[Paleopsych] NYT: A Romp Through Theories More Fanciful Than Freaky

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A Romp Through Theories More Fanciful Than Freaky
http://www.nytimes.com/2005/06/19/business/yourmoney/19shelf.html

    By ROGER LOWENSTEIN

    THIS book has no unifying theme." Thus do Steven D. Levitt and Stephen
    J. Dubner, authors of "Freakonomics," the talk-show host's dream best
    seller, appear to damn their own creation.

    Their modesty may be a trifle disingenuous. It would be more accurate
    to say that the book has no unifying subject. Indeed, their clever
    juxtapositions, the way they consistently mine illuminating truths by
    contrasting seemingly unrelated topics, is what makes "Freakonomics"
    (William Morrow) a romp of a read.

    The authors show the dangers in the crack trade by pointing out that
    the fatality rate for street dealers is greater than that of inmates
    on death row in Texas; they demonstrate the power of information, and
    the way the Internet has eroded the pricing power of automobile
    dealers, by recounting how a quite unrelated network (the Ku Klux
    Klan) was done in by an infiltrator who broadcast the group's secrets.

    The book is only barely about economics, freakish or otherwise, and
    even when the authors venture into a standard tutorial, such as one
    about how supply and demand influence wages, they do so with
    delightful and unexpected curveballs. Thus, they observe, "The typical
    prostitute earns more than the typical architect." This is less
    surprising than it might appear. Working conditions limit the supply
    of prostitutes and, as for demand, the authors mischievously observe
    that "an architect is more likely to hire a prostitute than vice
    versa."

    Their protestation notwithstanding, "Freakonomics" does have a
    unifying theme, which is the power of incentives to explain, and
    perhaps to predict, behavior. The authors clearly tilt against the
    one-dimensional theory, so dear to orthodox economists, that people
    are always motivated solely by maximizing their wealth. Rather, they
    side with the up-and-coming behavioralist school, which sees people's
    motivations as more nuanced and polydimensional.

    But you won't find any academic-sounding discourses here. Thus, the
    authors relate the experience of day-care centers in Haifa, Israel,
    that tried to discourage parents from picking up their children late
    by charging offenders the equivalent of a $3 penalty. The response was
    prompt: lateness increased!

    Apparently, parents felt less guilty if they were paying for their
    tardiness. Similarly, the example of a bagel distributor who tried to
    do business on the honor system shows that while greed surely
    motivates most people, it is by no means the only motivator.

    The book has an even more powerful leitmotif: to understand how
    incentives work, one has to distinguish between cause and effect. This
    requires more than the economics profession's favorite props -
    spreadsheets, computers and data. It requires someone to think,
    intelligently, about what the data are saying.

    The authors note, for instance, that the fact that cities with high
    murder rates have more police officers does not mean that the officers
    are causing murders. This prepares us for other, less intuitive
    examples.

    For instance, the presence of books in a household seems to be an
    effect of educated and motivated parents, and thus a good predictor of
    how their children will perform in school. The presence of books is
    not, however, a cause; therefore (alas), requiring children to read
    will not necessarily enhance their test scores.

    The authors are hard on experts in virtually every field - sociology,
    criminology, political analysis - for misreading data. They are
    equally tough on news-media aye-sayers for parroting the conventional
    wisdom so glibly.

    While all the world was congratulating Rudolph W. Giuliani for
    reducing violent crime, in particular by cracking down on turnstile
    jumpers, the authors demonstrate that Hizzoner probably had little to
    do with it. (Crime rates in New York and other cities had begun
    falling before he was elected mayor.) The experts simply missed a
    deeper, longer-running cause: the legalization of abortion in 1973,
    which led to fewer unwanted babies and, by the early 1990's, to fewer
    career criminals.

    The authors' diverse opinions are, in general, well founded, but when
    they write, "The typical parenting expert, like experts in other
    fields, is prone to sound exceedingly sure of himself," they run the
    risk of sounding, well, exceedingly sure of themselves.

    They also tilt the scales by paying more attention to those who err
    than to those who get it right. (They emphasize the many wrongheaded
    explanations for the drop in crime but play down the fact that
    newspaper articles correctly cited the rise in incarceration rates as
    a major factor.)

    Moreover, one should not forget that many if not most pieces of
    conventional wisdom are apt to be true. Mr. Levitt and Mr. Dubner try
    to demolish the common perception that money leads to success in
    politics by arguing that, in fact, success attracts money, not vice
    versa. Their evidence is that when big-spending politicians run for
    re-election against repeat opponents, the results usually mirror those
    of the previous election, even when the winning candidate spends less
    or when the losing candidate spends more.

    This is cute to a fault. It overlooks the power of money to introduce
    a new politician (say, Jon Corzine) to the public in the first place -
    money that is no longer necessary when he runs for re-election. The
    authors' conclusion, that "the amount of money spent by the candidates
    hardly matters at all," violates the expert wisdom, but it also
    violates common sense.

    ONE other criticism relates to the awkward co-authorship of this book,
    which is subtitled "A Rogue Economist Explores the Hidden Side of
    Everything." As the subtitle suggests, the material for the book is
    largely the fruit of the "rogue economist" (Mr. Levitt). Mr. Dubner,
    who had written two previous best sellers, entered the picture when he
    profiled Mr. Levitt in The [3]New York Times Magazine.

    So far, so good. However, each chapter begins with an italicized
    excerpt from the article, so "Freakonomics" periodically switches from
    the first-person plural to a third-person description, in general
    quite laudatory, of Mr. Levitt. Given that Mr. Levitt is a co-author,
    it is rather jarring to read, "Levitt is considered a demigod, one of
    the most creative people in economics and maybe in all social
    science."

    These quibbles aside, "Freakonomics" is a splendid book, full of
    unlikely but arresting historical details that distinguish the authors
    from the run of pop social scientists. Readers may even find
    themselves developing a dose of skepticism about the world - no bad
    thing.