and other data gleaned from sumo wrestling matches, along with the effect that allegations of corruption have on match results, to conclude that those who already have 8 wins collude with those who are 7-7 and let them win, since they have already secured their position for the following tournament. Despite condemnation of the claims by the Japan Sumo Association following the book's publication in 2005, the 2011 Grand Tournament in Tokyo was cancelled for the first time since 1946 because of allegations of match fixing.^[3]

The authors attempt to demonstrate the power of data mining, as a number of their results emerge from Levitt's analysis of various databases. The authors posit that various incentives encourage teachers to cheat by assisting their students with multiple-choice high-stakes tests. Such cheating in the Chicago school system is inferred from detailed analysis of students' answers to multiple choice questions. But first Levitt asks, "What would the pattern of answers look like if the teacher cheated?" The simple answer: the more difficult questions found at the end of test sections will be answered correctly more frequently than the easy questions at the beginning of test sections.

Reappraisals

In Chapter 2 of Freakonomics, the authors wrote of their visit to folklorist Stetson Kennedy's Florida home where the topic of Kennedy's investigations of the Ku Klux Klan were discussed. However, in their January 8, 2006 column in the New York Times Magazine, Dubner and Levitt wrote of questions about Stetson Kennedy's research ("Hoodwinked", pp. 26–28) leading to the conclusion that Kennedy's research was at times embellished for effectiveness.

In the "Revised and Expanded Edition" this embellishment was noted and corrected: "Several months after Freakonomics was first published, it was brought to our attention that this man's portrayal of his crusade, and various other Klan matters, was considerably overstated....we felt it was important to set straight the historical record."^[4]

Criticism

Freakonomics has been criticized for being a work of sociology and/or criminology, rather than economics. Israeli economist Ariel Rubinstein criticized the book for making use of dubious statistics and complained that "economists like Levitt ... have swaggered off into other fields", saying that the "connection to economics ... [is] none" and that the book is an example of "academic imperialism".^[5] Arnold Kling has suggested the book is an example of "amateur sociology".^[6]

Thomas Ferguson, author of Golden Rule: The Investment Theory of Party Competition was asked in 2009 to respond to the following statement in Freakonomics:

A winning candidate can cut his spending in half and lose only 1 percent of the vote. Meanwhile, a losing candidate who doubles his spending can expect to shift the vote in his favor by only that same 1 percent.

His response was:

Where on earth do such figures come from? You would need a fully specified regression equation to do this, that incorporated a lot of variables. Unless you hold constant everything else, including issues -- not easy even to imagine -- such claims are nonsense. Think of a couple of cases. Obviously, an incumbent Congressman or woman with a big margin could spend a bit less and probably do almost as well. By contrast, candidates in close elections surely cannot do this. The real issue is the dependence of money on taking conservative issue positions. Claims about existing candidates typically reflect censored data. That is, there's no one able to run that can run very far to the left.

The Impact of Legalized Abortion on Crime

Revisiting a question first studied empirically in the 1960s, Donohue and Levitt argue that the legalization of abortion can account for almost half of the reduction in crime witnessed in the 1990s. This paper has sparked much controversy, to which Levitt has said

"The numbers we're talking about, in terms of crime, are absolutely trivial when you compare it to the broader debate on abortion. From a pro-life view of the world: If abortion is murder then we have a million murders a year through abortion. And the few thousand homicides that will be prevented according to our analysis are just nothing—they are a pebble in the ocean relative to the tragedy that is abortion. So, my own view, when we [did] the study and it hasn't changed is that: our study shouldn't change anybody's opinion about whether abortion should be legal and easily available or not. It's really a study about crime, not abortion."^[7]

In 2003, Theodore Joyce argued that legalized abortion had little impact on crime, contradicting Donohue and Levitt's results ("Did Legalized Abortion Lower Crime?" Journal of Human Resources, 2003, 38(1), pp. 1 –37.). In 2004, the authors published a response,^[8] in which they argued that Joyce's argument was flawed due to omitted-variable bias.

In November 2005, Federal Reserve Bank of Boston economist Christopher Foote and his research assistant Christopher Goetz published a working paper,^[9] in which they argued that the results in Donohue and Levitt's abortion and crime paper were due to statistical errors made by the authors: the omission of state-year interactions and the use of the total number of arrests instead of the arrest rate in explaining changes in the murder rate. When the corrections were made, Foote and Goetz argued that abortion actually increased violent crime instead of decreasing it and did not affect property crime. They even concluded that the majority of women who had abortions in the 1970s were middle class whites rather than low income minorities as Levitt stated; this was, they stated, because white middle class women had the financial means for an abortion. The Economist remarked on the news of the errors that "for someone of Mr Levitt's iconoclasm and ingenuity, technical ineptitude is a much graver charge than moral turpitude. To be politically incorrect is one thing; to be simply incorrect quite another."^[10] In January 2006, Donohue and Levitt published a response,^[11] in which they admitted the errors in their original paper but also pointed out Foote and Goetz's correction was flawed due to heavy attenuation bias. The authors argued that, after making necessary changes to fix the original errors, the corrected link between abortion and crime was now weaker but still statistically significant, contrary to Foote and Goetz's claims. Foote and Goetz, however, soon produced a rebuttal of their own and said that even after analyzing the data using the methods that Levitt and Donohue recommend, the data does not show a positive correlation between abortion rates and crime rates.^[12] They are quick to point out that this does not necessarily disprove Levitt's thesis, however, and emphasize that with data this messy and incomplete, it is in all likelihood not even possible to prove or disprove Donohue and Levitt's conclusion.

Freakonomics commented on the effects of an abortion ban in Romania (Decree 770), stating that "Compared to Romanian children born just a year earlier, the cohort of children born after the abortion ban would do worse in every measurable way: they would test lower in school, they would have less success in the labor market, and they would also prove much more likely to become criminals. (p. 118)". John DiNardo, a professor at the University of Michigan, retorts that the paper cited by Freakonomics states "virtually the opposite of what is actually claimed":

On average, children born in 1967 just after abortions became illegal display better educational and labor market achievements than children born prior to the change. This outcome can be explained by a change in the composition of women having children: urban, educated women were more likely to have abortions prior to the policy change, so a higher proportion of children were born into urban, educated households. (Pop-Eleches, 2002, p.34).

— John DiNardo, Freakonomics: Scholarship in the Service of Storytelling^[13]

Levitt responded on the Freakonomics Blog that Freakonomics and Pop-Eleches "are saying the same thing":

Here is the abstract of the version of the Pop-Eleches paper that we cited:

…Children born after the abortion ban attained more years of schooling and greater labor market success. This is because urban, educated women were more likely to have abortions prior to the policy change, and the relative number of children born to this type of woman increased after the ban. However, controlling for composition using observable background variables, children born after the ban on abortions had worse educational and labor market achievements as adults. Additionally, I provide evidence of crowding in the school system and some suggestive evidence that cohorts born after the introduction of the abortion ban had higher infant mortality and increased criminal behavior later in life.

The introduction of the Pop-Eleches paper says:

This finding is consistent with the view that children who were unwanted during pregnancy had worse socio-economic outcomes once they became adults.

Effects of extra police on crime

Freakonomics claimed that it was possible to "tease" out the effect of extra police on crime by analysing electoral cycles. The evidence behind these claims was shown to be due partly to a programming error. McCrary stated "While municipal police force size does appear to vary over state and local electoral cycles ... elections do not induce enough variation in police hiring to generate informative estimates of the effect of police on crime."^[13]

Publishing history

Freakonomics peaked at number two among nonfiction on The New York Times Best Seller list and was named the 2006 Book Sense Book of the Year in the Adult Nonfiction category. The book received positive reviews from critics. The review aggregator Metacritic reported the book had an average score of 67 out of 100, based on 16 reviews.^[14]Freakonomics has a social review score 69/100 on Panjury.^[15]

Screen shot of Freakonomics Blog

The success of the book has been partly attributed to the blogosphere. In the campaign prior to the release of the book in April 2005, publisher (William Morrow and Company) chose to target bloggers in an unusually strategical way, sending galley copies to over a hundred of them, as well as contracting two specialized word of mouth (buzz marketing) agencies.^[1]

In 2006, the Revised and Expanded Edition of the book was published, with the most significant corrections in the second chapter.^[16]

Freakonomics blog

The authors started their own Freakonomics blog, which is "meant to keep the conversation going", in 2005.

In May 2007, writer and blogger Melissa Lafsky was hired as the full-time editor of the site.^[17] In August 2007, the blog was incorporated into The New York Times' web site – the authors had been writing joint columns for The New York Times Magazine since 2004 – and the domain Freakonomics.com became a redirect there.^[18] In March 2008, Annika Mengisen replaced Lafsky as the blog editor.^[19] The Freakonomics blog ended its association with the New York Times on March 1, 2011.^[20]

Among the recurrent guest bloggers on the Freakonomics blog are Ian Ayres,^[21] Daniel Hamermesh,^[22] Eric A. Morris,^[23] Sudhir Venkatesh,^[24] Justin Wolfers^[25] and others.

In 2008, Stephen Dubner asked for questions from the site's readers and then featured them in an extended Q&A on "Best Places to Live" with demographics expert Bert Sperling.^[26]

SuperFreakonomics

In April 2007, co-author Stephen Dubner announced that there would be a sequel to Freakonomics, and that it would contain further writings about street gang culture from Sudhir Venkatesh, as well as a study of the use of money by capuchin monkeys.^[27] Dubner said the title would be SuperFreakonomics,^[28] and that one topic would be what makes people good at what they do.^[29] The book was released in Europe in early October 2009 and in the United States on October 20, 2009.

Freakonomics radio

In September 2010, Marketplace radio announced the creation of a Freakonomics podcast hosted by Dubner and Levitt. It is available on iTunes and is aired bi-weekly on NPR.

Film adaptation

In 2010, Chad Troutwine, Chris Romano, and Dan O'Meara produced a documentary film adaptation with a budget of nearly US$3 million in an omnibus format by directors Seth Gordon, Morgan Spurlock, Alex Gibney, Eugene Jarecki, Rachel Grady, and Heidi Ewing.^[30] It was the Closing Night Gala premiere film at the Tribeca Film Festival on April 30, 2010.^[31] It was also the Opening Night film at the AFI/Discovery SilverDocs film festival on June 21, 2010. Magnolia Pictures acquired distribution rights for a Fall 2010 release.^[32]

Freakonomics: The Movie was released in major cities with a pay what you want pricing offer for selected preview showings.^[33] No report of the results has yet been published.

Freakonomics Consulting Group

In 2009, Steven Levitt co-founded Freakonomics Consulting Group, a business and philanthropy consulting company which became The Greatest Good and is now known as TGG Group. Founding partners include Nobel laureates Daniel Kahneman and Gary Becker, as well as several other prominent economists.^[34]

Media references

• In Orange Is the New Black season 3, episode 1 ("Mother's Day"), "Big Boo" finds "Pennsatucky" memorializing her six unborn children (five aborted and one miscarried), asks her if she has ever read Freakonomics, and summarizes the book's findings in the section, "Where Have All the Criminals Gone?", about the decrease in crime statistics after abortion was legalized.

See also

• Nominative determinism
• Correlation does not imply causation
• Malcolm Gladwell^[35]

References

Further reading

• Steven Levitt and Stephen J. Dubner (2009). Superfreakonomics: Global Cooling, Patriotic Prostitutes, and Why Suicide Bombers Should Buy Life Insurance. William Morrow/HarperCollins. ISBN 0-06-088957-8. 
• Steven Levitt and Stephen J. Dubner (2005). Freakonomics: A Rogue Economist Explores the Hidden Side of Everything. William Morrow/HarperCollins. ISBN 0-06-073132-X. 
• Ariel Rubinstein (2006): "Freak-Freakonomics", The Economists' Voice: Vol. 3 : Iss. 9, Article 7
• John DiNardo. "Freakonomics: Scholarship in the Service of Storytelling" (PDF). American Law and Economics Review. Oxford Journals. 8 (3): 615–626. doi:10.1093/aler/ahl014. 
• John DiNardo (December 2007). "Interesting Questions in Freakonomics" (PDF). Journal of Economic Literature. American Economic Association. 45 (4): 973–1000. doi:10.1257/jel.45.4.973. 
• Sudhir Venkatesh (2008). Gang Leader for a Day: A Rogue Sociologist Takes to the Streets. Penguin Group. 

External links

• Official website
• Critical review of the book by n+1 magazine
• Seminar on the book at Crooked Timber
• Full summary of Freakonomics