Posts Tagged ‘Steven Levitt’

Superfreakonomics by Steven D. Levitt and Stephen J. Dubner

September 10, 2010

After having it on my shelf for quite a while, I finally sat down and read Superfreakonomics; Levitt and Dubner’s follow-up to their bestselling book Freakonomics. Superfreakonomics is laid out much the same way as Freakonomics was, although less time is spent on declearing Levitt to be a genius.  However, with chapter titles as How is a street prostitute like a department-store santa?, Why should suicide bombers buy life insurance?, and What do Al Gore and Mount Pinatubo have in common?, the similarity to Freakonomics is unmistakeable. The similarity also makes Superfreakonomics feel like an act of duty more than a work of inspiration.

Just like John Whitehead, I enjoyed Freakonomics more than I did Superfreakonomics. I also agree with Whitehead that the highlight is the epilog on monkeys learning to use money. Levitt and Dubner do a great job, however, coming up with surprising conclusions:

This is a strange twist. Many of the best and brightest womenin the United States get an MBA so they can earn high wages, but they end up marrying the best and brightest men, who also earn high wages which affords these women the luxury of not having to work so much (p. 46).*

So, perhaps there’s more to getting an MBA than high wages? Bright men, for example. Next, do what you want to do:

Deliberate practice has three key components: setting specific goals; obtaining immediate feedback; and concentrating as much on technique as on outcome. The people who become excellent at a given thing aren’t necessarily the same ones who seemed to be “gifted” at a young age. This suggest that when it comes to choosing a life path, people should do what they love […] because if you don’t love what you’re doing, you are unlikely to work hard enough to get very good at it (p. 61).

Partly beg to differ. I think many of those really good at something (like, world-class-good), at least has to begin practicing at an early age.

Other amusing and at times unsettling conclusions are that death rates in Los Angeles drop when doctors go on strike (p. 81), in Singapore they have the the Manitenance of Parents Act (p. 106), economists believe more in theory than in the real world (“Sure, it works in practice, but does it work in theory?”, p. 115), the Endangered Species Act endanger rather than protect species (p. 139), buying locally produced food increases greenhouse-gas emissions (p. 167), and the movement to stop global warming has taken on the feel of a religion (p. 169).

Perhaps the most controversial part of the book is the chapter on global warming, where Levitt and Dubner embrace geoengineering as the short-term solution. The noise around the chapter was seemingly so annoying to someone that critical posts on the Freakonomics blog were removed (see here, for example). Among the disturbing claims Levitt and Dubner provide is that climate scientists ‘turn their knobs’ such that their model do not provide outlier estimates, because an outlier model is hard to get funded. The economic reality of research funding generate a scientific consensus, rather than independent research (p. 182). The claim ressonates with a seminar I recently attended. The seminar was given by a Danish climate scientist who were concerned that the famous hockey stick graph, hailed as the undisputable proof of man-made climate change, resulted from lack of data, inappropriate methods, and an assumed stable temperature prior to the industiral revolution. The discussion in Superfreakonomics do, however, seem fairly balanced in places, see for example the discussion on page 199.

I would recommend Superfreakonomics to anyone unfamiliar with Freakonomics, but, honestly, it’s a Freakonomics 2, and not any more super than it’s predecessor, which is, notwithstanding, quite superb. Superfreakonomics is perhaps an easier read (or I’ve become a better and quicker reader), but lacks a character like Sudhir Venkatesh.

* Page numbers refer to the Allen Lane UK edition.

The Purpose of Economics

June 3, 2009

The purpose of economics is, according to Gary Becker (a Chicago economist), ‘to understand and alleviate poverty.’ Levitt, at Freakonomics, writes

What’s surprising about Becker’s comment — and I believe he is telling the truth and not just being politically correct when he says helping the poor is the point of economics, because he never worries about political correctness — is that he is a staunch Republican and a firm believer in markets. There is no reason why that belief in markets can’t go hand in hand with really wanting to help the poor, it just usually doesn’t.

In a market economy, there are inevitably winners and losers. So most folks who worry about the poor are turned off by markets, believing that some other system could do a better job for the worst off. Becker, however, would argue that markets, especially when combined with access to good education, are the best shot the poor have.

In another Freakonomics post, Dubner discusses Becker’s idea of ‘the economic approach,’ where he somewhat surprisingly concludes that almost all deaths are suicides!

Economics Is Hard

March 19, 2009

In an old post on Freakonomics that discusses the Coase Theorem, Steven Levitt, the great economist, writes:

The basic idea of the Coase Theorem is that no matter who is assigned property rights, as long as transaction costs are not too high, the efficient outcome will be achieved.

That’s wrong, as far as I know. Well, at least, Deirdre McCloskey, who seem to know her stuff better than most, writes in her little gem Economical Writing:

“[T]he Coase Theorem” [that is] “the proposition that property rigths matter to allocation in the case of high transaction costs” (which, incidentally, is the correct statement of the theorem, widely misunderstood in economics) [p. 60, 2nd edition].

The quote is taken out of context, which is a discussion of the use of Capitalization, but that’s beside the point. Now, I looked the theorem up in the book I learned it from back in the days (‘Environmental Economics – In Theory and Practice’ by Hanley, Shogren, and White, 1997), and it was wrongly stated there as well:

The so-called Coase theorem posits that disputing parties will work out a private agreement that is Pareto efficient [that is, no-one can be made better off without making someone else worse off], regardless of the party to whom unilateral property rights to the non-market asset are assigned initially [p. 25].

Both Levitt and my text book are right, of course; property rights do not matter to efficiency when transaction costs are ignored. They are always present, however, and that’s were Coase put his emphasis, I think; when transaction costs are substantial, property rights matter. I should look up Coase’s original formulation and find out for myself, I know. I’m lazy, though, maybe some other time. I did google it, however, and every single explanation I found among the top hits got it the wrong way.

Economics is hard. Or confusing, maybe.

Time to get a haircut?

October 10, 2008

Steven Levitt is having his:

I have a colleague who told me some time back that he had identified a strong leading indicator of economists who think they are on the short list for winning the prize: getting a haircut the week before the Nobel is announced. He claims to have many data points supporting his theory.

The economics Nobel is announced Monday. If I’m not mistaken, this very colleague is sporting a snazzy new haircut.