January 15, 2007

Freakonomics. A Review.

People usually believe things that they best understand. As John Galbraith wrote, "economic and social behaviour are complex, and to comprehend their character is mentally tiring". So we "adhere, as though to a raft,to those ideas which represent our understanding." This engenders "conventional wisdom". "The hallmark of the conventional wisdom", wrote Galbraith, "is acceptability." Conventional wisdom then is widely accepted. It does not follow however that it is correct too.

Any attempt to sift through conventional wisdom and establish truth is "mentally tiring", and its result is likely to be unpopular. Undaunted, the authors of the interesting little book Freakonomics, set about examining conventional wisdom in a chosen set of issues. More often than not, they find that conventional wisdom is wrong, or in the very least, irrelevant. Sure enough, their conclusions are provocative, dismaying, disturbing and provide lot of food for thought.

Steven Levitt, a brilliant young economist and Stephen Dubner, an enterprising journalist met when the later was working on an article about the former for New York Times Magazine in 2003. Levitt's work (empirical research in microeconomics) is of a nature which could appeal to lay readers. Dubner's background had given him a great ability to write beautifully and persuasively. Together, they began to work on the book.

The choice of topics was determined by Levitt's earlier research. All the topics are widely discussed and are loaded with conflicting opinions and mindsets. Some of the topics are the role of parents, the reasons behind the dramatic fall in crime in America during the 90s, the drug dealers, and the possibility of cheating by school teachers, etc. Any position on these topics is bound to annoy someone. But this book is particularly provocative because of its haughty dismissal of "experts" and its explicit mission to trash conventional wisdom.

The crime rose alarmingly in America during the 80s and there were not a few experts predicting apocalypse. Indeed, as 90s began everyone agreed that worse was yet to come. But quite strangely, and for a while inexplicably, crime began to fall. And drastically. Soon the same experts who were predicting apocalypse began to explain the reasons for this unexpected fall. All the standard theories were offered: strong economy, increased and stricter prison terms, innovative police measures and more police, restrictions on guns, decreased supply of crack cocaine, increased use of capital punishment etc. Levitt and Dubner even mention the number of articles in major newspapers that cite each of these reasons from 1991 to 2001. It serves to dramatize their own explanation for crime-drop. After dismissing many of the above as highly unlikely or marginal (strong economy, gun control, death sentence, innovative police measures) and admitting a moderate impact of others (more police personnel, decreased supply of cocaine, stricter prison terms), they claim that one of the major reasons for the crime-drop of 90s was the lack of criminals. In 1973 US Supreme Court legalized abortion and this meant hundreds of thousands of unwanted children were not born (around 1.6 million annually). The authors cite numerous studies to the effect that children of teenage, poor, unmarried women are highly likely to have criminal lives. So the fact that millions of people who would have reached their peak criminal phase (late teens) around early 90s were simply not born was a huge factor in the crime-drop. Surely this is a highly controversial claim with its intrusion onto lots of touchy areas. Still, as the authors claim, this is what the data reveal.

The whole book is liberally filled with equally controversial conclusions (what parents do doesn't really matter to the child's future, real-estate agents do not necessarily ensure that their clients get the best deal, many schoolteachers and Sumo wrestlers cheat, money does not win elections, drug dealing is not such a lucrative business for most of its practitioners).

The most serious shortcoming the book, in my view, is that it is essentially an elaborate and slightly repetitive plug for all the relevant research papers of Levitt. It only cites various studies, and does not offer many critical arguments or incisive analysis. All the conclusions are derived using a black box (various studies they cite) and the reader is required to simply trust that black box. Or, one can go and look into the box by studying the relevant research papers.

Most of the arguments in the book follow this pattern:

Let us study event X. The conventional wisdom has it that the reasons/consequences of X are A,B,C,D,.....But in fact the study S1 and/or S2 and/or S3 has confirmed that the real reason/consequences are only A,C,... and more importantly 1,2,...

Except for some incidentally logical passages and very little serious argument, the book has nothing more to offer in the form of scientific thought.

The authors admit right at the beginning that the book has no "unifying theme" and that it follows a "sort of treasure-hunt approach". This absence of unifying theme jars the reader throughout the book. It becomes particularly troubling toward the end when the reader is bombarded with pages after pages of useless data (which one forgets as soon as the page is turned) but in the end retains very little substance.

Aside from a few pointers to the correct way of thinking (need for a more critical study of data, importance of the difference between causality and correlation) the book is just an ad hoc collection of interesting information.


At 2:22 AM, January 17, 2007, Anonymous Alex said...

I had talked about this book here.



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