Freakonomics
A Rogue Economist Explores the Hidden Side of Everything
Revised and Expanded Edition
Steven D. Levitt
and
Stephen J. Dubner
Contents
An Explanatory Note
Preface to the Revised and Expanded Edition
Introduction: The Hidden Side of Everything
1. What Do Schoolteachers and Sumo Wrestlers Have in Common?
2. How Is the Ku Klux Klan Like a Group of Real-Estate Agents?
3. Why Do Drug Dealers Still Live with Their Moms?
4. Where Have All the Criminals Gone?
5. What Makes a Perfect Parent?
6. Perfect Parenting, Part II; or: Would a Roshanda by Any Other Name Smell as Sweet?
Epilogue: Two Paths to Harvard
Bonus Material Added to the Revised and Expanded 2006 Edition
Notes
Acknowledgments
Searchable Terms
About the Authors
Credits
Copyright
About the Publisher
AN EXPLANATORY NOTE
In the summer of 2003, the New York Times Magazine sent Stephen J. Dubner, an author and journalist, to write a profile of Steven D. Levitt, a heralded young economist at the University of Chicago.
Dubner, who was researching a book about the psychology of money, had lately been interviewing many economists and found that they often spoke English as if it were a fourth or fifth language. Levitt, who had just won the John Bates Clark Medal (a sort of junior Nobel Prize for young economists), had lately been interviewed by many journalists and found that their thinking wasn’t very…robust, as an economist might say.
But Levitt decided that Dubner wasn’t a complete idiot. And Dubner found that Levitt wasn’t a human slide rule. The writer was dazzled by the inventiveness of the economist’s work and his knack for explaining it. Despite Levitt’s elite credentials (Harvard undergrad, a PhD from MIT, a stack of awards), he approached economics in a notably unorthodox way. He seemed to look at the world not so much as an academic but as a very smart and curious explorer—a documentary filmmaker, perhaps, or a forensic investigator or a bookie whose markets ranged from sports to crime to pop culture. He professed little interest in the sort of monetary issues that come to mind when most people think about economics; he practically blustered with self-effacement. “I just don’t know very much about the field of economics,” he told Dubner at one point, swiping the hair from his eyes. “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’s 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.”
What interested Levitt were the riddles of everyday life. His investigations were a feast for anyone wanting to know how the world really works. His singular attitude was evoked in Dubner’s resulting article:
As Levitt sees it, economics is a science with excellent tools for gaining answers but a serious shortage of interesting questions. His particular gift is the ability to ask such questions. For instance: If drug dealers make so much money, why do they still live with their mothers? Which is more dangerous, a gun or a swimming pool? What really caused crime rates to plunge during the past decade? Do real-estate agents have their clients’ best interests at heart? Why do black parents give their children names that may hurt their career prospects? Do schoolteachers cheat to meet high-stakes testing standards? Is sumo wrestling corrupt?
Many people—including a fair number of his peers—might not recognize Levitt’s work as economics at all. But he has merely distilled the so-called dismal science to its most primal aim: explaining how people get what they want. Unlike most academics, he is unafraid of using personal observations and curiosities; he is also unafraid of anecdote and storytelling (although he is afraid of calculus). He is an intuitionist. He sifts through a pile of data to find a story that no one else has found. He figures a way to measure an effect that veteran economists had declared unmeasurable. His abiding interests—though he says he has never trafficked in them himself—are cheating, corruption, and crime.
Levitt’s blazing curiosity also proved attractive to thousands of New York Times readers. He was beset by questions and queries, riddles and requests—from General Motors and the New York Yankees and U.S. senators but also from prisoners and parents and a man who for twenty years had kept precise data on his sales of bagels. A former Tour de France champion called Levitt to ask his help in proving that the current Tour is rife with doping; the Central Intelligence Agency wanted to know how Levitt might use data to catch money launderers and terrorists.
What they were all responding to was the force of Levitt’s underlying belief: that the modern world, despite a surfeit of obfuscation, complication, and downright deceit, is not impenetrable, is not unknowable, and—if the right questions are asked—is even more intriguing than we think. All it takes is a new way of looking.
In New York City, the publishers were telling Levitt he should write a book.
“Write a book?” he said. “I don’t want to write a book.” He already had a million more riddles to solve than time to solve them. Nor did he think himself much of a writer. So he said that no, he wasn’t interested—“unless,” he proposed, “maybe Dubner and I could do it together.”
Collaboration isn’t for everyone. But the two of them—henceforth known as the two of us—decided to talk things over to see if such a book might work. We decided it could. We hope you agree.
PREFACE TO THE REVISED AND EXPANDED EDITION
As we were writing Freakonomics, we had grave doubts that anyone would actually read it—and we certainly never envisioned the need for this revised and expanded edition. But we are very happy, and grateful, to have been wrong.
So why bother with a revised edition?
There are a few reasons. The first is that the world is a living, breathing, changing thing, whereas a book is not. Once a manuscript is finished, it sits, dead in the water, for nearly a year until it is made ready by the publisher for its debut. This doesn’t pose much of a problem if you have written, say, a history of the Third Punic War. But because Freakonomics explores all sorts of modern real-world issues, and because the modern world tends to change quite fast, we have gone through the book and made a number of minor updates.
Also, we made some mistakes. It was usually a reader who would bring a mistake to our attention, and we very much appreciate this input. Again, most of these changes are quite minor.
The most aggressively revised section of the book is the beginning of chapter 2, which tells the story of one man’s crusade against the Ku Klux Klan. Several months after Freakonomics was first published, it was brought to our attention that this man’s portrayal of his crusade, and of various other Klan matters, was considerably overstated. (For a fuller explanation, see an essay called “Hoodwinked?”.) As unpleasant as it was to acknowledge this error, and to diminish the reputation of a man beloved in many quarters, we felt it was important to set straight the historical record.
We have also futzed a bit with the architecture of the book. In the original version, each chapter was preceded by an excerpt from the New York Times Magazine profile that one of us (Dubner) wrote about the other (Levitt), and which led to our collaboration on this book. Because some readers found these excerpts intrusive (and/or egomaniacal, and/or sycophantic), we have removed them, instead reprinting the
complete Times profile in the back of this edition in the section called “Bonus Material”. There, it can be easily skipped over if one so chooses, or read in isolation.
The further bonus material is what accounts for our having called this edition “expanded” in addition to “revised.” Soon after the original publication of Freakonomics, in April 2005, we began writing a monthly column for the New York Times Magazine. We have included in this edition several of these columns, on subjects ranging from voting behavior to dog poop to the economics of sexual preference.
We have also included a variety of writings from our blog (www.freakonomics.com/blog/)—which, like this revised edition, was not planned. In the beginning, we built a website merely to perform archival and trafficking functions. We blogged reluctantly, tentatively, infrequently. But as the months went on, and as we discovered an audience of people who had read Freakonomics and were eager to bat its ideas back and forth, we took to it more enthusiastically.
A blog, as it turns out, is an author’s perfect antidote for that sickening feeling of being dead in the water once a manuscript has been completed. Particularly for a book like this one, a book of ideas, there is nothing more intoxicating than to be able to extend those ideas, to continue to refine and challenge and wrestle with them, even as the world marches on.
INTRODUCTION:
The Hidden Side of Everything
Anyone living in the United States in the early 1990s and paying even a whisper of attention to the nightly news or a daily paper could be forgiven for having been scared out of his skin.
The culprit was crime. It had been rising relentlessly—a graph plotting the crime rate in any American city over recent decades looked like a ski slope in profile—and it seemed now to herald the end of the world as we knew it. Death by gunfire, intentional and otherwise, had become commonplace. So too had carjacking and crack dealing, robbery and rape. Violent crime was a gruesome, constant companion. And things were about to get even worse. Much worse. All the experts were saying so.
The cause was the so-called superpredator. For a time, he was everywhere. Glowering from the cover of newsweeklies. Swaggering his way through foot-thick government reports. He was a scrawny, big-city teenager with a cheap gun in his hand and nothing in his heart but ruthlessness. There were thousands out there just like him, we were told, a generation of killers about to hurl the country into deepest chaos.
In 1995 the criminologist James Alan Fox wrote a report for the U.S. attorney general that grimly detailed the coming spike in murders by teenagers. Fox proposed optimistic and pessimistic scenarios. In the optimistic scenario, he believed, the rate of teen homicides would rise another 15 percent over the next decade; in the pessimistic scenario, it would more than double. “The next crime wave will get so bad,” he said, “that it will make 1995 look like the good old days.”
Other criminologists, political scientists, and similarly learned forecasters laid out the same horrible future, as did President Clinton. “We know we’ve got about six years to turn this juvenile crime thing around,” Clinton said, “or our country is going to be living with chaos. And my successors will not be giving speeches about the wonderful opportunities of the global economy; they’ll be trying to keep body and soul together for people on the streets of these cities.” The smart money was plainly on the criminals.
And then, instead of going up and up and up, crime began to fall. And fall and fall and fall some more. The crime drop was startling in several respects. It was ubiquitous, with every category of crime falling in every part of the country. It was persistent, with incremental decreases year after year. And it was entirely unanticipated—especially by the very experts who had been predicting the opposite.
The magnitude of the reversal was astounding. The teenage murder rate, instead of rising 100 percent or even 15 percent as James Alan Fox had warned, fell more than 50 percent within five years. By 2000 the overall murder rate in the United States had dropped to its lowest level in thirty-five years. So had the rate of just about every other sort of crime, from assault to car theft.
Even though the experts had failed to anticipate the crime drop—which was in fact well under way even as they made their horrifying predictions—they now hurried to explain it. Most of their theories sounded perfectly logical. It was the roaring 1990s economy, they said, that helped turn back crime. It was the proliferation of gun control laws, they said. It was the sort of innovative policing strategies put into place in New York City, where murders would fall from 2,262 in 1990 to 540 in 2005.
These theories were not only logical; they were also encouraging, for they attributed the crime drop to specific and recent human initiatives. If it was gun control and clever police strategies and better-paying jobs that quelled crime—well then, the power to stop criminals had been within our reach all along. As it would be the next time, God forbid, that crime got so bad.
These theories made their way, seemingly without friction, from the experts’ mouths to journalists’ ears to the public’s mind. In short course, they became conventional wisdom.
There was only one problem: they weren’t true.
There was another factor, meanwhile, that had greatly contributed to the massive crime drop of the 1990s. It had taken shape more than twenty years earlier and concerned a young woman in Dallas named Norma McCorvey.
Like the proverbial butterfly that flaps its wings on one continent and eventually causes a hurricane on another, Norma McCorvey dramatically altered the course of events without intending to. All she had wanted was an abortion. She was a poor, uneducated, unskilled, alcoholic, drug-using twenty-one-year-old woman who had already given up two children for adoption and now, in 1970, found herself pregnant again. But in Texas, as in all but a few states at that time, abortion was illegal. McCorvey’s cause came to be adopted by people far more powerful than she. They made her the lead plaintiff in a class-action lawsuit seeking to legalize abortion. The defendant was Henry Wade, the Dallas County district attorney. The case ultimately made it to the U.S. Supreme Court, by which time McCorvey’s name had been disguised as Jane Roe. On January 22, 1973, the court ruled in favor of Ms. Roe, allowing legalized abortion throughout the United States. By this time, of course, it was far too late for Ms. McCorvey/Roe to have her abortion. She had given birth and put the child up for adoption. (Years later she would renounce her allegiance to legalized abortion and become a pro-life activist.)
So how did Roe v. Wade help trigger, a generation later, the greatest crime drop in recorded history?
As far as crime is concerned, it turns out that not all children are born equal. Not even close. Decades of studies have shown that a child born into an adverse family environment is far more likely than other children to become a criminal. And the millions of women most likely to have an abortion in the wake of Roe v. Wade—poor, unmarried, and teenage mothers for whom illegal abortions had been too expensive or too hard to get—were often models of adversity. They were the very women whose children, if born, would have been much more likely than average to become criminals. But because of Roe v. Wade, these children weren’t being born. This powerful cause would have a drastic, distant effect: years later, just as these unborn children would have entered their criminal primes, the rate of crime began to plummet.
It wasn’t gun control or a strong economy or new police strategies that finally blunted the American crime wave. It was, among other factors, the reality that the pool of potential criminals had dramatically shrunk.
Now, as the crime-drop experts (the former crime doomsayers) spun their theories to the media, how many times did they cite legalized abortion as a cause?
Zero.
It is the quintessential blend of commerce and camaraderie: you hire a real-estate agent to sell your home.
She sizes up its charms, snaps some pictures, sets the price, writes a seductive ad, shows the house aggressively, negotiates the offers, and sees the deal through to its end. Sure, it’s a lot of work,
but she’s getting a nice cut. On the sale of a $300,000 house, a typical 6 percent agent fee yields $18,000. Eighteen thousand dollars, you say to yourself: that’s a lot of money. But you also tell yourself that you never could have sold the house for $300,000 on your own. The agent knew how to—what’s that phrase she used?—“maximize the house’s value.” She got you top dollar, right?
Right?
A real-estate agent is a different breed of expert than a criminologist, but she is every bit the expert. That is, she knows her field far better than the layman on whose behalf she is acting. She is better informed about the house’s value, the state of the housing market, even the buyer’s frame of mind. You depend on her for this information. That, in fact, is why you hired an expert.
As the world has grown more specialized, countless such experts have made themselves similarly indispensable. Doctors, lawyers, contractors, stockbrokers, auto mechanics, mortgage brokers, financial planners: they all enjoy a gigantic informational advantage. And they use that advantage to help you, the person who hired them, get exactly what you want for the best price.
Right?
It would be lovely to think so. But experts are human, and humans respond to incentives. How any given expert treats you, therefore, will depend on how that expert’s incentives are set up. Sometimes his incentives may work in your favor. For instance: a study of California auto mechanics found they often passed up a small repair bill by letting failing cars pass emissions inspections—the reason being that lenient mechanics are rewarded with repeat business. But in a different case, an expert’s incentives may work against you. In a medical study, it turned out that obstetricians in areas with declining birth rates are much more likely to perform cesarean-section deliveries than obstetricians in growing areas—suggesting that, when business is tough, doctors try to ring up more expensive procedures.
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