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The Most Over-Hyped Economics Book of 2005

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05/06/2005

Freakonomics, by economist Steven Levitt and co-author Stephen Dubner, claims it "Explores the Hidden Side of Everything." If nothing else, that claim, reinforced by "Prepare to be dazzled" and "the most interesting mind in America" on the front and back covers, not to mention lengthy quotes from an adoring New York Times Magazine article (by the co-author) to start every chapter, qualifies it as the most over-hyped economics book of the year. While the hype makes it like listening to a radio talk show host who plugs himself every other sentence, the book does deal with material substantially more interesting than the MEGO (my eyes glaze over) tomes often published in economics. It appeals to me because the title could also fit many applications of economics I have written about (senioritis, New Year's resolutions, back to school shopping, procrastination, why students take books they don't plan to read home for the holidays, etc.).

Freakonomics is strongest when its connection to real-world questions is viewed in contrast to economists' all-too-common focus on "theory" that is largely mathematics for its own sake, with only a tenuous relation to planet earth. In particular, that someone trained at MIT, a center of economics as mathematics, is primarily interested in reality and recognizes that "incentives are the cornerstone of modern life" merits celebration. After all, no amount of mathematical manipulation can consistently and usefully apply "the economic way of thinking" without knowledge of the details of actual situations and institutions, where crucial incentives lurk.

Levitt's approach starts with sometimes insightful, and other times just odd, questions. Then he applies his greatest comparative advantage, which is finding data, including original sources and original uses for evidence collected for other purposes, to test possible explanations (paying a laudable amount of attention to distinctions between correlation and causation, a problem which bedevils a great deal of empirical work, but little attention to limitations of the techniques he employs). One could say he is trying to be a forensic economist. His approach is most useful in applying evidence to reject poorly thought out "conventional wisdom," but he relies too heavily on his statistical techniques to establish his understanding as the "correct" one. In that way, he tends to push too far in the direction of Lord Kelvin's adage that "When you can measure what you are speaking about, and express it in numbers, you know something about it. But when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind."

The most interesting sections deal with aspects of crime, cheating and the "strategic" use of information. Those topics range from the effect of Roe v. Wade on subsequent crime and why many drug dealers still live with their mothers to detecting cheating by teachers and sumo wrestlers to the lack of perfect honesty by many experts and online daters. Other interesting applications-though generally better suited for professors to use as short asides or applications to wake up slumbering students than of serious importance-include financial versus moral incentives and their effects on parents picking up day care kids late, why real estate agents take more time and get more money for their own houses than for clients, how drug gangs relate to tournament theory and "legitimate" business organizations, code-words in real estate and naming patterns for children. Some of the back stories of how unusual data for several topics became available (e.g., the chapters on the Ku Klux Klan and drug dealers) were also interesting.

Overall, Freakonomics was disappointing (though partly because I already knew about Levitt's work). It offered some interesting applications of the economic way of thinking and the use of data to evaluate hypotheses, but it was thin (e.g., it had to be padded with multiple tables about naming patterns to pass 200 pages of text) and there was much more surface than substance. It does stand out from often impenetrable economics writing and is often diverting, but it falls far short of its hype that it will "redefine the way we view the modern world." There are some books that meet that criterion, as Mises Institute participants recognize far more than most, but this is not one of them. It will not get a permanent place on my shelves.

Gary M. Galles is a professor of economics at Pepperdine University. He is the author of The Apostle of Peace: The Radical Mind of Leonard Read.

 

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