Freakonomics by Steven D. Levitt and Stephen J. Dubner

Steven D. Levitt was a 37 year old economist in 2003 when he was profiled in the New York Times Magazine by writer Stephen J. Dubner. Levitt is a Harvard undergrad and has a PhD from MIT.

He professed little interest in the sort of monetary issues that come to mind when most people think about 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.”

What Levitt is good at is “distilling economics to its most primal aim: explaining how people get what they what….People respond to incentives”. How any given individual – businessperson or a stranger one meets – treats you will depend on how that person’s incentives are ‘set up’.

Levitt cites five principles and spends the rest of the book elaborating with examples drawn from all walks of life:

1. Incentives are the cornerstone of modern life.
2. The conventional wisdom is often wrong.
3. Dramatic effects often have distant, even subtle causes.
4. Experts – from criminologists to real-estate agents, use their informational advantage to serve their own agenda.
5. Knowing what to measure and how to measure it makes a complicated world much less so.

Levitt is the numbers man, Dubner is the writer, and its his prose, simple, clear and entertaining, that makes the book entertaining as well as informative.

This book is a must read for everyone – from people selling their houses who wonder if their real-estate agent is really getting as much as possible for the property (and if not, why not?) to drug dealers (if they make so much money why do they still live with their mothers?) to the black-white test gap and “acting white.”

The chapters have intriguing titles:

What Do Schoolteachers and Sumo Wrestlers Have in Common? Everyone assumes school children cheat, but no one expects teachers to do so. Levitt explains, with numbers, why they do it.

How is the Ku Klux Klan like a Group of Real Estate Agents? Levitt presents a brief history of Stetson Kennedy, who infiltrated the Klan during the 50s and exposed their activities on, of all things, the Superman radio program.

Why Do Drug Dealers Still Live With Their Moms? in which he explains, among other things, why prostitutes make more than architects.

Where Have All The Criminals Gone? in which he presents his theory that the crime rate is going down not because of better police departments but because of the legalization of abortion.

And finally, two chapters on parenthood: What Makes a Perfect Parent and Perfect Parenting Part II, or, Would a Roshanda by Any Other Name Smell as Sweet?

In this chapter Levitt illuminates the facts behind the classic racism test – where resumes for people with “black-sounding” names did more poorly than resumes for people with “white-sounding” names.

The reader might not agree with some of Levitt’s conclusions, but he or she is given the numbers to draw their own conclusions. Levitt illuminates disparate subjects…but in all things what he is really revealing is human nature. That’s the best of this book – readers can look into it as in a mirror. And who thought economics could do that?

William Morrow. 2005. ISBN 006073132X.
Available from Amazon.com for $17.13.