Freakonomics Revised and Expanded Edition

by Steven D. Levitt

  Until now.

  The restaurant, should you care to note, is called French Roast, and is on the northeast corner of 85th and Broadway, in Manhattan.

  Last I checked, the roast chicken was still on the menu. Bon appétit.

  —SJD (May 8, 2005)

  “Making Profits from Incivility on the Roads”

  I hardly ever drive anymore since I moved close to where I work. So whenever I do, the incivility on the roads leaps out at me. People do things in cars they would never do in other settings. Honking. Swearing. Cutting to the front of the line. And that is just my wife. The other drivers are far meaner.

  One obvious reason is that you don’t have to live with the consequences for any length of time. If you cut in line at airport security, you will be in close proximity for quite some time to the people you insulted. But with a car, you make a quick getaway.

  When I used to commute, there was one particular interchange where incivility ruled. (For those who know Chicago, it is where the Dan Ryan feeds into the Eisenhower.) There are two lanes when you exit the highway. One lane goes to the other highway, and one to a surface street. Hardly anyone ever wants to go to that surface street. There can be a half-mile backup of cars waiting patiently to get on the highway, and about 20 percent of the drivers rudely and illegally cut in at the last second after pretending they are heading toward the surface street. Every honest person that waits in line is delayed 15 minutes or more because of the cheaters.

  Social scientists sometimes talk about the concept of “identity.” It is the idea that you have a particular vision of the kind of person you are, and you feel awful when you do things that are out of line with that vision. That leads you to take actions that are seemingly not in your short-run best interest. In economics, George Akerlof and Rachel Kranton popularized the idea. I had read their papers, but in general have such a weak sense of identity that I never really understood what they were talking about. The first time I really got what they meant was when I realized that a key part of my identity was that I was not the kind of person who would cut in line to shorten my commute, even though it would be easy to do so, and even though it seemed crazy to wait 15 minutes in this long line. But if I were to cut in line, I would have to fundamentally rethink the kind of person I was.

  The fact that I don’t mind when my taxi driver cuts in these lines (actually, I kind of enjoy it) probably shows that I have a long ways to go in my moral development.

  All this is actually just a rambling prelude to my main point. I was in New York City the other day and my taxi driver bypassed a long line of cars exiting the freeway to cut in at the last second. As usual, I enjoyed being an innocent bystander/beneficiary to this little crime. But what happened next was even more gratifying to the economist in me. A police officer was standing in the middle of the road, waving every car that cut in line—including my taxi—over to the shoulder, where a second officer was handing out tickets as if on an assembly line. By my rough estimate, these two officers were giving out 30 tickets an hour, at $115 a pop. At more than $1,500 per officer per hour (assuming the tickets get paid), this was a fantastic moneymaking proposition for the city. And it nails just the right people. Speeding doesn’t really hurt other people very much, except indirectly. So to my mind, it makes much more sense to go directly after the mean-spirited behavior like cutting in line. This is very much in the spirit of William Bratton’s “broken windows” policing philosophy. I’m not sure it cuts down the number of cheaters on the roads in any fundamental way, since the probability of getting caught remains vanishingly small. Still, the beauty of it is that a) every driver that follows the rules feels a rush of glee over the rude drivers getting nailed; and b) it is a very efficient way of taxing bad behavior.

  So, my policy recommendation to police departments across the country is to find the spots on the roads that lend themselves to this sort of policing and let the fun begin.

  —SDL (Nov. 18, 2005)

  “Vegas Rules”

  So Levitt and I were in Las Vegas this weekend, doing some research. (Seriously.) We had a little downtime and decided to play blackjack. It was New Year’s Eve, at Caesars Palace, about 9 p.m. We sat down at an empty table where the dealer, a nice young woman from Michigan, was very patient in teaching us the various fine points that neither of us knew and which indicated that we were both inexperienced. Keep one hand in your lap, e.g. When you want a card, just flick your cards twice on the felt. When you’re standing, tuck one card under your chip/s. And so on.

  At one point, Levitt kind of gasped. He had had 21 but somehow had asked for another card. The last card was a 2. It wasn’t that he didn’t know how to play, or count; he was just distracted—talking to me, he’d later claim—and the dealer had seen him do something, or fail to do something else, that indicated he wanted another card. So here he was with 4 cards: a face card, a 4, a 7, and a 2. The dealer looked sympathetic. I vouched for Levitt, told her he wasn’t an idiot and surely wouldn’t have hit on 21 intentionally. She seemed to believe us. She said she’d call over her supervisor to see what could be done.

  She called the supervisor’s name over her shoulder. I could see the supervisor, and I could see that he couldn’t hear her. Remember, this is a casino on New Year’s Eve; it was pretty noisy. She keeps calling, and I keep seeing that he’s not hearing her, but she won’t turn around to call him. That would mean turning her back on her table full of chips and even if Levitt were dumb enough to hit on 21, he presumably was smart enough to grab a bunch of chips and run. (Or maybe, she was thinking, he’s actually dumb like a fox and used this hitting-on-21 trick all the time, to get the dealer to turn her back on the table.)

  Finally, I went over and fetched the supervisor myself. The dealer explained the situation. He seemed to accept Levitt’s explanation. Then he looked at me. “Did you want the card?” he asked, meaning the 2 that Levitt drew.

  “Well, now that I see it, sure I want it,” I said. I had 17; I certainly wouldn’t have hit on 17, but a 2 would give me a lovely 19.

  “Here,” he said, and gave me the 2. “Happy New Year.”

  Then the dealer took a card and busted.

  I don’t know much about gambling, but I do know that the next time I’m in Vegas and feel compelled to play some blackjack, I’m going to Caesars.

  And just so you don’t think that Levitt really is a complete gambling idiot: the next day, we sat down at the sports book and he grabbed a Daily Racing Form and studied it for about 10 minutes and then went up and placed a bet. He found a horse, going off at 7/2, that had never run a race. But he saw something that he liked. He bet the horse to win and win only. And then we watched the race on one of the jumbo screens. It took a good 60 seconds for his horse to settle into the gate—we thought it would be scratched—but then it got in and the gates opened and his horse led wire to wire. It was a good bit more impressive than his blackjack.

  —SJD (Jan. 3, 2006)

  “I Almost Got Sent to Guantánamo”

  I arrived at the West Palm Beach airport yesterday, trying to make my way back to Chicago, only to see my flight time listed on the departure board as simply “delayed.” They weren’t even pretending it was leaving in the foreseeable future. With a little detective work, I found another flight that could get me home on a different airline, bought a one-way ticket, and headed for airport security.

  Of course, the last-minute purchase of a one-way ticket sets off the lights and buzzers for the TSA. So I’m pulled out of the line and searched. First the full-body search. Then the luggage.

  It didn’t occur to me that my latest research was going to get me into trouble. I’ve been thinking a lot about terrorism lately. Among the things I had in my carry-on was a detailed description of the 9/11 terrorists’ activities, replete with pictures of each of the terrorists and information about their background. Also, pages of my scribblings on terrorist incentives, potential targets, etc. This stuff was the first thing the screener pulled out o
f my bag. The previously cheery mood turned dark. Four TSA employees suddenly surrounded me. They didn’t seem very impressed with my explanation. When the boss arrived, one of the screeners said, “He claims to be an economics professor who studies terrorism.”

  They proceeded to take every last item out of both my bags. It has been longer since I cleaned out my book bag than since I updated my personal web page. This is a book bag with 12 separate pockets, all of which are filled with junk.

  “What is this?” the screener asked.

  “It is a Monsters, Inc. lip gloss and key chain,” I responded.

  And so it went for 30 minutes. Other than the lip gloss, he was particularly interested in my passport (luckily it was really mine), my PowerPoint presentation, the random pills floating among the crevices of my bag (covered with lint and pencil lead from years in purgatory), and a beat-up book (When Bad Things Happen to Good People).

  Finally satisfied that I was playing for the home team, he allowed me to board a plane to Chicago. Thank God I had left at home my copy of the terrorist handbook that I blogged about recently, or I would have instead been flying straight to Cuba.

  —SDL (July 14, 2005)

  “Nobel Prize Winner Thomas Schelling”

  I’ve changed addresses 10 times since I graduated from college. And each time I’ve moved, I’ve looked at the battered old box of college notebooks and debated whether it was time to throw the box out. After all, it has been more than 15 years and the box has never once been opened.

  Thomas Schelling winning the Nobel Prize in Economics finally gave me a reason to open the box. My sophomore year in college, I took Econ 1030 from Schelling. I believe the course was entitled something like “Conflict and Strategy.” I still have vivid memories of the course. A crew-cut Schelling paced back and forth across the stage (never with any notes, if I remember correctly), spewing forth story after story that illuminated the application of simple game-theory concepts in everyday life. The pauses between the stories were long enough that I had the impression he was coming up with them on the spot, although my own experience as a teacher makes me think otherwise.

  For me, this first introduction to game theory was inspirational. For someone who thinks strategically, or would like to think strategically, the basic tools of game theory are essential. The beauty of Schelling’s class was how easy the math was and how readily it applied to real world settings. The topics of the course were basic: the Prisoner’s Dilemma in lecture 1; Schelling’s own “tipping point” model in lectures 2 and 3; the tragedy of the commons and public-goods games after that; then commitment devices, credible and non-credible threats, and the strategy and tactics of controlling one’s own behavior. (For those who are unaware, Schelling coined the term “tipping point” thirty years before Malcolm Gladwell made it popular.)

  Any economist could have taught the subjects in the class, but no one would have taught it as Schelling did. Each concept was accompanied by a barrage of examples. My notes are so poorly done—I would write down only a few key words—that now I can only guess at what the story was behind the words: “when Rhodesia became Zimbabwe,” “VHS vs. Beta,” “the quality of play in bridge leagues,” “choosing colleges,” “Dulles vs. National airports,” “Bear Bryant should not have voted for USC,” “good weatherman takes fair bets,” “tailgating,” “Landon vs. Roosevelt,” “randomly flushing the toilet,” etc.

  I even remember attempting to put Schelling’s lessons immediately into practice. People who know me know that I can fall asleep anywhere, anytime. I would guess that I slept through some portion of 90 percent of my college classes. So when Schelling taught us about commitment, I decided I would start sitting in the front row of class as a way of committing myself not to sleep. Unfortunately, the urge to sleep often proved all too powerful. If Schelling were to remember me, it would be as the only kid in the first row who always fell asleep.

  To my mind, Schelling represents the very best of game theory. He was a pioneer in the field, a man of ideas. Unfortunately for game theory, the simple ideas that are so alluring were quickly mined. What followed was less interesting. Modern game theory has become extremely mathematical, notation heavy, and removed from everyday life. Many of my colleagues would not agree with me, but I think game theory has failed to deliver on its enormous initial promise. I’m not the only one who feels this way. I was recently speaking with a prominent game theorist. He told me that if he knew what he knew and he were just getting started in the profession today, no way would he be a game theorist.

  Schelling was an early inspiration to me. His course and writings were one of the big influences pushing me toward economics. My approach to economics shares much with his approach. I was saying this last year to one of my colleagues, who happened to run into Schelling and told Schelling he should count me as one of his students. Schelling was unmoved.

  —SDL (Oct. 20, 2005)

  NOTES

  The bulk of this book was drawn from the research of Steven D. Levitt, often done in concert with one or more collaborators. The notes below include citations for the academic papers on which the material was based; most of them are available for download at http://pricetheory.uchicago.edu/levitt/LevittCV.html. We have also made liberal use of other scholars’ research, which is cited below; we thank them not only for their work but for the subsequent conversations that allowed us to best present their ideas. Other material in this book comes from previously unpublished research or interviews by one or both of the authors. Material not listed in these notes was generally drawn from readily accessible databases, news reports, and reference works.

  AN EXPLANATORY NOTE

  THE ITALICIZED EXCERPT originally appeared in Stephen J. Dubner, “The Probability That a Real-Estate Agent Is Cheating You (and Other Riddles of Modern Life),” New York Times Magazine, August 3, 2003.

  INTRODUCTION: THE HIDDEN SIDE OF EVERYTHING

  THE FALL AND FALL OF CRIME: The crime-drop argument can be found in Steven D. Levitt, “Understanding Why Crime Fell in the 1990’s: Four Factors That Explain the Decline and Six That Do Not,” Journal of Economic Perspectives 18, no. 1 (2004), pp. 163–90. /1–2 The superpredator: See Eric Pooley, “Kids with Guns,” New York Magazine, August 9, 1991; John J. DiIulio Jr., “The Coming of the Super-Predators,” Weekly Standard, November 27, 1995; Tom Morganthau, “The Lull Before the Storm?” Newsweek, December 4, 1995; Richard Zoglin, “Now for the Bad News: A Teenage Time Bomb,” Time, January 15, 1996; and Ted Gest, “Crime Time Bomb,” U.S. News & World Report, March 25, 1996. / 2 James Alan Fox’s dire predictions can be found in a pair of government reports: “Trends in Juvenile Violence: A Report to the United States Attorney General on Current and Future Rates of Juvenile Offending” (Washington, D.C.: Bureau of Justice Statistics, 1996) and “Trends in Juvenile Violence: An Update” (Washington, D.C.: Bureau of Justice Statistics, 1997). / 2 President Clinton’s fearful comment came during a 1997 speech in Boston announcing new anti-crime measures; see Alison Mitchell, “Clinton Urges Campaign Against Youth Crime,” New York Times, February 20, 1997. /3–4 The story of Norma McCorvey/Jane Roe: See Douglas S. Wood, “Who Is ‘Jane Roe’?: Anonymous No More, Norma McCorvey No Longer Supports Abortion Rights,” CNN.com, June 18, 2003; and Norma McCorvey with Andy Meisler, I Am Roe: My Life, Roe v. Wade, and Freedom of Choice (New York: HarperCollins, 1994). / 4 The abortion-crime link is laid out in John J. Donohue III and Steven D. Levitt, “The Impact of Legalized Abortion on Crime,” Quarterly Journal of Economics 116, no. 2 (2001), pp. 379–420. Other scholars have had disagreements with portions of the theory. See Ted Joyce, “Did Legalized Abortion Lower Crime?” Journal of Human Resources 39, no. 1 (2004), pp. 1–28; and the Donohue-Levitt response, “Further Evidence That Legalized Abortion Lowered Crime: A Response to Joyce,” Journal of Human Resources 39, no. 1 (2004), pp. 29–49. See also Christopher L. Foote and Christopher F. Goetz, “Testing Economic Hypotheses with State-Level Data: A Comment on Donohue and Levitt (2001),�
�� Federal Reserve Bank of Boston working paper 05–15 (2005); and, again, the Donohue-Levitt response, “Measurement Error, Legalized Abortion, the Decline in Crime: A Response to Foote and Goetz (2005),” National Bureau of Economic Research working paper, 2006.

  THE REAL REAL-ESTATE STORY: The study measuring how a real-estate agent treats the sale of her own home versus a client’s home is Steven D. Levitt and Chad Syverson, “Market Distortions When Agents Are Better Informed: A Theoretical and Empirical Exploration of the Value of Information in Real Estate Transactions,” National Bureau of Economic Research working paper, 2005. /5–6 The lax California auto mechanics are discussed in Thomas Hubbard, “An Empirical Examination of Moral Hazard in the Vehicle Inspection Market,” RAND Journal of Economics 29, no. 1 (1998), pp. 406–26; and in Thomas Hubbard, “How Do Consumers Motivate Experts? Reputational Incentives in an Auto Repair Market,” Journal of Law & Economics 45, no. 2 (2002), pp. 437–68. / 6 Doctors who perform extra C-sections are examined in Jonathan Gruber and Maria Owings, “Physician Financial Incentives and Caesarean Section Delivery,” RAND Journal of Economics 27, no. 1 (1996), pp. 99–123.

  THE MYTH OF CAMPAIGN SPENDING is told in greater detail in a trio of papers: Steven D. Levitt, “Using Repeat Challengers to Estimate the Effect of Campaign Spending on Election Outcomes in the U.S. House,” Journal of Political Economy, August 1994, pp. 777–98; Steven D. Levitt, “Congressional Campaign Finance Reform,” Journal of Economic Perspectives 9 (1995), pp. 183–93; and Steven D. Levitt and James M. Snyder Jr., “The Impact of Federal Spending on House Election Outcomes,” Journal of Political Economy 105, no. 1 (1997), pp. 30–53.