Freakonomics : A Rogue Economist Explores the Hidden Side of Everything
Steven D. Levitt & Stephen J Dubner
207pp | William Morrow | ISBN 0-713-9908-X | 2005 | US$25.95

Steven Levitt, a heralded young economist at the University of Chicago, is the intellectual inspiration of this book. However it would not have been written but for the co-operation of Mr Dubner, who is a New York Times journalist. (Since the book boasts a lively style rarely found in the prose of economics papers, he was probably quite deeply involved.)

If Professor Levitt’s reluctance to respond to publishers’ pleas reflects on his modesty, he should be congratulated for resisting plenty of temptations to vanity. His wide-ranging curiosity and willingness to reinvent the frontiers of economics have made him the closest thing the profession has to a rock star, celebrated for, among other things, finding economic principles at work in some of the more trivial exercises of humanity such as game shows.

Economists have another meaning for the word “trivial”, applying it to a solution which is self-evident. If the eclecticism of Freakonomics is one of its strengths, where it arguably falls down is that many of its conclusions are trivial in the economists’ sense. To borrow a technique used heavily by the authors, the reader of this review might care to decide which of these propositions explored in the book he or she considers controversial.

1. Schoolteachers sometimes fiddle test results to ensure a higher pass rate for their pupils.
2. Sumo wrestlers sometimes fix bouts.
3. Estate agents get a slightly better price on their own homes than those of their clients.
4. People exaggerate their good qualities on internet dating agencies.
5. Street-level drug dealers earn little money because most of it goes to gang leaders.
6. The legalisation of abortion in the US in the 1970s led to a sharp decline in the crime rate in the 1990’s.
7. Some people short-change an honesty box left out for bagels in the office.

For a book which makes much of the principle that "the conventional wisdom is often wrong”, there is a certain amount of it here. In fairness, Levitt and Dubner do provide interesting evidence for some unsurprising conclusions, which makes the book much more readable than a bare summary of its topics suggests. The record books of a Chicago drug gang can engage our attention even if we know that the big money does not go to the rank-and-file crack dealer.

Equally, some of Levitt and Dubner’s cases are spun out beyond what is really justified by their conclusion, like a long joke with a weak punchline. For example the bulk of one chapter is devoted to showing that the Ku Klux Klan preferred to keep its activities secret and lost credibility when its rituals were exposed by an infiltrator.

Of the selection of points listed above, the one that has gained most attention is of course the proposition that the greater availability of abortion in the US contributed to a decline in the crime rate. It is a simple proposition, claiming that the landmark Roe v. Wade decision in 1973 eventually led to a sharp decline in the demographic most prone to commit crime, namely the male offspring of poor, under-educated and unmarried mothers; and in turn this is the best single explanation of an unexpected and steep decline in the crime rate in the 1990s.

In this case the authors certainly have challenged conventional wisdom. They have also managed to antagonise pro-life advocates, who fear that the link may make abortion more acceptable. Ironically the reverse does not apply: pro-abortionists are, for public consumption at least, unlikely to advocate abortion as a means to control crime because of the eugenicist overtones of such a proposal, making Levitt’s argument somewhat friendless.

The authors refer to some strong evidence on the abortion-crime link. No doubt there are good arguments against much of it. The point is that for opponents of abortion, it should not matter. If abortion is the taking of an innocent life, it cannot be justified by a small probability that the child in question might have been a criminal when he grew up. Levitt’s argument may strengthen the willingness of politicians and others to accept permissive abortion laws. But the fact that a conclusion gives consolation to one’s enemies does not, unfortunately, mean that it is wrong. As Levitt has said in other publications on this debate, the link either exists or it does not; the friends that are made or lost by reaching a conclusion should not change the conclusion.

Freakonomics is at pains to stress that “morality… represents the way people would like the world to work – whereas economics represents how it actually does work". On the face of it, though, the book does not consistently live up to its own ideal. Life is full of honest behaviour, but Levitt and Dubner apply their microscope almost exclusively to cheating and deception. The resulting procession of unscrupulous Sumo wrestlers, mendacious teachers, fee-hungry real estate agents and bagel-stealers adds up to an impression that humanity is deeply untrustworthy. There is a sense of low expectations being gratifyingly fulfilled. “Who cheats? Well, just about anyone, if the stakes are right".

While it should be at least as interesting that 87 per cent of bagel buyers do not cheat on the honesty jar as that 13 per cent do, the authors spend a lot of time on the latter and none on the former. But their bias is an understandable one. “Incentives are the cornerstone of modern life,” they write. The incentive to cheat the bagel man is an economic one, a free bagel. The incentive not to cheat is a moral one. Levitt and Dubner wave briefly in the direction of moral incentives but, in their capacity as economists, have nothing really to say about them.

So what does the new discipline of freakonomics teach us? Few of the stones under which it shines its inquisitive light turn out to be hiding significant truths, but the process is arguably more the point than the product. If this book has a claim on our attention beyond its bouncy prose and memorable stories, it is the way in which it characterises an approach to life. If we apply, it says, the same rigour and respect for evidence in the small things of life as we do (or should do) in the larger, we may find out more about how we behave. More importantly, it reminds us that we should look the evidence in the face, even if it points in a direction which conflicts with how we wish the world to be. As to how we get the world from where it is to where it should be, that is beyond the scope of either Freakonomics or economics.

Paul Brunker is Head of Research for JPMorgan in Australia.