Steven Leavitt’s Freakonomics is a popular coffee table book these days, in fact my book club just covered it. Here’s some of my thoughts on it, not in any particular order or coherence.
The original article in the NYT magazine piece was the perfect length for this book. This explored each idea in more depth, but in the end, you were still left saying, “prove itâ€.
It takes giant brass ones for a writer to start each chapter with a quote from a magazine article explaining how amazing the subject/author of the book is, when the author wrote the magazine article in the first place. Steven Dubner, I’m looking at you.
One of the strangest things about Freakonomics is that there is virtually no economics in the book.
• The teachers cheating had zero to do with economics. It was straight statistics. I could have figured that all out, and probably for half the fee!
• The parenting stuff was pure statistics, and not original.
• The abortion thing also had zero economics in it
• The gang structure had some economics in it. But note that Leavitt didn’t do it. Some grad student risked his life to do it. And that still wouldn’t have mattered if the gang captain hadn’t been an ex-biz student. Sheesh, hand me a notebook with all the figures in it and I’ll deduce the financial structure also, what’s so great about that?
• The names of black and white people similarly had no economics in it.
• The sumo wrestling analysis was straight statistics.
..and so on. When there was a chapter that was about economics (like the KKK and the power of information), it was a relief.
So, I don’t know what Leavitt is, but it isn’t an economist, rogue or not. What he is a clear thinker who has a couple great skills. (1) He is very good at posing the problem or area of interest in a different way than other thinkers have done. (Or even recognizing that there is a problem/issue where no one had realized it) (2) Because of this, he finds data sources that no one had ever thought to use against. (3) He has enough analytic tools (stats and correlations and models and such) to be able to answer the question with the data. All of that is no mean feat, and the first is the real impressive thing.
I liked the chapter about names. Even though Justin was pegged as a particularly low class name, I still liked it! It’s a perfect illustration of his skills in #1 and #2, no one had ever thought about this issue and been able to find data you could do anything with. I frame his conclusions (again) in terms of Pinker’s theories. Pinker has a general theory about fashion and markers of status that is extraordinarily similar. Again, the high-status comes up with something new. The new thing has no value on its own; it is merely indicator of status. Fancy names, pipes, epaulets, crowns, purple clothes, etc. Eventually the next class down realizes they can gain a competitive advantage on their peers by pretending to be high status, so they adopt these indicators. And so on to the lower class. Eventually the high-status people need to find something new to mark themselves, because by now everyone has the original status symbol. So they move on the next “new thing”. You see this most extremely in fashion. Those weirdoes in Paris come up with some freaky new fashion. It makes no sense at all, but it is a marker for who is high class, and it gradually moves through society until it’s ubiquitous enough that the fashion mavens need to invent yet a new look. This theory aligns perfectly with Leavitt’s name research.
He claims the book is all about incentives. But incentives aren’t particularly economic. Certainly there are economic incentives. But there are just as certainly non-economic incentives, and non-economic ways that people react to economic incentives. In psychology, the same things are called positive and negative reinforcement.
Some day I’ll get around to writing where I see Economics as a field. The long and short of is that classical economics starts with a bunch of assumptions. Every single one of these assumptions is false, but they are good assumptions for getting economics off the ground. What we’ve seen in the last 30 years is economics taking a more realistic look at the world, relaxing these assumptions and comparing the results with real world phenomona. It is making economics more robust and empirical, but it is also making it less of it’s own science, as it blends in with statistics, game theory, politics, law, etc…
P.S. My father taught a course on Freakonomics. After four classes the whole class was bored with it, he had to dig out some more material. It’s that kind of book. Great insights, but you don’t know what to do with them.
