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Freakonomics

Mises Daily: Tuesday, June 21, 2005 by

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It is rare that an economics book makes the New York Times non-fiction bestseller list. The masses are more likely to be interested in reading about getting rich quick or flattening their stomachs; not supply, demand and other purposeful human action.

But, Steven D, Levitt and Stephen J. Dubner have struck publishing gold with their book, Freakonomics: A Rogue Economist Explores the Hidden Side of Everything. It is Levitt's curiosity about the world and his work on topical issues concerning public policy written about with the skill of best selling author Dubner, that makes this a collaboration that brings a new way of thinking to the average reader.

Freakonomics is not unique in its concept. While reading it, I couldn't help notice the similarities to David (son of Milton) Friedman's Hidden Order: The Economics of Everyday Life, and The Economics of Life: From Baseball to Affirmative Action to Immigration, How Real-World Issues Affect Our Everyday Life, written by another Chicago school economist, Gary Becker. And, Levitt's chapters on parenting bring to mind Richard Herrnstein's and Charles Murray's The Bell Curve: Intelligence and Class Structure in American Life. For sure, these books are more intellectually rigorous, but none were bestsellers.

Levitt and Dubner name their chapters provocatively to reel the reader in: for instance, Chapter 1 is entitled, "What Do Schoolteachers and Sumo Wrestlers Have in Common?"

Levitt's work examining test scores in Chicago schools has provided proof that mandating test scores give teachers incentive to cheat. And what of Sumo wrestlers? Those who finish tournaments with records under .500 are forced to wait hand and foot on participants who finish over .500. A review of the data of final tournament matches between 7-7 wrestlers and 8-6 opponents reveal that 7-7 wrestlers win nearly 80 percent of the time, far more than the predicated win percentage of less than 49 percent.

The book's chapter comparing the Ku Klux Klan and real estate agents is about information. The KKK had power until they were exposed over the radio and real estate agents hold pricing power if market prices are not widely known and accessible to the public. The authors also delve into internet dating sites. No surprise, women tend to lie about their weight, and men about their height. Women are most interested in men's incomes while men are most interested in a woman's looks.

Professor Levitt spent months in a Chicago ghetto gathering data on the drug trade. From this he learned of the extensive business network that was developed to sell drugs. Although most people assume drug dealers make bundles of money and drive big fancy cars, what Levitt learned was that like any other profession that holds out the potential for fame and riches (entertainers, athletes) most dealers make less than minimum wage and live with their moms while they keep working, hoping to make it to the top and earn millions.

The book's most controversial section is on crime, where the authors contend that legalizing abortions in the 1970's paved the way for lower crime rates in the 1990's. The theory being that with abortion legal, the price of the procedure fell, and more poor, unmarried women would abort unwanted children that would more likely grow up to be criminals.

Levitt and Dubner spend a quarter of the book on parenting and kids. The authors come to some interesting conclusions about what really matters in parenting. Kids tend to get higher test scores if their parents are highly educated: because these parents have higher IQs and IQ is strongly hereditary. Children of mothers over thirty tend to do better in school. These women tend to be better educated or career oriented. Children whose parents speak English at home have better test scores. Conversely, adopted children do worse on tests, because adopted kids are most influenced by their biological parents' IQs; that are likely low. Reading to children doesn't improve test scores. However, children growing up in a house full of books do well in testing. Lots of books, mean high IQ parents.

The final chapter on naming children is the most fun. What's in a name? Nothing really. But, the speed at which children's names change and why is interesting and funny.

Freakonomics has been criticized for its controversial content, its lack of scholarly rigor, trivial subject matter and conclusions, and failure to expose the real economic damage done by government regulations and government granted monopolies. But, despite the flaws, I'm happy that a book of this subject matter is a bestseller.