ECONOMICS
Real world scenarios
PARANJOY GUHA THAKURTA
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Levitt and Dubner staunchly refuse to take moral positions or prescribe solutions. They remain content using complex statistical tools on data compiled from diverse sources to draw unusual conclusions.
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Freakonomics: A Rogue Economist Explores the Hidden Side of Everything, Steven D. Levitt and Stephen J. Dubner, Penguin, 2005, p.242, £10.99, special Indian price £6.
THE first of the co-authors is supposed to be one of those super-bright, idiosyncratic economists from the University of Chicago while the second is a New York-based journalist and writer. In August 2003, the latter wrote an article on the former. This led to the book under review, which attracts potential readers by raising a series of tantalising questions.
Many questions
Why is a swimming pool more dangerous than a gun? Why do both schoolteachers in Chicago and sumo wrestlers in Japan cheat blatantly? Why do prostitutes earn more than architects? Why do drug dealers on the mean streets of American cities prefer to live with their moms? Why would a white supremacist organisation like the Ku Klux Klan as well as a bunch of real estate agents both find their respective businesses shrinking on account of public access to greater information?
Why did the decline in the crime rate in the U.S. during the 1990s have little or nothing to do with gun laws, quality of policing and the incidence of poverty and a lot to do with legalising abortion? And, why does the organisational structure of a crack-dealing cartel bear a striking resemblance to that of a respectable commercial corporation?
Like many smart economists, Levitt is great when it comes to crunching numbers. However, unlike many other social scientists, he and his co-author staunchly refuse to take moral positions or prescribe solutions to problems. They remain content using complex statistical tools, including regression analysis, on data compiled from diverse sources to draw unusual conclusions.
Unique insights
One such fascinating source is the work of a researcher of Indian origin, Sudhir Venkatesh, who was not merely able to "infiltrate" the shadowy world of crack dealers but also earn their confidence over time. Data acquired by Venkatesh was used by Levitt to compare the network of a gang of drug dealers with a corporate entity and raise wacky queries such as: "What a drug-dealer, a high-school quarterback and an editorial assistant have in common" or "Why early crack dealers were like Microsoft millionaires" or "How the invention of crack cocaine mirrored the invention of nylon stockings". Incidentally, both the products mentioned (crack cocaine and nylon stockings) became suddenly affordable and accessible to large numbers.
In what this reviewer felt was one of the most interesting parts of the book, the authors recall how Venkatesh — then studying for a Ph.D. in sociology in Chicago — managed to become friendly with, and then almost a part of, a branch of the Black Gangster Disciple Nation, a violent group of underprivileged African-American youngsters who sold crack out of abandoned buildings. This Indian student not only acquired unique insights into the lives of these drug dealers but eventually got hold of an authentic and detailed set of financial data pertaining to a four-year period that enabled economist Levitt to analyse the figures. "The problem with crack dealing is the same as in every other glamour profession: a lot of people are competing for a very few prizes," the authors point out.
The most controversial (by American standards) part of the book is the chapter entitled: "Where have all the criminals gone?" In this chapter, the authors link the sharp drop in the crime rate in the U.S. during the 1990s to the Supreme Court decision to give women the opportunity to make their own decision about abortion. They argue that capital punishment did not drive crime down nor did the booming economy or more innovative policing methods. What did lower the crime rate was that an entire generation of would-be criminals was just not born after the 1973 Roe versus Wade ruling of the U.S. Supreme Court. This chapter starts by drawing an analogy between what took place in America with what had happened in Romania after 1966 when Nicolae Ceausescu declared abortion illegal in that country.
Obvious conclusions
Levitt goes on to draw curious conclusions about parenting and about naming children. The problem with this racily-written book (not surprising, since one of the co-authors is a journalist) is that although each section starts with a series of provocative questions, many of them end with conclusions that are commonplace to say the least. Thus, after expending considerable space on the need to convert parenting from an art to a science and the nature-nurture debate, the authors end up stating the obvious: "Parents who are well educated, successful, and healthy tend to have children who test well at school... "
The authors keep emphasising the point that the book has no "unifying theme" but "has to do with thinking sensibly about how people behave in the real world" and that all that is required "is a novel way of looking, of discerning, of measuring". The book indeed does a lot of measuring, including measuring how monetary incentives work on the human psyche. In fact, there is so much measuring that it becomes difficult (sorry, impossible) to discern the authors' ideological or social positions on the vast range of issues of political and economic importance that they skim across.
Paranjoy Guha Thakurta is Director, School of Convergence and a journalist with over 29 years of experience in various media — print, radio, television and the Internet. He has directed documentary films and co-authored a book A Time of Coalitions: Divided We Stand. He may be contacted at paranjoy@yahoo.com.
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