Visions & Revisions
Unconventional Wisdom
07/01/2005

Why do so many drug dealers live with their mothers? What do real estate agents have in common with the Ku Klux Klan? What circumstances lead both school teachers and sumo wrestlers to cheat? In his new book Freakonomics: A Rogue Economist Explores the Hidden Side of Everything, Steven Levitt, a University of Chicago professor and economist, tackles these and a host of other unorthodox riddles that more conventional thinkers often leave unasked. Using the tools of economics and endless reams of data, Levitt and his coauthor, Stephen J. Dubner, unearth answers that are as surprising as they are controversial. Levitt spoke to Worth features editor Douglas McWhirter about the practical realities of Roe v. Wade, the social decline of girls named Britney and why truth and trouble so often go hand in hand.

Though you are an economist, you often ask and answer the kinds of questions that normally fall to sociologists, psychologists and political scientists. This does not seem at all like the “dismal science.”

I don’t think of economics as a subject matter of topics. I think of it as a set of strategies and approaches for understanding the world.

The way I look at it is that economics got dealt a great set of tools and a lousy set of topics. The tools of economics have been very valuable in understanding the complex workings of the economy. I try to use these tools to tackle some of the more interesting topics that other disciplines have traditionally owned.

Many people would rather not discuss some of the topics you take up in your book—abortion, crime, race and class, among others.

A lot of the conventional wisdom of how we view the world is dictated by what we want the world to look like, as opposed to how it really is.
In my work, I cast aside any sense of political correctness, any emphasis on morality and ethics, and try to describe the world as it is. Sometimes when you follow that path, it takes you to places that can be disconcerting, even freaky. I do not go looking for trouble, but I am also not afraid to look in places where trouble might be hiding.

Trouble was definitely hiding in the statistical connection you and your colleague John Donohue made in 2001 between legalized abortion and the national decrease in crime. What question did you hope to answer in studying this most contentious topic?

We come at abortion from a perspective that is completely different from other people. We are not asking whether abortion is right or wrong, or whether it should be legal or not. We use abortion simply to try to understand why there was a decrease in the crime rate in the ’90s. This drop in crime was amazingly large, and if you look at the other explanations for why this happened, none of them really works. As surprising as this may seem, legalized abortion in the 1970s—both from a theory perspective and from the data—is an important explanation of why crime fell in the ’90s.

The idea is pretty simple: Unwanted children are at risk of becoming criminals when they grow up. Legalized abortion reduced the number of unwanted children. When you put those two together, legalized abortion should reduce the amount of crime. When you go to the data, it is really quite compelling that the patterns we see are quite consistent with this idea.

It might seem strange, but as divisive as our discussion of this topic may seem, in the end I think it is unifying. The point we come to is that we should try to do what we can to keep unwanted children from growing up unwanted. Abortion, I think we can all agree, is one of the least effective ways of doing that.

Are you concerned that either side in the abortion debate might want to use these findings to further its agenda?

This is actually one finding that no one wants to use. There is no one who likes the fact that abortion reduces crime. It outrages those who are pro-life. I agree completely that if abortion is murder, then the focus on homicides that stem from legalized abortion is ludicrous. On the other side, if you think that a woman’s right to choose is paramount, who cares whether or not a few lives would be saved here or there by legalized abortion. It is just not important. Our analysis was not really about abortion at all. It was about crime, and maybe unwantedness.

You state that “incentives are the cornerstone of modern life.” What do you mean by that?

We mean that in our every activity, almost from birth, there is an incentive scheme out there that rewards certain kinds of behaviors and punishes other kinds of behaviors. There are financial incentives and moral incentives, but it goes far beyond that. Our basic premise is that people do the best they can to get the most they can for themselves. They do that by responding to the incentives that are presented to them in ways that generally make sense. If you can identify the incentives a person has, that is about as good a baseline for predicting behavior as you are going to find.

You specifically examine the incentives that lead Chicago school teachers, white-collar workers who eat bagels and sumo wrestlers to cheat. Based on your findings, does everyone cheat?

I think our view of human nature is not that people are good or bad; it is that people are sometimes good and sometimes bad. It all depends upon the incentives they face. We find that sumo wrestlers, white-collar workers buying bagels and elementary school teachers will all cheat sometimes. But then again, many times they won’t cheat. What we try to do in each case is to use data that were collected for completely different purposes to lay bare hidden behaviors in these three groups.

In another chapter, you note the similarity between the organizational chart of McDonald’s and that of a Chicago crack gang. Which organization operates more efficiently?

They do have the same structure, and in fact, many of the same kids who are selling drugs for the gang are working at McDonald’s at the same time. But I think without question McDonald’s is the more efficient of the two. It has the advantage of not having to carry out its activities in a clandestine manner.

The other difference that makes the gang less efficient is that the best way to move up in the gang is to kill your superior and take over in a violent manner. There are more humane ways of promotion in McDonald’s that make it a more efficient operation.

You try to determine statistically if those with distinctly black names, for example, Roshanda or DeShawn, suffer an economic penalty in our society. Does the name one is given affect life outcomes?

We find the name you are given does not impact your life. However, the circumstances you are born into affect the name that you are given and the life you lead. So, for instance, young, single African-American mothers are more likely to choose unique names that no one else has than are, say, middle-class, white, married parents. It is not the name Emily or LaToya that causes differences in life outcomes. Rather, it is the age and socioeconomic status of the parent, and several other factors.

The way we answer this question is to look at every child born in California over a 40-year period. We look at their circumstances at birth, and compare their life circumstances 20 or 30 years later when they themselves give birth and their child’s birth certificate enters the data set.

What factors drive the migration of a name’s popularity through different socioeconomic strata? Britney was considered a very posh name a few years back.

The pioneers in names tend to be very highly educated parents. These people start trends with names. Over time, as names become popular, they tend to work their way down the socioeconomic ladder. For instance, a name like Britney was considered very classy in the ’70s. Now it is actually a name that is a very strong signal of low socioeconomic status. What appears to happen is less-educated parents see what the highly educated parents are naming their kids. Once a name is adopted by less-educated parents, highly educated parents abandon the name and move on to a new set of names.

You turn the conventional wisdom of parenting on its ear by suggesting that good parents are defined not by what they do, but by who they are. What should obsessive parents who force their children to watch Baby Mozart DVDs take from this?

Our answer would be to relax. There is little evidence in the data that particular activities that parents engage in with their child have a noticeable impact on early test scores. For instance, in the data, we see that reading to your children or taking your children to museums has no impact on how they will ultimately perform in schools.

It is not that parents aren’t important. It just seems that the decisions you make that are important to your child’s outcome really happen much earlier in life. We do find important differences in children’s test scores based on the educational level and socioeconomic status of their parents, as well as the age of their parents. That leads us to think it is who you are, not what you do, that is most important in raising children.

While conclusions like this may seem like common sense, they may also be politically incorrect. Would you be interested in such topics if they were not?

I don’t think there is anything per se attractive to me about forbidden topics. I think, rather, the reason my work has taken me in that direction is because those are the areas that no one else is thinking about carefully. As a consequence, we often have the wrong ideas or perceptions about the answers. My own rule, which I have had since I began as an economist, is to study questions that I find interesting. I have never worried whether or not anyone else might find them interesting.

Photograph by Kristofer Dan-Bergman.