Friday, March 25, 2005

Levitt Book

In the mail: A galley of Steven Levitt’s forthcoming book Freakonomics: A Rogue Economist Explores the Hidden Side of Everything, co-authored with journalist Stephen J. Dubner, who wrote this NY Times profile of Levitt in 2003. Levitt is an economist at the University of Chicago; he has won the Clark Medal, given every two years to the most promising economist under 40. The book’s website is here.

Levitt is not at all occupied with traditional questions of economics. At one point, the book quotes him as telling Dubner, “I just don’t know very much about the field of economics. I’m not good at math, I don’t know a lot of econometrics, and I also don’t know how to do theory. If you ask me about whether the stock market’s going to go up or down, if you ask me whether the economy is going to grow or shrink, if you ask me whether deflation’s good or bad, if you ask me about taxes – I mean, it would be total fakery if I said I knew anything about any of those things.”

So what does he study? All sorts of unique questions, which he often analyzes using unique sources of data. In one instance, he obtained a notebook containing the complete financial records of a drug gang spanning several years, and he found that most drug dealers live with their mothers because they don’t actually make that much money. In his most (in)famous article, he and another economist theorized that crime declined in the 1990s because of Roe v. Wade (as the theory went, abortion was more often procured by women in poverty, and thus eliminated the fetuses most likely to grow up to be criminals). He developed an algorithm that helped identify Chicago public school teachers who were cheating by altering their students’ answers on standardized tests. He’s also studied questions such as, “How do you know when sumo wrestlers are cheating?,” and “Do real estate agents have the proper incentive to help you sell your house?”

All of these questions, and more, are explored in the book. I’d describe the unifying theme as: “The effects of incentives – whether endogenous or whether created by legal and political institutions – on human behavior.”

I was intrigued by his analysis of campaign finance. The book begins by noting the conventional wisdom that “money buys elections.” Sounds plausible, but Levitt has shown it to be basically false. He found a unique way to study the question: Examine all the instances since 1972 (nearly 1,000 nationwide) in which the same two candidates faced each other in successive elections, and then find out whether the amount of money affected the results.

To quote the book: “Here’s the surprise: the amount of money spent by the candidates hardly matters at all. A winning candidate can cut his spending in half and lose only 1 percent of the vote. Meanwhile, a losing candidate who doubles his spending can expect to shift the vote in his favor by only that same 1 percent. What really matters for a political candidate is not how much you spend; what matters is who you are. . . . Some politicians are inherently attractive to voters and others simply aren’t, and no amount of money can do much about it.”

After all, this result isn’t that counterintuitive: Candidates who win often may have raised more money, but that’s because winning candidates are attractive to donors for the same reasons that they are attractive to voters. And donors like to feel that they are part of a winning team. (It’s not that Dennis Kucinich lost the Democratic primary because he wasn’t given enough money; it’s that Kucinich wasn’t given any money because donors thought he was too much of a fruitcake to win the Democratic primary.)

The one thing that threw me off a bit was that while the book is ascribed to Levitt as the lead author and Dubner as the co-author, the book never (as far as I can tell) uses the first person. There are no sentences that say, “What occurred to me as I studied this question,” etc., or “It was only when I thought of X that I realized that the solution lay,” etc., etc. Everything is written as if Dubner is the sole author. Indeed, each of the chapters begins with an excerpt from Dubner’s NY Times article about Levitt (which no doubt led someone to offer Dubner a book contract). Seeing Levitt so often discussed in the third person was a bit disorienting, given that he is supposed to be the lead author. The book does do a great job of showing Levitt’s way of thinking, but it doesn’t have his authorial voice.

But that’s just a minor quibble. I found it a fascinating and engrossing book, appealing to anyone who is intellectually curious. Definitely worth buying when it is released next month.

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