Freakonomics is a good read for all market researchers, and for a great many other people as well. The book is written by iconoclastic economist Steven Levitt and has its roots in several articles for the New York Times. In essence, what Levitt does is to look at problems in a new way, he is very good at disregarding conventional wisdom, and in asking: what are the relevant data, what are the unresolved questions, and how can the data help us understand these questions?
On example of this approach is his highly contentious view that one of the main drivers of the reduction in crime in the US from the mid-90s was the legalization of abortion (in 1990 there were 2,245 murders in New York, in 2003 this had fallen to 596). Using a wide range of data and relatively simple tools, such as weighting and regression, Levitt starts by dismissing several myths about the reduction in crime that occurred right across the US. In general it was not due to increased use of capital punishment, it was not due to the booming economy, it was not due to innovative policing (although increases in police numbers did have an effect), nor was it due to tougher gun laws. Levitt showed that the bursting of the crack cocaine market (where prices fell through the floor) did have an effect (people were less willing to kill and risk being killed when the profits disappeared). But, his main claim was that a large part of the drop in the US crime rate was a direct, but unintended, consequence of the legalizing of abortion in 1973, with the Roe vs Wade Supreme Court ruling. Since the ruling there have been about 1.6 million abortions a year, amongst a population of 225 million. Most of these abortion relate to women and girls who felt they were unable to be mothers at that time (too poor, too busy, emotionally unready, too career oriented, addicted to drugs, in a bad relationship, in no relationship, victims of rape and incest – the reasons why these women felt that they should not be mothers are almost endless). The data showed Levitt that many of these 1.6 million fetuses would have gone on to be criminals in the 90s and beyond, he does not say all of them, or even most of them, but that a significant minority of them would have been criminals.
The argument about the unintended consequences of Roe vs Wade showed Levitt at his best, and the semi-numerate press and opinion-formers at their worst. Levitt was attacked by the Right as defending abortion, he was attacked by the Left for appearing to support eugenics. In fact what he did was to take the facts and present a plausible relationship. As Levitt says in his book, it is for others to decide whether this change was a good thing, are 1.6 million abortions a year a price worth paying for the drop in crime?
The book is an eclectic mix, looking at how teachers and sumo wrestlers cheat, why most drug dealers are so poor that they live with their moms, and he extent to which estate agents fail to look after you when they sell your house.
The book is highly readable and is a wake up call for all of us to be more objective in our analysis, to separate our ‘views’ from the process of asking questions and the need to base our analysis on the relevant data.
Although the book was first published in 2005 (and by Penguin in 2006) the Freaknomics lives on through a website, www.freakonomics.com and regular articles in the New York Times Magazine.
