You Guys Should All Read Freakonomics.

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EconomistInTraining Posted: Tue, Apr 12 2011 2:37 PM

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It does a nice job of showing.

1. How basic microeconomic theory gets you a long way.
2. How data is necessary to answer many important questions.

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Clayton replied on Tue, Apr 12 2011 2:47 PM

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Steven Levitt actually differentiates between correlation and causation, a distinction much too fine for most mainstream economists. Furthermore, Levitt does not tackle the kinds of questions that Mises and Hoppe do (fundamental questions regarding the nature of prices, and so on). Rather, he tackles specific questions like "Why did the crime rate go down in the 1990's?" which by their very nature cannot be answered via praxeological methods and no Austrian would claim that they can be so answered. Furthermore, by restricting himself to causal hypotheses instead of insinuating causation through a deluge of well-chosen correlations (typical for mainstream analysis in most disciplines these days, not just economics), Levitt's contributions are of genuine value. I think Freakonomics would be a good fit for the LvMI bookstore.

Clayton -

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Matticus Rex replied on Tue, Apr 12 2011 3:10 PM

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Unfortunately, Levitt has engaged in quite a bit of sloppy economics, and both authors consistantly put forth the idea (mostly on their blog) that the government is capable of solving problems. Not quite LvMI store material, though it's worth a read (mostly for entertainment).

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John James replied on Tue, Apr 12 2011 3:39 PM

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I agree with both Clayton and Rex.  Levitt is definitely an interesting character, and he definitely deserved his John Bates Clark medal.  I enjoyed Freakonomics and plan on reading the sequel.  And Levitt even admits himself that he prefers microeconomics to macro because you can actually answer the questions that are asked.  He readily admits that macro is "voodoo" and that economists are historically terrible at macro forecasting.  Although, he also implies that absolutely no one can really understand the macroeconomy enough that they could have a good track record at forecasting in that realm...but I think that's because he comes from Chicago and more than likely isn't at all familiar with Austrian economics.

And I was very disappointed when I found out some of their data and analysis was incorrect (which Dubner and Levitt admitted and retracted), as I thought he was more attentive than that (but then again, who is perfect?).  But at the same time I like the way no question is too obscene or strange, and that he has no problem following where the evidence leads, and accepting the conclusions that it points to.

Although I'm afraid his (journalist) partner and co-author might be quite a bit less economically/scientifically minded, and let his leftist (I assume) tendencies come out, as Jacob Huebert pointed out last week.  (It appears quite evident that Levitt has very little to do with the Freakonomics Blog any more, and possibly nothing to do with the podcast).

Even with that being the case, they have come to some pretty useful conclusions by asking some important questions with their second book.  John Stossel even did an entire special with them on their ideas.... (playlist for the full episode here.)

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William replied on Tue, Apr 12 2011 4:19 PM

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Freakanomics was the first econ book that I bought (even before my college textbooks), I liked it a lot at the time; even though, as of now, I am inclined to agree with Clayton.  Still , a really good read for those of us (such as myself) who aren't economists.  I think Krugman's Pop Internationalism was a very good read for non economists as well.  Though I haven't looked at that book since I first read it in like '04-'06ish and don't remember it all to well anymore.

Either way they're "real" econ books presented in a layman format and are engaging to read.  Which is probably a good thing.

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DanielMuff replied on Tue, Apr 12 2011 5:19 PM

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I saw the movie. It was kinda disappointing.

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GooPC replied on Tue, Apr 12 2011 8:52 PM

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Economists love incentives. They love to dream them up and enact them, study them and tinker with them. The typical economist believes the world has not yet invented a problem that he cannot fix if given a free hand to design the proper incentive scheme. His solution may not always be pretty—it may involve coercion or exorbitant penalties or the violation of civil liberties—but the original problem, rest assured, will be fixed.

This statement should make every Austrian sick to their stomach. What about being value free? What about subjective valuations?

More Fun than Truth by Robert P. Murphy

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Clayton replied on Tue, Apr 12 2011 9:23 PM

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I think Murphy's review is a bit unfair. Levitt explicitly makes the argument that designing functional incentives systems that actually achieve the desired outcome is impossible for any individual. In the movie version of Freakonomics, he relates the story of re-potty-training his daughter. He offered her a bag of candy each time she went on the pot. Miraculously, she was re-trained within a day but after three days, she went to the bathroom just a little to get a bag of candy... then she went to the bathroom a little more to get another bag of candy, then a little mroe, and so on. Levitt points out that not only had she potty-trained but she had developed such exquisite bladder control that she could regulate herself to maximize the amount of candy she got. In less than three days, his three-year-old daughter had broken a custom-designed system of incentives built by a trained economist. Levitt asks what hope there is for any group of system-builders, however clever, of designing an incentive system for the general public. If his three-year-old can break the system of incentives in three days, there's not much hope of engineered incentives systems holding up against millions of people in the general public.

I don't think Levitt is a statist but I think he understands that you lose all credibility in the eyes of the wider public and academia by being frankly anti-state. I think of it like being frankly atheist 200+ years ago. Nobody would take you seriously. You had to at least pretend to believe in God if you actually wanted anyone to read you or take you seriously.

Clayton -

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Jeremiah Dyke replied on Tue, Apr 12 2011 9:29 PM

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I've read Freakonomics & SuperFreakonomics but not their SuperFreackonoimics book with graphics. They are witty guys who love the controversial as much as the counter intuition. 

My fav is still Steven Landsburg (met him one time, got a pic :)) for pop Economics.  Armchair Economist, More Sex is Safer Sex and his newest book The Big Questions are marvelous!  

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John James replied on Wed, Apr 13 2011 2:43 AM

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Jeremiah reminded me of Tim Harford, author of The Undercover Economist.  That was actually a great book as well.  And interestingly enough, Steven Levitt called it "a rare specimen: a book on economics that will enthrall...Beautifully written and argued, it brings the power of economics to life."

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Jeremiah Dyke replied on Wed, Apr 13 2011 4:24 AM

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John, have you read Harford's the Logic of Life? Not as good as UE but still good.