Freakonomics: O estranho mundo da economia

Capitalism’s Economic illiteracy 2.0…

Preamble:
--"probably the best-known economics book of our time"
…This is how (real-world) economist Ha-Joon Chang described Freakonomics (2005), before critiquing its entire premise (see later).
--I was reminded of this when re-reading Klein’s The Shock Doctrine: The Rise of Disaster Capitalism (2007). I was thinking how Klein’s book might be the best-known anti-capitalist book of our time, so I did some quick searches to see how books on “economics” and “capitalism” ranked on Goodreads in terms of number-of-ratings. You can see a longer list in my review of Klein’s book:
-838,472 ratings: Freakonomics (the most ratings of any “economics” book I could find).
-46,867 ratings: The Shock Doctrine

--Now, if you know me, you’ll know why I’ve avoided Freakonomics for so long.
…It reminds me of the grueling process of trying to learn about the real world when your entire vocabulary is Orwellian… when you cannot even formulate coherent questions. We should pause here and reflect on how significant this barrier is.
--I remember walking in circles amidst the prominently-displayed glossy covers which I started with, including:
-ex. Malcolm Gladwell: a salesperson rather than a serious social theorist: Outliers: The Story of Success; Gladwell’s blurb is on the cover of Freakonomics: “Prepare to be dazzled.”
-ex. Steven Pinker: The Blank Slate: The Modern Denial of Human Nature is referenced in the book.
--Such a popular book was indeed a breeze to read, but harder to review. If I could find satisfaction in unpacking Jordan Peterson’s 12 Rules for Life: An Antidote to Chaos, then it’s about time I cross off the most popular “economics” book.

Highlights:

1) Economics illiteracy 2.0:
--The best propaganda must start with a kernel of truth, as a lure (ex. Jordan Peterson acknowledging the “chaos” and lack of meaning/values in modern society).
…Thus, Levitt (the economist in Freakonomics) tries to distance himself from:

a) Mainstream economics (i.e. Neoclassical economics, which is never named):
--We can think of this as “Economics illiteracy 1.0”. Levitt correctly disparages this school of thought as a bunch of math/econometrics/theory that do not ask (I would say avoid) interesting questions (esp. critical framing).
--Levitt still seems to describe this as a “science” (misleading) with excellent tools (also misleading), applied to the monetary world of stock markets/economic growth/inflation/taxes which Levitt claims to avoid. If the tools are excellent, it’s strange how Levitt avoids applying them to the listed topics (imagine studying “economics” and saying, nah, don’t care about these. What a relief, that would make my studies much easier!).

b) Freakonomics (i.e. Neoclassical microeconomics):
--This is “Economics illiteracy 2.0”. If you read carefully, the authors admit their book is actually “applied microeconomics” with a hearty dose of marketing (“rogue”, “unorthodox”, “Freak”).
--Such rebels, a journalist for the New York Times Magazine marketing an economist from the infamous Chicago School of Economics (such a credible tradition, including the “Chicago Boys” “free market” economists in Chile’s Pinochet dictatorship). Director of the Becker Friedman (yes, Milton Friedman) Institute for Research in Economics.
…Winner of the John Bates Clark Medal which the book describes as “a sort of junior Nobel Prize for young economists”: firstly, the “Nobel Prize” in Economics is infamous for being a fake Nobel given to mostly pro-finance shills; secondly, John Bates Clark was the infamous Neoclassical economics pioneer in the US who justified inequalities (during the robber barons “Gilded Age”!) as natural law based on their contributions, departing from Classical rent theory (thus, “Neoclassical” is “anti-Classical” according to Michael Hudson/Anwar Shaikh etc.).
--Given such mainstream biases, Freakonomics mentions “capitalism” only twice (and never defined), (1) in the context of Adam Smith (and the rise of capitalism, long ago so readers cannot contextualize), and (2) tossed in (with zero context) when mentioning information asymmetries.
--With the big picture of economics left opaque, Levitt focuses on (1) individual behavioral incentives and (2) data analysis to explore “everyday life”/“how the world really works” (including pop culture/sports/crime)/“everything”. This is why Ha-Joon Chang questions the entire premise of this “economics” book, in Ch.1 “Life, the Universe and Everything” of Economics: The User's Guide
--The root of “economics” is described as how people (individuals) get what they want. The problem with starting from the individual/micro is the structural/macro rules (esp. economics) are not assessed (in terms of how they are socially constructed/alternatives). So, even if Levitt focuses on cheating/corruption/crime (which indeed are avoided in Neoclassical economics), it’s from the individual level so the structural incentives seem vaguely inevitable.
--This book is actually dealing with psychology/sociology topics (thus, asking interesting but misplaced questions) using crude tools described in an economized manner. For an actual intro to real-world economics, see: Talking to My Daughter About the Economy: or, How Capitalism Works—and How It Fails.

…see comments below for rest of the review…

Yeah, this isn't 'rogue economics'. This is sociology. It's not a new discipline. And this is really spurious sociology that wouldn't pass muster in academia, so Levitt published it for public consumption.

I guess some people don't like this book because it's not centered around one theme. Instead, it's more about the seemingly diffuse academic work of one of the authors Steven D. Levitt (the other author is a journalist, Stephen J. Dubner). Levitt is something of an economist but more like a social scientist using the tools of Microeconomics applied to other fields that happen to catch his interest (often having something to do with cheating, corruption, crime, etc.). In the back of the book he mentions how he considers himself a student of Thomas Schelling who is kind of like the father of Game Theory (strategy theory?), except much more of a 'man of ideas' than what one might think of when one thinks about game theory today, which is much more mathematical.

Anyway, as for the book itself, I thought it was really great. I really like what Levitt is doing as far as using the tools of Microeconomics in other fields. One of my intellectual heroes (I only have a few) is Kenneth Waltz who did the exact same thing in the field of International Relations in the '70's and wrote the seminal book The Theory of International Politics, which pretty much the single-handedly invented defensive (neo) realism. More generally, I think Economics is probably the most formalized of the social sciences and the one to which others should esteem. A lot of the Political Science field concerned with both voter behavior and how legislatures work is now pretty formalized as well, and, I, for one, think this is a good thing. I don't see how anyone could think it's not (good) unless they a)think the scientific method cannot be used to analyze human behavior; or b)have a visceral aversion to mathematical languages. Actually, I am one of the latter, but I, at least, see the value in having a formalized language to work with.

As for the book itself, there's some maybe-controversial things in there like Levitt did some work that showed that the legalization of abortion in the U.S. (Roe v. Wade) was one of the main reasons that crime in the U.S. dropped in the '90's and continues at the same rates today. He stands behind it pretty hardily though and it doesn't seem like he has a moral agenda at all. Some might argue that the best writers are those who are best able to disguise their moral agenda, but considering he writes about all kinds of not-very-serious things like how sumo wrestling in Japan is probably corrupt as far as matches g,o and there's stuff in there about how real estate agents sell their houses for more than they sell their customers' houses (which, may or may not be surprising), I really don't think he has a hidden pro-life agenda.

Anyway, there's a bunch of stuff in there (the book), hence the 'freak' in Freakonomics. It's well-written. It's not dry. It's written for a lay audience. I recommend it. Read it and feel the power of social science! ;-)

As the old joke goes, the questions in economics exams are the same every year; only the answers change.

(re-reading in prep for the super-freaks)

Sure, this book was a compelling read that offered us all some great amo for cocktail party conversation. But ultimately I think most of what Leavitt claims is crap.

He dodges accoutability with the disclaimer about his book NOT being a scholarly work, but then goes on to drop statistics, theories and expert opinions. These assertions laid, he doesn't provide readers with enough information to critically examine his perspectives.

Ultimately I have a problem with the unquestioned, unaccoutable role of the public intellectual. Leavitt dances around with his PhD on his sleeve, but is never subject to peer review or any sort of academic criticism. I think it's irresponsible.

Freakonomics: A Rogue Economist Explores the Hidden Side of Everything (Freakonomics), Steven D. Levitt, Stephen J. Dubner
Freakonomics: A Rogue Economist Explores the Hidden Side of Everything is the debut non-fiction book by University of Chicago economist Steven Levitt and New York Times journalist Stephen J. Dubner. It was published on April 12, 2005, by William Morrow. The book has been described as melding pop culture with economics. By late 2009, the book had sold over 4 million copies worldwide.
The book is a collection of articles written by Levitt, an expert who had gained a reputation for applying economic theory to diverse subjects not usually covered by "traditional" economists. In Freakonomics, Levitt and Dubner argue that economics is, at root, the study of incentives. The book's chapters cover:
Chapter 1: Discovering cheating as applied to teachers and sumo wrestlers, as well as a typical Washington, D.C.–area bagel business and its customers
Chapter 2: Information control as applied to the Ku Klux Klan and real-estate agents
Chapter 3: The economics of drug dealing, including the surprisingly low earnings and abject working conditions of crack cocaine dealers
Chapter 4: The role legalized abortion has played in reducing crime, contrasted with the policies and downfall of Romanian dictator Nicolae Ceauşescu (Levitt explored this topic in an earlier paper entitled "The Impact of Legalized Abortion on Crime," written with John Donohue.)
Chapter 5: The negligible effects of good parenting on education
Chapter 6: The socioeconomic patterns of naming children (nominative determinism)
تاریخ نخستین خوانش: روز بیست و هفتم ماه آگوست سال 2008 میلادی
عنوان: اقتصاد ناهنجاری‌های پنهان اجتماعی؛ نویسنده: استیون لویت، استپان‌ دابنر؛ مترجم: سعید مشیری؛ تهران: نشر نی‏‫، 1386؛ در 269 ص؛ شابک: 9789643129507؛ چاپ دوم 1392؛ موضوع: اقتصاد از نویسندگان امریکایی - جنبه های روانشناسی - سده 21 م
عنوان: اقتصاد، علم انگیزه‌ها؛ نویسنده: استیون دی‌. لویت؛ مترجم: امیرحسین توکلی؛ تهران: سبزان‏‫، 1385؛ در 197 ص؛ شابک: 9789648249674؛ عنوان روی جلد: اقتصاد علم انگیزه‌ها: مهارت‌های لازم برای کشف ابعاد پنهان پدیده‌ها؛
‬کتاب «فریکونومیکس» در باره ی اقتصاد، از اقتصاددان دانشگاه شیکاگو «استیون لویت» است، که نخستین بار در روز دوازدهم ماه آوریل سال 2005 میلادی منتشر شد. این کتاب تا پایان سال 2009 میلادی، بیش از چهار میلیون نسخه فروش داشته است. کتاب با عنوان «اقتصاد ناهنجاری‌های اجتماعی» توسط نشر نی و با ترجمه ی جناب «سعید مشیری»، و با عنوان: «اقتصاد، علم انگیزه‌ها»؛ با ترجمه ی جناب «امیرحسین توکلی»، منتشر شده است. کتاب چندین فصل دارد: درباره حقه زدن در شغل‌هایی مانند معلمی و کشتی‌گیران سومو؛ شباهت‌های کوکلوس‌کلان‌ و افراد معاملات ملکی؛ سیستم اقتصادی کارتل‌های مواد مخدر؛ تاثیر قانونی‌سازی سقط جنین در کاهش جرایم چندین سال بعد؛ نقش بسیار کم تربیت خوب کودکان توسط والدین در بهتر شدن آموزش و پرورششان؛ و الگوهای نامگذاری کودکان در یک جامعه. ا. شربیانی

Extremely enlightening! Worthy of 15 stars out of 5! This is a book about the world and not about any science in particular. It's about learning to question the given and see beyond the obvious. An extremely useful gift in the misguiding modern world.

Yeah, populistic much too much but neverthless compulsively readable. A definite revisit and reread.

Q:
As Levitt sees it, economics is a science with excellent tools for gaining answers but a serious shortage of interesting questions. His particular gift is the ability to ask such questions. For instance: If drug dealers make so much money, why do they still live with their mothers? Which is more dangerous, a gun or a swimming pool? What really caused crime rates to plunge during the past decade? Do real-estate agents have their clients’ best interests at heart? Why do black parents give their children names that may hurt their career prospects? Do schoolteachers cheat to meet high-stakes testing standards? Is sumo wrestling corrupt?
And how does a homeless man in tattered clothing afford $50 headphones?
(c)
Q:
the modern world, despite a surfeit of obfuscation, complication, and downright deceit, is not impenetrable, is not unknowable, and—if the right questions are asked—is even more intriguing than we think. All it takes is a new way of looking.
(c)
Q:
“Experts”—from criminologists to real-estate agents-use their informational advantage to serve their own agenda. However, they can be beat at their own game. And in the face of the Internet, their informational advantage is shrinking every day-as evidenced by, among other things, the falling price of coffins and life-insurance premiums.
Knowing what to measure and how to measure it makes a complicated world much less so. If you learn how to look at data in the right way, you can explain riddles that otherwise might have seemed impossible. Because there is nothing like the sheer power of numbers to scrub away layers of confusion and contradiction.
So the aim of this book is to explore the hidden side of . . . everything. This may occasionally be a frustrating exercise. It may sometimes feel as if we are peering at the world through a straw or even staring into a funhouse mirror; but the idea is to look at many different scenarios and examine them in a way they have rarely been examined.
...
Steven Levitt may not fully believe in himself, but he does believe in this: teachers and criminals and real-estate agents may lie, and politicians, and even CIA analysts. But numbers don’t.
(c)
Q:
Levitt had an interview for the Society of Fellows, the venerable intellectual clubhouse at
Harvard that pays young scholars to do their own work, for three years, with no commitments.
Levitt felt he didn’t stand a chance. For starters, he didn’t consider himself an intellectual. He would
be interviewed over dinner by the senior fellows, a collection of world-renowned philosophers,
scientists, and historians. He worried he wouldn’t have enough conversation to last even the first
course.
Disquietingly, one of the senior fellows said to Levitt, “I’m having a hard time seeing the
unifying theme of your work. Could you explain it?”
Levitt was stymied. He had no idea what his unifying theme was, or if he even had one.
Amartya Sen, the future Nobel-winning economist, jumped in and neatly summarized what he
saw as Levitt’s theme.
Yes, Levitt said eagerly, that’s my theme.
Another fellow then offered another theme.
You’re right, said Levitt, my theme.
And so it went, like dogs tugging at a bone, until the philosopher Robert Nozick interrupted.
“How old are you, Steve?” he asked.
“Twenty-six.”
Nozick turned to the other fellows: “He’s twenty-six years old. Why does he need to have a
unifying theme? Maybe he’s going to be one of those people who’s so talented he doesn’t need one.
He’ll take a question and he’ll just answer it, and it’ll be fine.”
(c)
Q:
There are three basic flavors of incentive: economic, social, and moral. Very often a single incentive scheme will include all three varieties. Think about the anti-smoking campaign of recent years. The addition of a $3-per-pack “sin tax” is a strong economic incentive against buying cigarettes. The banning of cigarettes in restaurants and bars is a powerful social incentive. And when the U.S. government asserts that terrorists raise money by selling black-market cigarettes, that acts as a rather jarring moral incentive.
Some of the most compelling incentives yet invented have been put in place to deter crime. Considering this fact, it might be worthwhile to take a familiar question—why is there so much crime in modern society?—and stand it on its head: why isn’t there a lot more crime? After all, every one of us regularly passes up opportunities to maim, steal, and defraud. The chance of going to jail—thereby losing your job, your house, and your freedom, all of which are essentially economic penalties—is certainly a strong incentive. But when it comes to crime, people also respond to moral incentives (they don’t want to do something they consider wrong) and social incentives (they don’t want to be seen by others as doing something wrong). For certain types of misbehavior, social incentives are terribly powerful. In an echo of Hester Prynne’s scarlet letter, many American cities now fight prostitution with a “shaming” offensive, posting pictures of convicted johns (and prostitutes) on websites or on local-access television. Which is a more horrifying deterrent: a $500 fine for soliciting a prostitute or the thought of your friends and family ogling you on www.HookersAndJohns.com.
(с)
Q:
Some cheating leaves barely a shadow of evidence. In other cases, the evidence is massive.
Consider what happened one spring evening at midnight in 1987: seven million American children
suddenly disappeared. The worst kidnapping wave in history? Hardly. It was the night of April 15,
and the Internal Revenue Service had just changed a rule. Instead of merely listing each dependent
child, tax filers were now required to provide a Social Security number for each child. Suddenly,
seven million children—children who had existed only as phantom exemptions on the previous
year’s 1040 forms—vanished, representing about one in ten of all dependent children in the United
States
(c)
Q:
Of all the ideas that Kennedy had thought up—and would think up in the future—to fight bigotry, his Superman campaign was easily the cleverest and probably the most productive. It had the precise effect he hoped: turning the Klan’s secrecy against itself, converting precious knowledge
into ammunition for mockery. Instead of roping in millions of members as it had just a generation
earlier, the Klan lost momentum and began to founder. Although the Klan would never quite die,
especially down South—David Duke, a smooth-talking Klan leader from Louisiana, mounted
legitimate bids for the U.S. Senate and other offices—it was also never quite the same. In The Fiery Cross: The Ku Klux Klan in America, the historian Wyn Craig Wade calls Stetson Kennedy “the single most important factor in preventing a postwar revival of the Ku Klux Klan in the North.”
This did not happen because Kennedy was courageous or resolute or unflappable, even though he was all of these. It happened because Kennedy understood the raw power of information. The Ku Klux Klan was a group whose power—much like that of politicians or real-estate agents or stockbrokers—was derived in large part from the fact that it hoarded information. Once that information falls into the wrong hands (or, depending on your point of view, the right hands), much of the group’s advantage disappears.
(с)
Q:
Information is so powerful that the assumption of information, even if the information does not actually exist, can have a sobering effect.
(c)
Q:
It is common for one party to a transaction to have better information than another party. In
the parlance of economists, such a case is known as an information asymmetry. We accept as a
verity of capitalism that someone (usually an expert) knows more than someone else (usually a
consumer).
(c)
Q:
If you were to assume that many experts use their information to your detriment, you’d be
right. Experts depend on the fact that you don’t have the information they do. Or that you are so
befuddled by the complexity of their operation that you wouldn’t know what to do with the
information if you had it. Or that you are so in awe of their expertise that you wouldn’t dare
challenge them. If your doctor suggests that you have angioplasty—even though some current
research suggests that angioplasty often does little to prevent heart attacks—you aren’t likely to
think that the doctor is using his informational advantage to make a few thousand dollars for
himself or his buddy. But as David Hillis, an interventional cardiologist at the University of Texas
Southwestern Medical Center in Dallas, explained to the New York Times, a doctor may have the
same economic incentives as a car salesman or a funeral director or a mutual fund manager: “If
you’re an invasive cardiologist and Joe Smith, the local internist, is sending you patients, and if you
tell them they don’t need the procedure, pretty soon Joe Smith doesn’t send patients anymore.”
(c)
Q:
Consider this true story, related by John Donohue, a law professor who in 2001 was teaching at Stanford University: “I was just about to buy a house on the Stanford campus,” he recalls, “and the seller’s agent kept telling me what a good deal I was getting because the market was about to zoom. As soon as I signed the purchase contract, he asked me if I would need an agent to sell my previous Stanford house. I told him that I would probably try to sell without an agent, and he replied, ‘John, that might work under normal conditions, but with the market tanking now, you really need the help of a broker.’”
Within five minutes, a zooming market had tanked. Such are the marvels that can be conjured by an agent in search of the next deal.
(c)
Q:
They were also a lot richer, taller, skinnier, and better-looking than average. That, at least, is what they wrote about themselves. More than 4 percent of the online daters claimed to earn more than $200,000 a year, whereas fewer than 1 percent of typical Internet users actually earn that much, suggesting that three of the four big earners were exaggerating. Male and female users typically reported that they are about an inch taller than the national average. As for weight, the men were in line with the national average, but the women typically said they weighed about twenty pounds less than the national average.
Most impressively, fully 70 percent of the women claimed “above average” looks, including 24 percent claiming “very good looks.” The online men too were gorgeous: 67 percent called themselves “above average,” including 21 percent with “very good looks.” This leaves only about 30 percent of the users with “average” looks, including a paltry 1 percent with “less than average” looks—which suggests that the typical online dater is either a fabulist, a narcissist, or simply resistant to the meaning of “average.” (Or perhaps they are all just realists: as any real-estate agent knows, the typical house isn’t “charming” or “fantastic,” but unless you say it is, no one will even bother to take a look.) Twenty-eight percent of the women on the site said they were blond, a number far beyond the national average, which indicates a lot of dyeing, or lying, or both.
Some users, meanwhile, were bracingly honest. Eight percent of the men—about 1 in every 12 conceded that they were married, with half of these 8 percent reporting that they were “happily married.” But the fact that they were honest doesn’t mean they were rash. Of the 258 “happily married” men in the sample, only 9 chose to post a picture of themselves. The reward of gaining a mistress was evidently outweighed by the risk of having your wife discover your personal ad.
(c)
Q:
But if there is no unifying theme to Freakonomics, there is at least a common thread running through the everyday application of Freakonomics. It has to do with thinking sensibly about how people behave in the real world. All it requires is a novel way of looking, of discerning, of measuring. This isn’t necessarily a difficult task, nor does it require supersophisticated thinking. We have essentially tried to figure out what the typical gang member or sumo wrestler figured out on his own (although we had to do so in reverse).
Will the ability to think such thoughts improve your life materially? Probably not. Perhaps you’ll put up a sturdy gate around your swimming pool or push your real-estate agent to work a little harder. But the net effect is likely to be more subtle than that.
You might become more skeptical of the conventional wisdom; you may begin looking for hints as to how things aren’t quite what they seem; perhaps you will seek out some trove of data and sift through it, balancing your intelligence and your intuition to arrive at a glimmering new idea. Some of these ideas might make you uncomfortable, even unpopular. To claim that legalized abortion resulted in a massive drop in crime will inevitably lead to explosive moral reactions.
(c)

I am indebted to airport bookstores. And I am thus indebted to such an extent, that I can confess to arriving early for any flight departing from an airport with a bookstore for the sole purpose of securing a few additional minutes to browse books. If it were not for the practicalities of travelling, I would probably have bought this book much sooner than I did for I had been securing extra minutes in airport bookstores just to read through another chapter long before I actually bought it.

You see, my travels are laden with a heavy debate: shall I pack my extra suitcase with books or groceries? I resolve this by alternating. For one trip to the Outside, a spare duffel bag will be dedicated to books and I will shun all opportunities to visit grocery stores just to preserve that determination. On the next visit, I will carry a spare cooler (rather than duffel bag) and splurge on leg of lamb and cheeses free of artificial coloring. The ultimate effect of this system, however, is a backlog in possessing the books I'd like to read.

Finally, however, the fates aligned. I was travelling to Iowa on what I expected to be a gloriously grocery-focused trip. But my cooler broke as I was carrying it to the truck that we would drive to our local airport. There wasn't time to fix it. I was sad, of course, as I had been anticipating all the pork I was going to return with from Iowa. But I consoled myself with all those Iowa cookbooks I could now carry, and resolved not to prolong any lamentations over the cooler. And, oh, did I find myself lugging around a heavy library - such hours did I spend in Powells (there was a 1 week layover in Oregon) and Iowa City's bookstores. The day before we left Iowa, Nate told me about how much he enjoyed this book. His description renewed my interest, and I committed myself to buying a copy before we left. But, alas, we ran out of time. We didn't make it to a bookstore. It was sadder than the last-minute loss of the cooler. So when we arrived in Chicago, and had a few minutes to wait for the connecting flight to Alaska, and our gate was right next to a book kiosk, and I was pretty sure there was just enough room in my carry-on to squeeze in one more book - it was this book that I grabbed.

I raced through it. Loving each chapter. I really can't recommend it enough. A fun read, for those who like to be entertained by books. Informative too, for those that like to read for knowledge, thought, and/or discourse. But what elevates it to favorite is that it alters perception and challenges assumptions. For what it's worth, I have no regrets that I carried this book rather than Iowa pork.....and I can think of no finer testament to a good book. Then again, most of my entertainment these days revolves around pickling turnips. So if turnips aren't your thing, feel free to take my recommendation with a grain of salt....but you should still read this book.