Review: Freakonomics: What Levitt really didn’t say

“There’s no question I have written some ridiculous papers.”

“Sometimes you write papers and they’re less about the actual result, more about your vision of how you think your profession should be. And so I think some of my most ridiculous papers actually fall into the high-fashion category.”

Stephen Levitt in “How Freakonomics is ruining the dismal science” drawing an analogy to the fashion industry: haute couture versus pret-a-porter.

UNIVERSITY of Chicago economist Steven Levitt’s  and New York Times journalist and (somewhat sidelined) author Stephen Dubner’s book, Freakonomics: A Rogue Economist Explores the Hidden Side of Everything, has fascinated the public for a long time.

If memory serves me right, it stayed on many an international bestseller lists, including the New York Times and our local list, Straits Times Bestsellers.

Two quotes on the book cover jump out at the reader immediately, if you’re reading the same version as mine. One quote strikes hard.

Prepare to be dazzled.

Malcolm Gladwell, Freakonomics, 2005

Freakonomics is a good book in the sense that it entertains and sheds some information on the causality of certain events but you’ll have to take his information with a pinch of salt too.

I am unsure whether Levitt’s defined causes can be taken at face value, given that he is as much the kind of expert that he was denouncing.

If you were to assume that many experts use the 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.

Levitt, Freakonomics, 70, 200

The last line of the above quote will strike the reader hard because as I understand, the book has since undergone reprints to amend parts of the copy that readers thought were too self-serving and “sycophantic”, particularly the vignettes appearing before each chapter. Strike and awe, Levitt.

Levitt fits everywhere and nowhere. He is a noetic butterfly that no one has pinned down (he was once offered a job on the Clinton economic team, and the 2000 Bush campaign asked him about being a crime advisor) but who is claimed by all. He has come to be acknowledged as a master of the simple, clever solution. He is the guy who, in the slapstick scenario, sees all the engineers futzing with a broken machine — and then realises no one has thought to plug it in.

The New York Times, August 2003 in Freakonomics, 87

And this is not the only vignette.

Back to the word “dazzled”.

Let the word roll around your tongue, soak in it for a while and you’ll realise that “dazzle” does not have a positive connotation.

By its definition, dazzling requires pyrotechnics, devices that shoot out light, like fireworks. A dazzling display of lights. I’m dazzled by your beauty (not because I’m wearing beer goggles).

Dazzling distracts.

You might be unable to comprehend the underlying message of the book because the lights used to cast the book on stage are too bright.

The heavy use of data (numbers, statistics, the sort) and dialectical ideas form the lights. We can’t reach the diamond lost in the crevices of the rocks because there’s a light shining in your eyes. We avert our gaze and assume that Freakonomics is really a book on the brilliance of the social science, economics.

No the book is less about economics than the high-fashion of economics. Levitt himself admitted in the epigram (is this the correct term) on top of this post.

I would have preferred the word “impressed” or “superbly well-informed” because this is what the book is about — a representation of information that tries to isolate the causality of certain events rather than spurious correlations.

In the book, co-authors Levitt and Dubner (the former does the numbers, the latter does the writing) deconstruct many of our not-so-apparent assumptions.

There’s also a bit of humour in the book that soothes the dreariness of economics and numbers.

The bit that I recall the most is this is an account of a sociology graduate’s fieldwork  :

[Venkatesh’s] assignment: to visit Chicago’s poorest black neighbourhoods with a clipboard and a seventy-question, multiple-choice survey. This was the first question on the survey:

How do you feel about being black and poor?
a. Very bad
b. Bad
c. Neither bad nor good
d. Somewhat good
e. Very good

(Levitt, 2005, 94)

A few paragraphs later, Venkatesh stumbles into some members of a gang playing dice. He manages to shoot off a few questions and realises one thing:

As Venkatesh would later tell his university colleagues, he realised that the multiple choice answers A through E were insufficient. In reality, he now knew, the answers should have looked like this:

a. Very bad
b. Bad
c. Neither bad nor good
d. Somewhat good
e. Very good
f. Fuck you

(Levitt, 2005, 94)

The last option cracked me up. An economist with a sense of humour? Or Dubner’s writing ability? Either way, humour peeks out at unexpected places and Dubner can be given credit for that. A dialectical opposition emerges again. Economics dreary. Dismal science. Inject humour. Voila!

For me, the book redeems its sycophantic nature through its dialectical arguments. Levitt draws correlations between two groups of seemingly non-related entities, thereby demonstrating the fact that there are always relationships if we know how to look. Take for example, sumo wrestlers and school teachers. Or the chapter on Ku Klux Klan and real-estate agents.

ON INTERNET, BLOGGERS AND THE SUPPOSED EROSION OF AUTHORITY

More importantly (and this is my main takeaway from the book), underlying the entire book (some critics have argued that there isn’t one) is the theme of information power and the act of withholding it, as put forth in the example of the Ku Klux Klan and the real-estate agents.

The antithesis of this informational power, he proposes, is the Internet. It democratises by dealing information to its users.

The book attributes the fall in prices of life insurance in the 1990s to the Internet. Websites which let a customer compare, “within seconds”, the price of insurance sold by different companies, proliferated. This mushrooming brought about a “$1 billion” drop in the total amount paid for life insurance, according to Levitt.

Levitt underscores the function of these websites and draws a distinction between dealing and peddling in information, the distinction of which I opine, is important to websites in this day and age.

It is worth noting that these [life insurance] websites only listed prices, they didn’t even sell the policies. So it wasn’t really insurance they were peddling.

Like Stetson Kennedy, they were dealing in information.

Here I come to my own distillation of Levitt’s unseen argument.

Websites that peddle information (for eg websites selling car insurance, second-hand cars, life insurance) can be easily out-valued by websites that deal in information.

The latter kind of websites aggregates information and attempts to level the playing field by ensuring there is as much information as possible. After all, consumers inherently desire perfect information in a marketplace to make the best and most rational decision, discounting emotional purchases.

Ultimately the most valuable websites should be those that disseminate information perfectly to consumers, after establishing that such dissemination is useful to their economic decisions.

As Levitt puts it, “[i]nformation is a beacon, a cudgel, an olive branch, a deterrent, depending on who wields it and how. Information is so powerful that the assumption of information, even if the information does not actually exist, can have a sobering effect.” (Freakonomics, 67)

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