Superfreakonomics: Global Cooling, Patriotic Prostitutes and Why Suicide Bombers Should Buy Life Insurance
Steven D Levitt and Stephen J Dubner
"Incentives are the cornerstone of modern life," the economist Steven Levitt and the journalist Stephen Dubner wrote in their 2005 book, Freakonomics. Incentives, they suggested, explain why teachers in Chicago inflate students' test scores, why real-estate agents don't get the best prices for homes they sell, and why drug dealers stay in the game even though hardly any get rich. The book was translated into 35 languages and sold over four million copies. Hence, incentives also explain the recent publication of a sequel.
Levitt and Dubner set out to challenge conventional wisdom by using what they call an "economic approach" to explain the vagaries of human behaviour. As they describe it, this involves collecting data about the choices people make and the consequences of those choices, and then relying on the data - instead of faulty assumptions or preconceived notions - to understand the incentives behind those decisions. What they find, again and again, is that al- though self-interest is the most powerful incentive of all, people often define their interests in ways that are hard to predict or seem irrational.
This isn't much of a revelation. In truth, it's been one of the cornerstones of behavioural economics for decades. What differentiates Levitt and Dubner is that they have chosen to popularise this insight through a series of cheap provocations. Their first book created a stir by positing that the drop in US crime rates during the 1990s was not caused by better policing, tougher laws, or improved economic opportunities. It was, they argued, an unintended consequence of the Supreme Court decision that legalised abortion - since the data suggested that the women most likely to take advantage of easier-to-obtain abortions were also the most likely to give birth to future criminals. The marquee provocation in Superfreakonomics concerns global warming. Instead of just promoting costly efforts to reduce carbon emissions by trying to change individual behaviour, they argue, policymakers should also consider "geoengineering" solutions that could theoretically counteract global warming by mimicking the cooling effects of major volcanic eruptions. "Instead of wringing our filthy hands about behaviour that is so hard to change," they plead, "what if we can come up with engineering or design or incentive solutions that supersede the need for such change?"
Predictably, this elicited howls from environmentalists, along with allegations that the authors distorted some fundamental aspects of climate science and misrepresented the ideas of a prominent climatologist. The contretemps has played right into Levitt and Dubner's hands - and their marketing strategy. They pointed to the outrage as evidence of the moralism and myopia they claim distorts public policy and prevents the development of simple and effective solutions to many of the world's ills. Conservationist appeals for collective self-sacrifice will fail, they argue, because the only policies that ever succeed are those that don't interfere with the pursuit of self-interest.
Though they pose as impartial observers driven only by a desire to seek the truth, Levitt and Dubner are in fact covert advocates for a free-market ideology that encourages dogmatic scepticism of government regulation and intervention. What they offer is not a data-driven methodology built upon unbiased research: it is a worldview. That is why the titillating data that provide much of the fodder for the book - the banking habits of terrorism suspects; the prices charged by Chicago prostitutes; the characteristics of excellent emergency-room doctors - frequently have very little bearing on the conclusions they draw. Those conclusions are wholly predetermined, and the "evidence" has been assembled around them not so much to bolster their strength, but to distract from their polemical intent.
In one section of the new book, Levitt and Dubner set out to debunk the merits of children's car seats, whose use is required by law in the United States. They trumpet the results they obtain at a crash-test lab, which suggest that seat belts perform just as well as government-mandated car seats. So far, so good. But then they concede that more comprehensive research shows that car seats provide better protection - and yet go on to argue that governments should cease their meddling and instead encourage car companies to design child seat belts, without a shred of evidence to support the feasibility of that idea. Suddenly, as soon as the picture turns out to be complicated, rigorous analysis is no longer required - amusing anecdotes and fact-free assertions will do just fine.
Perhaps what best reveals Levitt and Dubner's underlying agenda is what's missing from Superfreakonomics. You might expect two writers with a background in economics and an interest in decision-making to be curious about how the world's financial system was brought to its knees by a cascading series of poor choices made by individuals and small groups of people. Apparently not. The writers claim that they have not considered the current crisis because macroeconomics "is simply not our domain". They would have us believe that their "economic approach" is broad enough to encompass sociology, environmental science, medicine, engineering and automobile design - but not macroeconomics. The more likely reason, of course, is that the financial meltdown serves as a powerful rebuttal to Levitt and Dubner's faith in free-market orthodoxies. The crisis might have been avoided had regulations existed (or been enforced) to counteract incentives for firms to take huge risks while pretending to be prudent. Plenty of responsible, free market-loving economists have admitted as much in the past year. But who wants to be a mere economist when you can be a superfreakonomist?
Justin Vogt, a regular contributor to The Review, is a writer living in New Orleans.