Freakonomics
Author:
Steven D. Levitt and Stephen J. Dubner
Publisher:
William Morrow
Date of Publication:
2006
ISBN:
0061234001
Rating:
8
Summary:
It was only a matter of time before I picked this book up. Sociologists don’t, generally, seem to be that enamored of our more famous cousins (there is a Nobel Prize in Economics but not in Sociology), but this book got a lot of press and even a lot of play in Sociological circles, so I figured I should read it. I’m glad I finally did as it is an intriguing book and it illustrates just how one might go about packaging social science in such a way that it makes it engaging reading for the general public.
So what does the book have to say about economics and social life? As the authors write, there is no general unifying theme except maybe to say that social issues can be addressed using empirical data, which is, in a nutshell, the unifying theme of the social sciences in general. Other than that general theme, the book jumps from idea to idea, bringing empirical data and social scientific analysis to bear on a number of issues. The authors present data and theories on all of the following:
- The drop in crime rates in the 1990s was due primarily to the passage of Roe v. Wade in 1973 and not to: innovative policing, more extensive use of capital punishment, nor the economic boom of the 1990s (though more police and more prisons probably played a role). I was initially very skeptical of this claim, but I do think the authors muster enough evidence to indicate that it has to at least be taken seriously. The basic argument is that by legalizing abortion, women who would not have previously been able to get abortions – primarily the lower and working classes – are more likely to get abortions. As a result, these lower class and working class women are less likely to have offspring (or fewer offspring), and, because their offspring have a greater likelihood of committing crime (not for genetic reasons but for sociological reasons – class, stratification, disparity, poor parenting, lack of supervision, etc.), the potential pool of criminals actually began to shrink. Ergo, there were lower crime rates about 20 years after Roe v. Wade when the kids of these women would have been coming of age and beginning their turbulent, high crime years. I’m still a bit skeptical of this claim, but, after reading this, I think there may just be something to it. I think more international comparisons are needed to bolster this theory.
- The authors claim real estate agents do not have your best interest in mind when they are trying to sell your home. Given our recent home purchasing and selling attempts (which isn’t how social science is done, I know), I found this argument extremely compelling. According to the authors, real estate agents encourage their clients to take the first good offer that comes along rather than waiting for the best offer. When they are selling their own homes, however, they wait, on average, an additional 10 days and usually end up with better offers as a result. The reason: an extra couple of thousand dollars may mean a lot to the home buyer or seller, but given the percentages real estate agents earn, they don’t translate into substantial earnings (e.g., about $150 for a $10,000 increase in price). As a result, they would rather get the sale then wait to get a small increase in profit. There is a confounding factor here that the author doesn’t address that I think probably explains some of this disparity: I may be mistaken on this, but I’m guessing that real estate agents tend to upgrade homes within the same market rather than moving to new locations, which is what many of their clients are doing. Because they are upgrading they can afford to wait. People moving for a new job can rarely afford to wait to sell their home. Ergo, real estate agents don’t have to move right away and can therefore hold out for a good offer. Even so, I think the authors are generally right – real estate agents aren’t really looking out for their clients’ best interests, but their best interests (there are some notable exceptions to this, I’m sure).
- Another idea the authors address is the idea that money makes no difference in campaigns; some candidates are just liked while some are not liked. According to their analysis, it makes almost no difference how much money you spend on a campaign, other factors have greater appeal – charisma, looks, etc. Additionally, the authors note that about $1 billion is spent every year on campaigns in the U.S., which seems like a lot of money. However, that is the equivalent of what Americans spend every year on chewing gum, which kind of puts things in perspective. The authors also frame this as “the cost of democracy,” which seems a bit disingenuous, but a reasonable assertion at some level.
- The authors also ask some very intriguing questions that lead to engaging insights. For instance, “What do school teachers and sumo wrestlers have in common?” The answer: they both cheat. When schools engage in high stakes testing (high stakes being teachers’ positions and salaries are contingent on test scores, e.g., No Child Left Behind), teachers tend to cheat – around 5%, give students answers or corrects their tests. The authors used a large data set from the Chicago school districts along with some algorithms to detect cheating teachers. It’s actually a very fascinating analysis that is quite compelling. It is also a pretty damning argument as far as educational policy is concerned – high stakes testing leads to cheating, not better education. How, then, do sumo wrestlers cheat? It’s more collusion than anything, but basically it boils down to throwing matches when their opponent needs a win and they don’t (the argument is pretty complicated, but makes sense). A large percentage of the elite sumo wrestlers in Japan actually collude in throwing matches. Ergo, both school teachers and sumo wrestlers cheat.
- The authors also draw extensively on the research of other economists and even sociologists (hooray!) to illustrate economic principles. Some of this borrowed research focuses on life in gangs in Chicago and is absolutely fascinating. The author gained access to the financial log book of a gang via a sociologist who worked closely with a gang in Chicago and ran some analyses on the data. He found that the foot soldiers in the gang make less than minimum wage. Additionally, they have a 1 in 4 chance of dying over a 6 year period as a member of a gang (which is, technically, higher than the chance of dying if you are on death row, where fewer than 1 in 4 inmates are put to death in a 6 year period). If they make so little money and take such big risks, what’s the motivation? It turns out that the leaders of gangs make a lot of money. The immediate leader of the gang studied by this sociologist was bringing in close to $8,000 per month, which means he was making almost $100,000 per year. He also had a bachelor’s degree and ran the gang like a business. The leaders above him, who made up the elite of the elite, brought in close to $500,000 per year. Ergo, the chance of making a lot of money is one major motivation for joining a gang, despite the terrible initial pay and the substantial risks of violence, death, and imprisonment.
- The authors also look at educational and financial outcomes for children and find both some enlightening and disturbing things. There are a number of factors that don’t matter for child success in education, including: recently moving into a better neighborhood, the mother not working between birth and kindergarten, spanking, the child watching television, frequently taking the child to museums, and participation in Headstart. What, then, does correlate with better educational outcomes for children? Having your first child after thirty correlates with better educational outcomes, most likely because people who do this have spent some time preparing themselves both educationally and economically, which means they value those things and pass that on to their children. Educational attainment and socioeconomic status are both important and are transmitted to children. Having lots of books in one’s home is also a significant correlate, but reading to one’s children is not (the explanation here is complicated; if you want details, read the book). An idea discussed here that is undoubtedly one of the more controversial ones in the book is that adopted kids tend to do worse in school. The reason has less to do with the act of adoption than with genetics (which is where the controversy comes in). The parents of kids who are put up for adoption tend to come from lower social classes, have lower educational attainment, and there seems to be something of a genetic component to their level of intelligence. In contrast, parents who adopt tend to be more educated and have a higher socioeconomic class. The “success” of the adoptive parents can attenuate some of the genetic limitations of adopted children, but that attenuation is not seen early in life – adopted children still tend to not do as well in school. But by the end of their secondary education they end up having pretty good educational and economic outcomes, in large part thanks to the influence of their adoptive parents. One of the more intriguing points the authors make in relation to educational outcomes of children is that reading parenting books is basically useless. First, they often give contradictory advice that is almost never based on empirical research. But, more importantly, any advice they give is going to come too late – the factors that predict educational success are already set by the time you start reading the books. Ergo, the books will have a minuscule influence, at best.
- Finally, the authors talk about names and how they relate to status. The issue is a combination of both race and class differences – different names are popular among different races and classes. The classic argument is that there is later life discrimination based upon people’s names (and there is a substantial body of literature indicating this does happen). But the point the authors make is that those names reflect status differences in and of themselves. Using a massive data set from the state of California covering the last 40 or so years, an economist found that popular names change and vary by race and class (and gender, of course, but that almost goes without saying). Intriguingly, among whites, popular names start in the upper classes than filter down to the lower classes. Once a name becomes ubiquitous among the lower classes, the upper classes pick new names they like. For blacks, on the other hand, it is only in the last 15 to 20 years that there has been a push for very unique names that, some argue, reflect African heritage. The authors ultimately argue that, even though there may be some discrimination based on names later in life, the names themselves reflect status differences.
Review:
Okay, that was a bit detailed. So, I’ll make my review relatively short. It was a little awkward having the book jump from topic to topic, but the insights themselves are intriguing and make for interesting reading. Additionally, the book is well-written and engaging. I already pointed out a few areas where I’m a bit skeptical, but most of the research discussed is outside my particular area of expertise, so I’m hesitant to be any more critical (I’ll happily leave that to the real experts on these issues).
One idea mentioned by the authors did, indirectly, relate to the research I do, so I have to discuss it. The authors stated that economics is the study of incentives, of how people get what they want. If that is true, then it won’t necessarily work for studying religion, as it isn’t always about what people want but rather what they are raised with (i.e., what they get). Of course, this criticism of economics (assuming the definition is accurate), is a general criticism as well. Whenever socialization plays a role in life outcomes, which it clearly does with things like religion, educational attainment, and even criminal behavior, economic models will not be able to explain all of the behavior. Let me give just a quick example from religion that illustrates this idea. A boy, Todd, is born into a highly religiously committed Mormon family and is socialized into the Mormon religion (Christian Smith’s recent book indicates the chances of Todd sharing his parents beliefs and values are higher than 80%, at least through about age 18). So, Todd adopts all of the leitmotifs of the religion and is a devout Mormon. Then, come about age 22 he marries and begins having kids. He didn’t work all that hard in school and is now stuck working in construction, where he makes about $30,000 per year. His religion tells him to have as many kids as he feels he can have and not to put them off. It also tells him that his wife shouldn’t work. So, he has four kids and his wife stays home to raise them. Given his income, he is living barely above the poverty level. What’s more, if he wants to remain a Mormon in good standing he has to give 10% of his income to the religion, usually calculated pre-taxes. That takes away an additional $3,000 of his income. With all of these stresses, he is barely making ends meet, and certainly not living a comfortable life. This isn’t the life he wants. Then he starts studying his religion and finds some things he doesn’t like (e.g., the exploits of the early leaders and different doctrines that seem questionable). As a result of these findings he decides he no longer believes. But Todd, now 30, is stuck. If he leaves the religion, his wife, who doesn’t share his new ideas, will leave him, taking the kids with her. In what sense can the question, “How does this reflect incentives or people getting what they want?” explain Todd’s situation? How do you quantify Todd’s devotion to his wife and family? How do you translate that into numbers? There probably is some intangible, subjective line of stress or suffering which, if crossed, will push Todd to leave the religion anyway, but how would an economist predict it? In short, life isn’t always about what we want. Often it’s about the hand of cards we are dealt from our parents (e.g., socialization). Certainly there are incentives involved in life, but they aren’t always quantifiable. This is particularly true in something like religion. (I apologize for the lengthy example, but this is something I’ve spent a lot of time thinking about and thought others might find it interesting.)
One other thing I have to point out that is more humorous than insightful is that, in the discussion of baby names, three names came up that I had heard about from a relative. My brother-in-law’s wife (does that, technically, make her my sister-in-law, or not?), in a name-down with Debi, threw out a couple of names that were absolutely hilarious. Now, don’t take this the wrong way; I’m not trying to make fun of anyone’s name. But, at some level, you just have to admit that some names are over-the-top ridiculous and funny. Debi mentioned she met someone with the name Yomajesty (as in, Your Majesty). My sister-in-law said she had heard two names that were unbeatable: Lemonjello and Orangejello. Yes, that is “lemon jello” and “orange jello,” but they are pronounced a little differently than you might think. Here’s my phonetic spelling, “le mahn ghello” and “or ahn ghello.” These are, in fact, names discovered in the baby name database from California, which also happens to be where my sister-in-law currently lives. So, she may, in fact, have run into these two kids. But, she may also have heard the names from someone who read this book. The name to beat all names, though, is this one, “Shithead.” I kid you not, that is a name someone gave to their child. Of course, they pronounced it a little differently as well, “shi teed,” but still – someone’s a total ass for giving their kid that name. Anyway, I just thought this was funny – I heard these names before reading the book from a source that didn’t mention the book. And when they mentioned them in the book I cracked up, again…
Overall, Freakonomics is a good little read. It isn’t a primer on economics, but it does make the subject intriguing, and hopefully will give the lay reader a little more insight on what social scientists do. It is worth reading if you get a chance, but don’t expect any thematic coherency in the topics addressed and be prepared to be a little shocked.